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
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|Author: |Williams |
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|Version: |6/14/2016 As Amended |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Jay Dickenson |
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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
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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.
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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
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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
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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
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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
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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 that is are 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
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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
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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,
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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.
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