BILL ANALYSIS Ó
SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS
Senator Ben Hueso, Chair
2015 - 2016 Regular
Bill No: SB 180 Hearing Date: 4/7/2015
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|Author: |Jackson |
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|Version: |3/26/2015 As Amended |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Jay Dickenson |
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SUBJECT: Electricity: emissions of greenhouse gases.
DIGEST: This bill (1) defines "peaking" and "nonpeaking"
electricity generation, (2) requires establishment of greenhouse
gas (GHG) emission performance standards for each type of
generation and (3) prohibits long-term financial commitments
with generating sources that do not meet the emission standards.
ANALYSIS:
Existing law:
1. Prohibits a load-serving entity - an investor-owned
utility (IOU), electric service provider (ESP) and
community choice aggregator (CCA) - or a local
publicly-owned utility (POU) from entering into a long-term
financial commitment for baseload electricity generation -
meaning either a new ownership investment in baseload
generation or a new or renewed contract with a term of five
or more years for such generation - unless that generation
complies with a GHG emission performance standard.
Existing law directs the California Public Utilities
Commission (CPUC) and the California Energy Commission
(CEC) to establish the GHG emission performance standard
applicable to load-serving entities and POUs, respectively.
2. Requires the CPUC, by February 1, 2007, in consultation
with the CEC and the California Air Resources Board (ARB),
to establish a GHG emission performance standard for all
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baseload generation of load-serving entities and POUs at a
rate of emissions of GHG that is no higher than the rate of
emissions of such gases for combined-cycle natural gas
baseload generation. Current law defines "baseload
generation" as electricity generation from a powerplant
that is designed and intended to provide electricity at an
annualized plant capacity factor of at least 60 percent.
3. Requires the CEC, by June 30, 2007, in consultation with
the CPUC and the ARB, to establish a GHG emission
performance standard for all baseload generation of POU at
a rate of emissions of GHG that is no higher than the rate
of emissions of such gases for combined-cycle natural gas
baseload generation. Statute makes requirements of the CEC
in relation to its adoption of the emission performance
standard with powers and responsibilities regarding its
emission performance standard and the POUs that largely
parallel the CPUC's powers and responsibilities regarding
its emission performance standard and the load-serving
entities.
4. Directs the CEC and the CPUC, each in consultation with
ARB, to reevaluate and continue, modify, or replace the GHG
emission performance standard once an enforceable standard
is in place for POUs and load-serving entities,
respectively. (Public Utilities Code §8340 et seq.)
This bill:
This bill establishes the terms "nonpeaking generation" and
"peaking generation," to be defined by the CPUC and the CEC, and
requires the CPUC and the CEC to establish separate GHG emission
performance standards for each type of generation.
Specifically, this bill:
1. Redefines "GHG emission performance standard" to mean
permissible levels of emissions of GHG for peaking and
nonpeaking generation of electricity.
2. Defines "nonpeaking generation" to mean electricity
generation from a powerplant that is designed and intended
to provide electricity at an annualized plant capacity
factor to be determined by the CPUC and the CEC, in
consultation with California Independent System Operator
(CAISO), considering both current energy generation needs,
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as well as energy generation needs as the GHG emission
performance standards for nonpeaking generation are
implemented.
3. Defines "peaking generation" as electricity generation
from a powerplant that is designed and intended to provide
electricity at an annualized plant capacity factor to be
determined by the CPUC and the CEC, in consultation with
CAISO, considering both current energy generation needs, as
well as energy generation needs as the GHG emission
performance standards for peaking generation are
implemented.
4. Directs the CPUC and the CEC each, but in consultation
with one another, by June 30, 2017, to adopt GHG emissions
performance standard for nonpeaking generation and for
peaking generation of load-serving entities and POUs,
respectively, to be updated every five years.
5. Directs the CPUC and the CEC to establish its initial
GHG performance standard for nonpeaking generation at the
lowest level each agency determines to be technologically
feasible without risking the reliability of the electrical
grid and of electric service.
6. States that the GHG emission performance standard for
nonpeaking powerplants that is to take effect on July 1,
2027, is to be no higher than the rate of emissions of GHG
for the lowest-emitting combined-cycle natural gas
powerplant in operation at that time.
7. Prohibits, as of July 1, 2017, a load-serving entity or
a POU from entering into a new long-term financial
commitment for peaking or nonpeaking generation unless the
source of the generation complies with the applicable GHG
emission performance standard.
8. Declares that once a powerplant has all necessary
permits or certificates to operate and has been deemed to
comply with the applicable GHG emission performance
standard, the permitted or certificated GHG emission
performance standard is the only GHG emission performance
standard that shall govern the powerplant's energy
generation.
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9. Defines carbon capture and storage (CCS) as any method
authorized by the CEC for preventing the release of GHG
into the atmosphere, including injection of carbon dioxide
or other GHG into geological formations so as to prevent
releases into the atmosphere.
10. Declares any CCS project associated with an application
for certification by the CEC as a related facility for
permitting purposes.
Background
The GHG Emission Performance Standard . In the early 2000s,
coal-fired powerplants supplied about one-fifth of the
electricity consumed in California.<1> Following passage of SB
1368 (Perata, 2006), the CEC and the CPUC adopted an emission
performance standard (EPS) for baseload electricity generation,
meaning generation from a powerplant designed and intended to
provide electricity of at least 60 percent the powerplant's
capacity. The two agencies set the standard at an emissions
rate of 1,100 pounds of carbon dioxide (CO2) per megawatt-hour
(MWh). This was, according to the agencies' calculations, a
rate that did not exceed the rate of GHG emitted by a natural
gas-fired combined-cycle powerplant used for baseload
generation, the standard established by SB 1368.
SB 1368 requires the CEC and CPUC to reevaluate and continue,
modify, or replace the EPS. Statute, however, is vague about
when or by what criteria the agencies are to do so, other than
to say when an enforceable EPS "is in operation."
The effect of the EPS was to prevent the state's retail sellers
of electricity and POUs from entering into new contracts for
coal-fired generation of electricity or from renewing such
contracts. In 2013, coal-fired powerplants supplied less than
eight percent of the electricity consumed in California. Coal
should provide even less of California's power in coming years
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<1> Source: California Energy Commission Energy Almanac
(http://energyalmanac.ca.gov/electricity/total_system_power.html)
.
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as older contracts for coal-generated electricity expire.
In 2012, the Natural Resources Defense Council (NRDC) and the
Sierra Club formally proposed the CEC consider and EPS lower
than the 1,100 pound standard, contending and EPS of 825-850
pounds was "economic and feasible."<2> CEC considered the
proposal and, in the end, decided not to revise the EPS. In
explaining its decision, the CEC concluded the current EPS had:
Successfully prevented new long-term investments by
California utilities in high-emitting baseload resources,
such as coal facilities.
Encouraged the early divestiture of existing high-GHG
emitting baseload resources.
More generally, the CEC expressed concern that lowering the EPS
could impede California utilities' ability to provide the
operational flexibility necessary to cost-effectively integrate
renewables resources. This was because CEC feared the lower EPS
would prevent facilities from being able to balance new
renewable development with inherently less-efficient fast-start
natural gas generation. The end result of lowering the EPS
therefore, warned the CEC, might be an increase in GHG
emissions, contrary to the goal of SB 1368. The CEC further
noted that several other state policies - including the ARB's
cap-and-trade market mechanism to reduce GHG emissions -
effectively drive investment in the most efficient natural gas
electricity generation practical.
New Emission Performance Standards - Peaking and Nonpeaking . A
"peaker" powerplant is generally understood to be a plant that
runs only when demand for electricity peaks. For example, a
peaker plant may be put into service on a hot summer day when
cooling-related electricity use climbs and then removed from
service when electricity use drops off as the day cools. A
search of the Public Resources Code and the Public Utilities
Code does not show an existing statutory definition of "peaker"
plant.
This bill modifies the EPS by proposing two new EPSs - one for
"nonpeaking" electricity generation and another for "peaking"
electricity generation. Rather than provide a definition for
either type of generation, the bill tasks the CEC, in
consultation with the CAISO, with defining the terms.
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<2> See CEC Docket No. 12-0IR-1.
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Presumably, CEC would define nonpeaking generation in a way that
is generally similar to the existing definition of "baseload"
generation, which this bill removes from law. Peaking
generation, in contrast, as CEC would likely define it, would be
generation used at some rate well below the current rate used to
define "baseload" generation.
The bill then calls on the CEC and the CPUC, by June 30, 2017,
working in consultation with one another and with the ARB, to
establish GHG EPSs for nonpeaking generation and for peaking
generation. The bill requires the agencies to establish the
initial nonpeaking EPS at a level not higher than the rate of
emission for the lowest-emitting combined-cycle natural gas
powerplant in operation at that time. The bill does not
prescribe the level at which the agencies are to set the initial
EPS for peaking generation.
The CEC's and the CPUC's new EPSs would apply to IOUs and
load-serving entities, respectively. The effect of the new EPSs
would be to prohibit an IOU or a load-serving entity from
entering into a long-term financial commitment for electric
power unless the source generating the power complies with the
relevant EPS.
Different Conditions, Different Results . It may be that the
bill's prescriptive standard for the initial nonpeaking EPSs is
not practicable. As noted above, the bill requires the agencies
to set the initial nonpeaking EPS at a level not higher than the
rate of emission for the lowest-emitting combined-cycle natural
gas powerplant in operation at that time. Such a
one-size-fits-all standard may not be appropriate, however.
Powerplant efficiency varies according to ambient conditions so
that identical powerplants operating in different settings may
experience different efficiencies. The author and committee may
wish to consider amendments that require the agencies to take
into consideration siting factors such altitude, regional
climate, and operating capacity when setting the EPSs.
Bill Envisions Carbon-Capture-and-Storage Future . One way that
natural-gas fired powerplants, or other fossil-fueled
powerplants, could meet more stringent EPSs is through the use
of CCS, also referred to as carbon sequestration. This
technique encloses GHG emitted during electricity generation or
other industrial processes in geological formations. The United
States Department of Energy has funded several CCS projects at
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coal facilities around the country in pursuit of the still
elusive "clean coal." The CEC, however, indicates these
projects have faced numerous setbacks. It is not clear at this
time how viable CCS will be as a GHG mitigation strategy.
Nonetheless, this bill envisions a future in which CCS projects
seek permitting in California. The bill declares that any CCS
project associated with an application with the CEC for
powerplant certification is a "related facility." This means
the CEC, not a local agency or other permitting agency, would
have responsibility for certifying the CCS project.
The bill defines CCS as any method "authorized" by CEC for
preventing the release of GHG into the atmosphere. However, the
CEC does not "authorize" such methods. The author and committee
may want amend the definition to strike reference to the CEC's
authorization of such methods.
A Complicated, Shifting Policy Mix . California has robust
clean-energy policies. For example, current statute requires
the state to receive at least 33 percent of its electricity from
renewable sources by 2020, and tasks the ARB with reducing the
emissions of GHG from most economic sectors of the state,
including electricity generation. Those policies are likely to
morph and expand. Governor Brown has called for generating half
of the state's electricity from renewable resources and cutting
petroleum use in cars and trucks by half, a goal many presume
would be achieved by shifting a large portion of transportation
fuel from petroleum-based sources to electricity. The Senate
pro tem has proposed to codify these goals in SB 350, a bill
under consideration in this committee. At the federal level,
the Environmental Protection Agency has proposed regulations,
currently subject to litigation, that limit the emission of
carbon from existing powerplant. It is worth considering how
this bill fits in to this complex, evolving clean-energy
context.
In declining to use its existing authority to modify the current
EPS, the CEC noted the potential for a more-stringent EPS to
impede renewable development and, counterintuitively, lead to an
overall increase in GHG from the electricity generating sector.
Such a warning warrants caution, especially as the Legislature
considers significantly expanding clean energy goals. The
author and committee may wish to consider requiring the state's
energy and air pollution agencies to analyze, via formal, public
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processes, the likely effects of the EPSs proposed by this bill
and to report the findings to the Legislature before the
requirements of this bill take effect.
Author-Proposed Amendments . The author has proposed amendments
to correct drafting errors, as follows: on page 15, in line 12,
and on page 18, in line 34, change "2027" to "2017" to correct
drafting errors.
Double Referral . Should this bill be approved by the committee,
it will be re-referred to the Senate Committee on Environmental
Quality for its consideration.
Prior/Related Legislation
SB 1368 (Perata, Chapter 598, Statutes of 2006) required CPUC
and CEC, respectively, to establish a GHG emission performance
standard applicable to new long-term financial commitments for
baseload electricity generation of load-serving entities and
POUs.
FISCAL EFFECT: Appropriation: No Fiscal
Com.: Yes Local: Yes
SUPPORT:
American Lung Association in California
Asian Pacific Environmental Network
Breathe CA
California Black Health Network
California League of Conservation Voters
Climate Parents
Coalition for Clean Air
Coastal Environmental Right Foundation
Environmental Action Committee of West Marin
Environmental Defense Fund
National Parks Conservation Association
Sierra Club California
OPPOSITION:
California Chamber of Commerce
California Manufacturers & Technology Association
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California Municipal Utilities Association
M-S-R Public Power Agency
Northern California Power Agency
Pacific Gas and Electric Company
San Diego Gas & Electric Company
Southern California Edison
Southern California Public Power Authority
ARGUMENTS IN SUPPORT: Supporters contend the EPSs required by
this bill will enable one more mechanism by which the state will
achieve it GHG-reduction goals.
ARGUMENTS IN OPPOSITION: Opponents argue the state has existing
policies to achieve the reduction of GHG from electricity
generation and that the EPSs required by this bill will
complicate and possibly hinder further development of renewable
energy resources.
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