BILL ANALYSIS Ó SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS Senator Ben Hueso, Chair 2015 - 2016 Regular Bill No: AB 2206 Hearing Date: 6/21/2016 ----------------------------------------------------------------- |Author: |Williams | |-----------+-----------------------------------------------------| |Version: |6/14/2016 As Amended | ----------------------------------------------------------------- ------------------------------------------------------------------ |Urgency: |No |Fiscal: |Yes | ------------------------------------------------------------------ ----------------------------------------------------------------- |Consultant:|Jay Dickenson | | | | ----------------------------------------------------------------- SUBJECT: Renewable gas DIGEST: As proposed to be amended, this bill requires the California Air Resources Board (ARB) to adopt policies to significantly increase the sustainable production and use of "renewable gas." (The current version of the bill also requests the California Council on Science and Technology (CCST) to undertake a study on the California Public Utilities Commission's (CPUC) biomethane standards. A similar parallel request of CCST is proposed in the Budget Act. Therefore, the author has proposed amending this bill to remove the request of CCST. In light of the author's proposal, this analysis considers only the provisions of the bill that direct ARB to consider and adopt policies to significantly increase the sustainable production and use of renewable gas.) ANALYSIS: Existing law: 1)Directs the ARB to monitor and regulate sources of emissions of greenhouse gases (GHG) that cause global warming in order to reduce GHG emissions to 1990 levels by 2020. (Health & Safety Code §38510 et seq.) ARB instituted a low-carbon fuel standard as one element of achieving the GHG emission reduction goal. 2)Requires retail sellers of electricity - investor-owned utilities (IOU), community choice aggregators (CCAs), and AB 2206 (Williams) PageB of? energy service providers (ESPs) - and publicly owned utilities (POU) to increase purchases of renewable energy, such that at least 50 percent of retail sales are procured from renewable energy resources by December 31, 2030. This is known as the Renewable Portfolio Standard (RPS). (Public Utilities Code §399.11 et seq.) 3)Declares electricity produced by certain renewable energy resources, including natural gas produced from biomass, digester gas or landfill gas, as potentially eligible for credit under the RPS. (Public Utilities Code §399.12, Public Resources Code §25741) 4)Defines "biogas" as gas that is produced from the anaerobic decomposition of organic material and "biomethane" as biogas that meets the standards adopted by CPUC for injection into a common carrier pipeline. (Health and Safety Code §25420) 5)Requires CPUC to adopt policies and programs that promote the in-state production and distribution of biomethane. (Public Utilities Code §399.24 ) 6)Requires the California Energy Commission (CEC) to hold public hearings to identify in its Integrated Energy Policy Report (IEPR) impediments that limit procurement of biomethane in California, including, but not limited to, impediments to interconnection, and to offer solutions. (Public Resources Code §25326.) This bill: 1)Requires ARB to adopt a policy, consistent with existing state policies and programs and in consultation with the CPUC, to increase "renewable gas," including biogas as defined by Health and Safety Code §25420, generated by an eligible renewable energy resource that meets the requirements of the RPS or generated by direct solar energy. 2)Directs ARB to ensure that eligible renewable gas provides direct benefits to the state's environment by avoiding or reducing the emission of criteria air pollutants, reducing or avoiding emissions that adversely affect the waters of the state, or reducing or avoiding nuisance associated with the emission of odors. AB 2206 (Williams) PageC of? Background Biogas, biomethane, and "renewable gas:" natural gas by other names. Bioenergy is renewable energy produced from biomass wastes including forest and other wood waste, agriculture and food processing wastes, organic urban waste, waste and emissions from water treatment facilities, landfill gas and other organic waste sources. Biomass waste can be used to generate renewable electricity, liquid fuels and biogas. Statute defines "biogas" as a gas produced from the anaerobic decomposition of organic material. The result is a gaseous mixture composed primarily of carbon dioxide and methane. Depending on where it is produced, biogas can be categorized as landfill gas or digester gas. Landfill gas is produced by decomposition of organic waste in a municipal solid waste landfill. Digester gas is typically produced from livestock manure, sewage treatment or food waste. From an environmental perspective, biogas has several advantages over conventional natural gas. Combustion of natural gas, including biogas, releases carbon dioxide (CO2) into the atmosphere. However, the combustion of natural gas destroys methane, a gas that is a much more potent GHG than is CO2. In addition to destroying methane, the combustion of biogas, for CO2 accounting purposes, is considered carbon neutral. This is because the carbon in biogas, unlike the carbon in conventional natural gas, was so recently present in the atmosphere. In addition, biogas can be used to displace the use of fossil fuels, such as conventional natural gas, thereby further decreasing its carbon intensity. Biogas can be used directly to produce electricity or can be converted to biomethane by removing carbon dioxide and other impurities. Statute defines "biomethane" as biogas that meets the standards, adopted by the CPUC in keeping with statute, for injection into a common carrier pipeline. Biomethane can replace fossil sources of natural gas in homes and factories and compressed or liquefied as natural gas used in vehicles. Biomethane can also be used to produce renewable hydrogen in fuel cells.<1> This bill introduces a new term, "renewable gas," to statute. This bill does not provide an explicit definition of "renewable gas." Rather, it directs ARB, in coordination with the CPUC, to --------------------------- <1> 2012 Bioenergy Action Plan AB 2206 (Williams) PageD of? adopt a policy that is consistent with existing state policies and programs to increase the production and use of renewable gas, including biogas, generated by either an eligible renewable energy resource that meets the requirements of the RPS Program or direct solar energy. Many existing state policies and programs promote biogas. The Global Warming Solutions Act (aka "AB 32") requires a reduction in California GHG emissions to 1990 levels by the year 2020. Statute provides ARB broad authority to achieve statewide GHG reductions. In keeping with that authority, statute requires ARB to adopt a "scoping plan" of measures that will, collectively, reduce California GHG emissions, as required by law. ARB adopted its latest update to the scoping plan in 2014. The plan includes a "cap-and-trade" program for the state's largest GHG emitters. The plan also includes dozens of sector-specific measures, including measures to promote the development and use of natural gas derived from renewable sources. For Fiscal Year 2016-17, the administration has proposed the following ARB biogas programs, both to be funded from the Greenhouse Gas Reduction Fund (GGRF): Very Low Carbon Fuels Incentives Project. The proposed Governor's Budget for 2016-17 would set aside $40 million in Fiscal Year 2016-17. The funding would pay for the production of very low-carbon transportation fuels to encourage their production in California. ARB staff is still developing the incentive mechanisms. In any case, biomethane producers would likely qualify for program funding. Low NOx Engine Incentives. ARB proposes to provide $23 million in funding for trucks with certified low-NOx (oxides of nitrogen) engines. ARB recommends requiring such trucks to operate on renewable fuel, such as biomethane, to maximize GHG emission reductions. The ARB describes the low-NOx engine incentives as complementary of the Very Low Carbon Fuels Incentives Project, described in the preceding bullet. In addition, since early in the century, state law has required electric utilities to procure increasing amounts of electricity generated by renewable resources, a requirement known as the AB 2206 (Williams) PageE of? RPS. As of this year, each of California's electric utilities is required to procure at least 50 percent of its electricity from renewable resources. Statute lists numerous goals of the RPS program, each of which, according to statute independently justifies the program. Statute declares a facility that uses natural gas produced from biomass, digester gas or landfill gas as a renewable energy resource, the electricity produced by which is eligible for credit under the RPS. Statute also directs the CEC to hold public hearings to identify in its IEPR impediments that limit procurement of biomethane in California, including, but not limited to, impediments to interconnection, and to offer solutions. Accordingly, in 2006, 2011 and 2012, the CEC released editions of its bioenergy action plan, which it describes as strategies, goals, objectives, and actions that California state agencies will take to increase bioenergy development in California. The 2012 Bioenergy Action Plan made the following recommendations relative to biogas: Increase research and development of diverse bioenergy technologies and applications, as well as their costs, benefits, and impacts. Continue to develop and make accessible information about the availability of organic wastes and opportunities for bioenergy development. Streamline and consolidate permitting of bioenergy facilities and reconcile conflicting regulatory requirements to the extent possible. Assess and monetize the economic, energy, safety, environmental, and other benefits of biomass. Facilitate access to transmission, pipelines, and other distribution networks. Similarly, statute directs the CPUC to adopt policies and programs that promote the in-state production and distribution of biomethane. In response to statutory mandate, the CPUC, in 2014, adopted health and safety standards that limit the amounts of certain constituents determined to be harmful to either human health or pipeline integrity in pipeline injected biomethane. The standards are to address the reluctance of energy utilities to inject biomethane into natural gas pipelines. In addition, the CPUC, in 2015, found that gas producers should bear all costs relating to the processing and pipeline injection of biomethane. As part of that decision, the CPUC adopted a $40 million ratepayer-funded program to offset a portion of the AB 2206 (Williams) PageF of? costs to gas producers of connecting to utility pipelines. Program funding will pay up to 50 percent of a biomethane project's interconnection cost, up to $1.5 million per project. Given the state's many efforts to promote the use of biogas, it is unclear why the ARB needs additional authority, as provided by this bill, to increase the production and use of renewable gas. Bill proponents note the lack of development and use of biogas as evidence of the need for a new, ARB-led policy. Bill opponents note the relative high price of biogas, relative to the retail price of conventional natural gas, and worry that the bill will lead to mandates to purchase biogas, despite the price differential. In any case, the language in this bill is nearly identical, with a few differences, to language in a bill, SB 1043 (Allen), heard and approved by this committee in April. That bill was held on the Senate Appropriations suspense file. Renewable gas produced from direct solar energy. Only for purposes of the requirements of ARB created by this bill, the bill defines "biogas" as having the same meaning as in Health and Safety Code §25420. In addition, only for purposes of the requirements of ARB created by this bill, the bill defines "renewable gas" to mean gas generated either by: An eligible renewable energy resource that meets the requirements of the RPS program. Direct solar energy. The CEC reports it is funding research by the California Institute of Technology (CalTech) on converting sunlight to fuels. While CEC staff note that the technology might be transformational, they nonetheless characterize it as "very early, higher risk research." Similarly, ARB relays that gas produced direct solar energy might complement or contradict the state's environmental and energy goals, depending upon factors such as the source of the gas. It seems unwise to require ARB to adopt policies that promote the use of such an unproven technology as gas produced by direct solar energy. Similarly, it seems unwise to direct ARB, in absolute terms, to adopt policies to significantly increase the sustainable production and use of "renewable gas," especially in light of the many existing state policies and programs to AB 2206 (Williams) PageG of? promote the production and use of biogas. Better, it seems, to amend the bill to provide discretion to ARB, and to require it to coordinate with the state's energy agency, in adopting such policies. Therefore, the author may wish to amend the bill, as follows: SEC. 2. Section 39734 is added to the Health and Safety Code, to read: 39734. (a) For purposes of this section, "biogas" has the same meaning as in Section 25420. (b) To meet the state's renewable energy, low-carbon fuel, and waste diversion goals, the state board, in coordination with the Public Utilities Commission and the California Energy Commission , shall consider and, as appropriate, adopt a policy or programs thatisare consistent with existing state policies and programs to increase the production and use of renewable gas, including biogas, generated by either of the following: (1) An eligible renewable energy resource that meets the requirements of the California Renewables Portfolio Standard Program (Article 16 (commencing with Section 399.11) of Chapter 2.3 of Part 1 of Division 1 of the Public Utilities Code). (2) Direct solar energy. (c) In adopting the policy described in subdivision (b), the state board shall ensure that eligible renewable gas provides direct benefits to the state's environment by reducing or avoiding all of the following: (1) Emissions of criteria pollutants. (2) Emissions that adversely affect the waters of the state. (3) Nuisances associated with the emission of odors. Delete reference to CCST study. As described at the top of this analysis, the author has agreed to remove from the bill all provisions found in Section 3 of the current version of the bill. Double referral. Should this bill be approved by this committee, it has been referred to the Senate Committee on AB 2206 (Williams) PageH of? Environmental Quality. Prior/Related Legislation AB 1900 (Gatto, Chapter 602, Statutes of 2012) directed the CPUC to identify landfill gas constituents, develop testing protocols for landfill gas injected into common carrier pipelines, adopt standards for biomethane to ensure pipeline safety and integrity, and adopt rules to ensure open access to the gas pipeline system. AB 2196 (Chesbro, Chapter 605, Statutes of 2012) ensured that biogas qualifies for RPS credit, provided its production, delivery and use meet certain conditions. SB 1122 (Rubio, Chapter 612, Statutes of 2012) required IOUs to collectively procure at least 250 MW of generation eligible for the RPS from bioenergy generation project, including biogas projects. AB 2313 (Williams, 2016) requires the CPUC to modify its monetary incentive program for biomethane projects. The bill passed the Assembly 57-20 and is pending consideration by this committee. AB 2773 (Quirk, 2016) requires the CPUC to modify its technical standards applicable to biomethane to be injected into a common carrier pipeline. The bill was held on the Assembly Committee on Appropriations suspense file. SB 1043 (Allen, 2016) included language nearly identical to language in this bill. The bill was held on the Senate Committee on Appropriations suspense file AB 577 (Bonilla, 2015) would have required the CEC to develop and implement a grant program for projects related to biomethane production. The bill was held on the Senate Committee on Appropriations suspense file. SB 687 (Allen, 2015) would have established the renewable gas standard (RGS), requiring all sellers of natural gas to provide to retail end-use customers in California increasing amounts of "renewable gas," so that, by January 1, 2030, at least 10 percent of the natural gas supplied is "renewable gas." The bill passed this committee on a vote of 7-3 and was held on AB 2206 (Williams) PageI of? suspense by the Senate Committee on Appropriations. FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes SUPPORT: Bioenergy Association of California (Source) All Power Labs American Biogas Council Atlas ReFuel CR&R Clean Energy Eisenmann Corp. Harvest Power NGVAmerica Organic Waste Solution Sanitation Districts of Los Angeles County Solid Waste Association of North America TSS Consultants Victor Valley Water Reclamation Authority West Biofuels OPPOSITION: Agricultural Council of California Agricultural Energy Consumers Association California Dairies, Inc. California Farm Bureau Federation California Poultry Federation Dairy Institute of California Milk Producers Council Western United Dairymen ARGUMENTS IN SUPPORT: According to the author: California has adopted dozens of policies to increase low carbon fuels, renewable energy, energy efficiency, recycling, carbon sequestration and more. But, California must reduce emissions from the gas sector and encourage in-state refining of biofuel to meet long term climate goals. Unfortunately, natural gas use has been increasing in recent years and will likely to continue to do so given the rapid increase in gas fired power plants and the historically low price in natural gas. Alternatively, AB 2206 (Williams) PageJ of? biomethane, which can be produced from biological material, can provide immediate and significant emissions reductions and other benefits. AB 2206 highlights what has been a significant challenge to truly decarbonzing the gas sector - biomethane is an under-utilized resource and the market has been slow to develop in California because the collection, purification, and pipeline injection of biomethane is cost prohibitive. In fact, since the adoption of the regulatory standards for pipeline biomethane, not one new project has been built. Directing the ARB to exercise existing authority to promote in state production of renewable gas will have a significant impact on greenhouse gas emissions and landfilling. Increasing the use of renewable gas will create jobs and economic productivity, and strengthen California's energy security. ARGUMENTS IN OPPOSITION: Opponents argue that the state would be better served by continuing and expand incentives to in-state biomethane projects and by seeking to address remaining obstacles to their development. Opponents also argue it is premature to promote projects that produce or use synthetic gas, including gas produced from direct solar energy. -- END --