BILL ANALYSIS Ó
AB 1144
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Date of Hearing: April 27, 2015
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Das Williams, Chair
AB 1144
(Rendon) - As Amended April 14, 2015
SUBJECT: California Renewables Portfolio Standard Program:
unbundled renewable energy credits
SUMMARY: Revises the Renewables Portfolio Standard (RPS)
product content categories to provide that unbundled renewable
energy credits (RECs) count in category 1 if they are associated
with electricity generated by a landfill or digester gas source
and used at a publicly owned wastewater treatment facility put
into service on or after January 1, 2016.
EXISTING LAW:
1)The RPS requires "retail sellers" of electricity [i.e.,
investor-owned utilities (IOUs), energy service providers
(ESPs) and community choice aggregators (CCAs)], as well as
publicly owned utilities (POUs), to procure eligible renewable
energy resources to meet the following portfolio targets:
a) 20 percent on average from January 1, 2011 to December
31, 2013.
b) 25 percent by December 31, 2016.
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c) 33 percent by December 31, 2020 and each year
thereafter.
2)Provides that eligible renewable generation facilities must
use biomass, solar thermal, photovoltaic, wind, geothermal,
renewable fuel cells, small hydroelectric, digester gas,
limited non-combustion municipal solid waste conversion,
landfill gas, ocean wave, ocean thermal or tidal current.
3)Establishes "balanced portfolio" requirements for procurement
based on the following three categories (or "buckets") of
renewable energy products:
a) Bucket 1 - Renewable energy interconnected to the grid
within, scheduled for direct delivery into, or dynamically
transferred to, a California balancing authority (i.e.,
real renewable energy supplied to the California grid,
located within or directly proximate to the state). Of the
total renewable energy contracts executed after June 1,
2010, the following percentages must fall into this
category:
i) At least 50 percent for the 2011-2013 compliance
period.
ii) At least 65 percent for the 2014-2016 compliance
period.
iii) At least 75 percent thereafter.
b) Bucket 2 - Renewable energy where substitute
non-renewable energy is used to provide a reliable delivery
schedule into a California balancing authority (i.e.,
firmed and shaped energy where substitute energy is used to
compensate for delivery problems due to intermittent
generation or inadequate transmission capacity from a
remote renewable resource).
c) Bucket 3 - Renewable energy products not meeting either
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condition above, including unbundled renewable energy
credits (RECs) (i.e., the original source of renewable
energy must be located within the western grid, but
otherwise need not have a physical connection to
California). Of the total renewable energy contracts
executed after June 1, 2010, the following percentages may
fall into this category:
i) Not more than 25 percent for the 2011-2013
compliance period.
ii) Not more than 15 percent for the 2014-2016
compliance period.
iii) Not more than 10 percent thereafter.
FISCAL EFFECT: Unknown
COMMENTS:
1)Background. The RPS is the centerpiece of California's effort
to develop a clean energy system and reduce pollution and
greenhouse gas emissions associated with electricity
consumption. The original RPS bill, SB 1078 (Sher), Chapter
516, Statutes of 2002, set a goal of 20 percent by 2017. SB
107 (Simitian), Chapter 464, Statutes of 2006, accelerated the
deadline for 20 percent to 2010. SBX1 2 (Simitian), Chapter
1, Statutes of 2011-12 First Extraordinary Session, codified
the current 33 percent by 2020 RPS target and also established
product content categories (or "buckets"), which place the
highest value (Bucket 1) on renewable energy that is directly
delivered into California because it has the greatest
economic, environmental and reliability benefits. In its
decision implementing the product content categories, the
Public Utilities Commission determined that all unbundled RECs
are categorized as Bucket 3, regardless of their source.
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2)Author's statement:
Wastewater utilities generate methane emissions from their
operations, which air quality regulation limits. If the utility
does not use the methane, then they generally are required to
"flare" the methane to reduce air pollution. While some
wastewater utilities already capture and use their methane to
produce and use the electricity at their own facility, such
energy-water infrastructure may not be affordable for others,
particularly smaller facilities. Allowing them to sell their
Renewable Energy Credits in category 1 will help generate the
funding to pay for the infrastructure. AB 1144 therefore
reduces air pollution and helps finance the infrastructure - in
California - to create renewable energy.
3)Bigger issues at play. The manner in which RECs associated
with renewable energy produced and used onsite should be
counted in the RPS has been the subject of intense debate for
several years. In its 2011 decision implementing the product
content categories established by SBX1 2, the Public Utilities
Commission determined that all unbundled RECs are categorized
as Bucket 3, regardless of their source. Because of the
compliance limits on Bucket 3, as well as lack of energy
value, unbundled RECs are worth significantly less than
bundled renewable energy in Bucket 1. The issue affects a
variety of renewable energy sources produced and used onsite,
including distributed solar, geothermal, as well as biogas
from wastewater, dairy, and landfill sources. While energy
produced from these sources may meet the qualitative
requirements of Bucket 1, the fact that the energy is used
onsite makes it different, so simply declaring that it's
Bucket 1 might not be an appropriate solution. One issue is
that the energy used onsite reduces the utility's RPS
obligation. In effect, the energy is partially counted as an
offset to the RPS, so permitting the RECs to be sold and fully
counted toward a retail seller's RPS obligation amounts to
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double counting the same unit of renewable energy. Another
double counting issue arises if a customer generator which has
sold its RECs to a retail seller for RPS compliance makes a
claim for advertising or regulatory purposes that the customer
is using renewable energy. In addition, an unbundled REC from
customer generation should only be considered to have Bucket 1
value if it remains within the utility that serves the
customer generator, because the REC would have no energy value
if it sold to another utility. Finally, it is unclear what
distinguishes RECs generated by publicly-owned wastewater
treatment facilities from other sources of unbundled RECs for
RPS purposes.
REGISTERED SUPPORT / OPPOSITION:
Support
California Association of Sanitation Agencies (sponsor)
Carpinteria Sanitary District
Goleta Sanitary District
Leucadia Wastewater District
Noble Americas Energy Solutions
Ross Valley Sanitary District No. 1
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Sanitation Districts of Los Angeles County
Southern California Edison
Victor Valley Wastewater Reclamation Authority
West County Wastewater District
Opposition
The Utility Reform Network
Analysis Prepared by:Lawrence Lingbloom / NAT. RES. / (916)
319-2092
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