BILL ANALYSIS Ó
SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
Senator Bob Wieckowski, Chair
2015 - 2016 Regular
Bill No: SB 180 Hearing Date: 4/29/15
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|Author: |Jackson |
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|Version: |4/20/2015 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant|Rebecca Newhouse |
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Subject: Electricity: emissions of greenhouse gases
ANALYSIS:
Existing law:
1. Requires California Public Utilities Commission (PUC), by
February 1, 2007, in consultation with CEC and the California Air
Resources Board (ARB), to establish a GHG emission performance
standard for all baseload generation of load-serving entities at
a rate of emissions of GHG that is no higher than the rate of
emissions of GHGs for combined-cycle natural gas baseload
generation.
2. Requires CEC, by June 30, 2007, in consultation with PUC and the
ARB, to establish a GHG emission performance standard for all
baseload generation of publicly owned utilities (POU) at a rate
of emissions of GHG that is no higher than the rate of emissions
of GHGs for combined-cycle natural gas baseload generation.
3. Prohibits a load-serving entity, or a POU, from entering into a
long-term financial commitment for baseload electricity
generation unless that generation complies with the GHG emission
performance standard.
4. Specifies that CO2 that is permanently disposed of in geological
formations, in compliance with applicable laws and regulations,
does not count toward emissions of the powerplant in determining
compliance with the GHG emission performance standard.
5. Requires PUC to consider net emissions from the process of
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growing, processing, and generating the electricity from the fuel
source when calculating GHG emission by facilities generating
electricity from biomass, biogas, or landfill gas energy.
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 PUC and CEC, in consultation with California
Independent System Operator (CAISO), considering both current
energy generation needs, 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 PUC and
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 PUC and CEC each, but in consultation with one another and
ARB, by June 30, 2017, to adopt a GHG emission performance
standard for nonpeaking generation and for peaking generation of
load-serving entities and POUs, respectively, to be updated every
five years based on new technology.
5.Directs PUC and CEC to establish its initial GHG performance
standard for nonpeaking and peaking generation at the lowest level
each agency determines to be technologically feasible without
risking the reliability of the electrical grid and of electric
service, or hampering further deployment of renewable generation
resources or reductions of greenhouse gas emissions, and taking
into consideration siting factors such as altitude, regional
climate, and operating capacity.
6.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
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with the applicable GHG emission performance standard.
7.Specifies that nonpeaking emissions performance standard applies
only to nonpeaking powerplants and the peaking emissions
performance standard applies only to peaking powerplants.
8.Requires PUC, in calculating GHG emissions by facilities
generating electricity from biomass, biogas, or landfill gas
energy to reconsider and modify its prior decisions implementing
this section in light of the best and most recent scientific
information available.
9.Defines carbon capture and storage (CCS) as any method that
prevents the release of GHGs into the atmosphere.
10.Specifies that GHGs that are prevented from being released into
the atmosphere as a result of carbon capture and storage or carbon
capture and sequestration, in compliance with applicable laws and
regulations, do not count as emissions of the powerplant in
determining compliance with the GHG emission performance standard.
11.Declares any CCS project associated with an application for
certification by CEC as a related facility for permitting
purposes.
12.Specifies that the provisions of the bill become operative on
January 1, 2017.
Background
1. SB 1368 and Coal-Generated Electricity.
In the early 2000's, coal-fired powerplants supplied about
one-fifth of the electricity consumed in California, with about
half of that from coal imports.
From 2007 to 2012, coal energy imports declined by 18%, and
energy from in-state coal and petroleum (pet) coke plants
declined by 62%.
According to a CEC report on current and expected coal use
updated last November, "Coal-based energy supplies totaled 23,323
gigawatt hours (GWh) in 2012, equal to about 8% of the statewide
energy requirements to serve California loads. Nearly all these
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energy imports are tied to long-term utility power purchase
agreements, ownership interests or procurement contracts, some of
which have been in place for decades. Publicly owned utilities in
Southern California have most of the long-term contracts with
out-of-state coal plants." Specifically, of the coal energy
imports in 2012, the largest share, 44 percent went to LA
Department of Water and Power, followed by 24% to Southern
California Edison, 7% to Anaheim, and 5 percent to California
Department of Water Resources.
"The supply of coal-fired energy procured by California utilities
from out-of-state plants or generated in California by coal and
pet coke plants is expected to decline by 38% between 2012 and
2022. In these years, associated greenhouse gas emissions are
expected to drop from about 23.8 million metric tons (MMT) of
carbon dioxide equivalent (CO2e) to 14.8 million metric tons."
According to CEC, this decline in coal contract deliveries in due
in large part to the constraints imposed by the EPS created by
Senate Bill SB 1368 (Perata) Chapter 598, Statutes of 2006.
Specifically, SB 1368 (Perata), Chapter 598, Statutes of 2006,
required CEC and PUC to adopt a greenhouse gas emission
performance standard (EPS) for baseload electricity generation
and prohibits the state's utilities from entering into long-term
financial commitments unless any baseload generation supplied
under the long-term financial commitment complies with the GHG
emission performance standard. SB 1368 required the EPS to be
capped at a rate of GHG emissions that did not exceed the rate of
GHG emitted by a natural gas-fired combined-cycle powerplant used
for baseload generation.
Pursuant to SB 1368, the GHG emission performance standard was
set at 1,100 pounds of carbon dioxide (CO2) per megawatt-hour
(MWh) by PUC and CEC. Since all existing contracts with
coal-fired generating facilities provide baseload energy supplies
that exceed emissions limits defined by the EPS (On average, coal
combustion releases approximately 2,250 pounds of carbon dioxide
into the atmosphere for each MWh generated), as these contracts
expire, they cannot be renewed or extended with another long-term
contract.
2. Peaking and Baseload Plants.
Baseload power is defined as electricity generation from a
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powerplant that is designed to provide electricity at least 60%
of the total hours in a year (a 60% capacity factor). Baseload
power contracts are for power that is intended to be operating to
meet demand night and day and throughout the year.
This is different from peak power, which is intended to be
available only at those times of the day and year when demand
spikes. Baseload power generally comes from more efficient power
plants and tends to be cleaner and cheaper than peak power. One
reason is due to inherent inefficiencies with starting and
stopping electricity generation. Another reason is, because
peaking plants run inconsistently and usually for short periods
of time due to high electricity demand, it is less cost effective
for powerplant operators to finance upgrades for those plants.
Another type of generation, load-following generation, is
becoming increasingly important with implementation of the
Renewable Portfolio Standard, which requires utilities meet 33%
of their retail sales of electricity with renewable resources by
2020.
Load-following generation is usually powered through natural gas
powerplants, and is necessary to match the increases and
decreases in electricity demand throughout the day. As more
renewables are integrated into the grid, baseload power
generation will likely decline, and faster ramping load-following
generation, used to balance the electricity supply from
intermittent renewable resources, will likely increase.
SB 1368 required an EPS for baseload power, defined in the
initial legislation as plants running at 60% capacity annually,
but did not specify an EPS for peak power, or "peaking
generation."
SB 180 sunsets existing provisions for the determination of an
EPS for baseload generation, and instead, directs CEC and PUC to
set a "peaking" and "nonpeaking" or baseload-type, emission
performance standard. SB 180 also requires PUC and CEC to
determine what annualized plant capacity factor qualifies
electricity generation for "peaking" and "nonpeaking" generation.
3. Carbon Capture and Sequestration.
Studies by a broad range of governmental and non-governmental
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organizations on the international, federal and state level
report that carbon capture and storage (CCS) is a critical
component of an effective strategy for achieving stringent global
greenhouse gas (GHG) emission reductions. CCS in most cases
refers to technologies that capture CO2 emissions from
powerplants and other large industrial sources and the subsequent
compression, transport, and injection of the carbon into a
geological formation that prevents its release to the atmosphere.
The "storage" aspect of CCS can be accomplished by the injection
of CO2 into large, deep underground porous reservoir rock
saturated with brackish water. These formations are estimated by
a joint CEC and Department of Conservation report to have a
capacity of tens to hundreds of metric gigaton of CO2. As a
reference, statewide GHG emissions are approximately half a
gigaton. Some proponents of CCS also contend that carbon can be
"stored" in another way, specifically during a process known as
enhanced oil recovery (EOR).
EOR is a process that injects a fluid, such as steam or CO2, into
an oil or gas well with declining reserves in order to pressurize
the well and increase oil and gas production (and mobility, in
the case of oil) from those reserves. During CO2 EOR, some of
the CO2 partially dissolves in the oil, and is retrieved with
recovered oil, while the remaining CO2 presumably remains trapped
underground.
Recently, there have been reports on alternatives to geologic
sequestration, or EOR CO2 storage. Specifically, mineral
carbonation is emerging as an area of interest and potential
alternative to geologic injection of CO2. Mineral carbonation
involves the reaction of CO2 with magnesium and calcium oxides to
produce inert carbonite materials, which then may be used to
generate commercially viable byproducts for various applications.
In California due to the fact that fossil fuels, including oil
for transportation and natural gas for electricity production,
will constitute a substantial component of California's emissions
for some time to come, CCS is viewed by some as a technology with
great potential to reduce the carbon footprint of new and
existing powerplants burning natural gas in order to meet
California's GHG goals. According to ARB's 2008 Scoping Plan,
CCS within California and the Western region could help achieve
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the GHG goals for 2050. An ARB resolution in December 2010
directed the executive officer to initiate a public process to
establish a protocol to account for geologic sequestration and
provide recommendations on how such sequestration should be
addressed in the cap and trade program.
In the United States, there are two large scale CCS projects that
are capturing CO2 from coal-fired powerplants. One of these is a
582 MW project in Mississippi and the other is a 250 MW
powerplant in Texas. One CCS project that is currently in the
planning phase is the Hydrogen Energy California (HECA) project.
The HECA project would construct an integrated gasification
combined cycle powerplant that also plans to manufacture hydrogen
from coal and petroleum coke to generate 300 megawatts of
electricity, produce nitrogen-based fertilizers and capture 90%
of CO2 produced from the gasification process. The project would
be located on a 453-acre site in Kern County currently used for
agricultural purposes about seven miles west of Bakersfield. The
HECA project plans to transport the CO2 by pipeline to Occidental
of Elk Hills, Inc. (OEHI) for use at the adjacent Elk Hills Oil
Field for enhanced oil recovery.
Although there have been a handful of nonpower plant CCS projects
in operation for over two decades, the first large-scale
powerplant CCS project on the globe became operational last
October. The Boundary Dam project in Saskatchewan, Canada uses
coal as a feedstock and produces about 110 MW, and sells the
captured CO2 projects for EOR.
CCS projects are very expensive. The Boundary Dam project
produces a relatively small amount of power (110 MW) and costs
$1.3 billion. It received $240 million from the Canadian
Government. The Kemper County project in Mississippi now under
construction is now projected to cost almost $5.6 billion, and
the HECA project in Kern County is expected to cost over $4
billion. The federal Department of Energy is contributing $408
million and $437 million in tax credits.
CEC reports that the HECA project application review process has
had serious delays because the HECA applicant has not provided
information required by CEC staff to complete their environmental
impact statement.
In March, a motion was filed by interveners to terminate the
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application process. HECA responded that they are no longer
certain about the viability of the carbon capture and
sequestration site proposed for the project and they are pursuing
alternative plans for how they would use and store the captured
CO2.
SB 1368 specifies that CO2 captured from a powerplant and
permanently sequestered in geological formations does not count
toward the powerplant's emissions under EPS. CEC's EPS
regulations do not count CO2 projected to be successfully
sequestered and considers CO2 successfully sequestered if the
project includes the capture, transportation, and geologic
formation injection of CO2 emissions, complies with all
applicable laws and regulations, and has an economically and
technically feasible plan that will result in the permanent
sequestration of CO2 once the sequestration project is
operational.
SB 180 amends statute by deleting references to geologic
formations, and instead specifies that GHGs that are prevented
from being released into the atmosphere as a result of carbon
captures and storage or carbon capture and sequestration, in
compliance with applicable laws and regulations, does not count
toward determining compliance with the GHG emission performance
standard.
4. CEC's Licensing and Siting Powerplants.
The California Energy Commission is the lead agency for licensing
thermal powerplants 50 megawatts and larger and the plants
related facilities, including transmission lines, fuel supply
lines, water pipelines, under the California Environmental
Quality Act (CEQA) and has a certified regulatory program under
CEQA. Under its certified program, CEC is exempt from having to
prepare an environmental impact report. Its certified program,
however, does require environmental analysis of the project,
including an analysis of alternatives and mitigation measures to
minimize any significant adverse effect the project may have on
the environment.
According to CEC's website, "The Energy Commission's
license/certification subsumes all requirements of state, local,
or regional agencies otherwise required before a new plant is
constructed. The Energy Commission coordinates its review of the
facility with the federal agencies that will be issuing permits
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to ensure that the Energy Commission certification incorporates
conditions of certification that would be required by various
federal agencies."
Two different review processes that are available for powerplants
at CEC are the 12-month review (also called "Application for
Certification") and the Small Power Plant Exemption (SPPE). The
SPPE is available for projects between 50 MW and 100 MW, provided
the proposed project does not create an unmitigated significant
impact on environmental resources.
5. PUC's Decision D.07-01-039 and Biomass Powerplants.
PUC's 2007 decision 07-01-039 adopted an interim GHG emissions
performance standard for new long-term financial commitments to
baseload generation undertaken by all load-serving entities,
consistent with the requirements and definitions of SB 1368
In this decision, PUC classified bioenergy generation as
compliant with the GHG emission performance standard of 1,100 lbs
CO2/MWh emissions performance standard, even though out of the
stack often times carbon emission can be much higher than the
standard, based on the conclusion that bioenergy generation
avoided GHGs that would have otherwise occurred in the disposal
of the biomass materials.
According to PUC, "In particular, the record shows that electric
generation using biomass (e.g., agricultural and wood waste,
landfill gas) that would otherwise be disposed of under a variety
of conventional methods (such as open burning, forest
accumulation, landfills, composting) results in a substantial net
reduction in GHG emissions. This is because the usual disposal
options for biomass wastes emit large quantities of methane gas,
whereas the energy alternatives either burn the wastes that would
become methane or burn the methane itself, generating CO2 .
Since methane gas is on the order of twenty to twenty-five times
more potent as a GHG than CO2, and since methane has an
atmospheric residence time of twelve years, after which it is
converted to atmospheric CO2, trading off methane for CO2
emissions from energy recovery operations leads to a net
reduction of the greenhouse effect."
Comments
1. Purpose of Bill.
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According to the author, "In recognizing the changing landscape
of electricity generation in California, SB 180 creates two new
Emissions Performance Standards-one for "nonpeaking generation"
and another for "peaking generation"-that will limit the amount
of carbon dioxide power plants may emit. SB 180 requires that the
state adopt the lowest EPSs that are technologically feasible
without putting the reliability of the electrical grid and
electric service at risk, and requires the EPSs to be revised
downward every five years based on technological advances. This
will force California to phase out its dirtiest power plants,
which are typically located in disadvantaged communities with
high levels of pollution, and will eventually lead California
toward a fossil-fuel free future for energy generation."
2. CEC and Lowering the EPS.
In 2012, the Natural Resources Defense Council (NRDC) and the
Sierra Club formally proposed CEC consider revising the EPS to a
level lower than the 1,100 pound standard, contending an EPS of
825-850 pounds was economic and feasible. NRDC and Sierra Club
stated that they did not believe the EPS was sufficiently
stringent to require the use of the most efficient and least
polluting baseload fossil-fueled technology commercially
available in 2012.
CEC considered the proposal and, in the end, concluded "that the
current EPS for POUs should not be lowered at this time for
several reasons." In explaining its reasoning, CEC stated that
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, CEC expressed concern that lowering the EPS for
baseload power could impede California utilities' ability to
provide the operational flexibility necessary to cost-effectively
integrate renewables resources. They note that "if the EPS
standard is set so low that it precludes powerplants with fast
start capabilities, which are inherently less efficient, carbon
emissions could increase."
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However, SB 180 directs PUC and CEC to establish its initial GHG
performance standard for nonpeaking and peaking generation at the
lowest level each agency determines to be technologically
feasible without risking the reliability of the electrical grid
and of electric service, or hampering further deployment of
renewable generation resources or reductions of greenhouse gas
emissions.
The bill also requires PUC and CEC to take into consideration,
when setting the EPS altitude, regional climate and operating
capacity.
For nonpeaking generation, SB 180 does not ensure PUC and CEC
will set a lower EPS. In fact, SB 180 gives PUC and CEC the
discretion to set EPS standards that are lower, identical, or
even higher, than the current EPS based on their determinations
of what standard will ensure grid reliability and operational
flexibility necessary for renewable integration, as well as
ensuring a standard that does not impede GHG emissions
reductions.
However, SB 180 does ensure that PUC and CEC set an EPS for
"peaking generation," which is a type of generation that is not
currently captured under the EPS requirements of SB 1368.
1. Reconsider and Modify.
SB 180 requires that PUC reconsider and modify its previous
decision on EPS compliance for biomass facilities. Their decision
determined that although biomass facilities typically had higher
GHG emissions rates than natural gas powerplants, they prevent
the release of methane, a much more potent GHG. Additionally,
carbon from biomass was recently pulled out of the atmosphere.
Decision making at PUC is a long and costly process.
The author may wish to consider if there is a less formal,
time-consuming and costly way to have PUC revisit this issue in
order to provide guidance on whether the science indicates a
change from the previous decision is necessary.
Additionally, since a reconsideration of this decision based on
best available science does not necessarily mean that a different
finding will be made, an amendment is needed to strike "and
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modify" from the bill, so as not to presuppose the outcome of
this reevaluation by PUC.
2. Carbon Capture and Sequestration.
SB 180 attempts to accomplish two goals regarding carbon capture
and storage/sequestration: (1) Clarification that any CCS project
associated with an application for certification of an electrical
generating facility is a related facility for purposes of CEC's
parallel process for siting and licensing powerplants under the
California Environmental Quality Act (CEQA), and (2) Creating a
technology neutral definition of CCS for purposes of the emission
performance standard in the bill.
The former aim is an attempt to preempt CEQA litigation
surrounding potential CCS projects that would be used to
sequester GHGs from powerplants, but that are not physically
connected or close to the powerplants, by providing in the bill
that these CCS projects associated with powerplants are
considered related facilities, and therefore one project, for
purposes of CEC's CEQA regulatory process.
The latter goal comes from recent research suggesting that other
forms of storing or sequestering carbon besides injecting into
geologic formations, such as mineral absorption, can be used to
prevent the release of the GHGs into the atmosphere.
However, SB 180 deletes language relating to CO2 being
"permanently sequestered" in an effort to make the statute
technology neutral. To more closely mirror the original language
of SB 1368, while still not prescribing which technology should
be used, an amendment is needed to specify that for carbon
capture and storage associated with EPS compliance, GHGs must be
permanently sequestered, so as to prevent them from being
released into the atmosphere.
Related/Prior Legislation
SB 1368 (Perata), Chapter 598, Statutes of 2006, prohibited POUs and
load-serving entities from entering into long-term financial
commitments for generation unless the baseload power complied with
an emissions performance standard, established by PUC and CEC.
SOURCE: Author
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SUPPORT:
American Lung Association, California
Asian Pacific Environmental Network
Breathe CA
California Black Health Network
California League of Conservation Voters
Clean Power Campaign
Climate Parents
Coalition for Clean Air
Coastal Environmental Right Foundation
Environment California
Environmental Action Committee of West Marin
Environmental Defense Fund
National Parks Conservation Association
Sierra Club California
OPPOSITION:
California Manufacturers and Technology Association
California Municipal Utilities Association
M-S-R Public Power Agency
Northern California Power Agency
Pacific Gas and Electric Company
Southern California Edison
ARGUMENTS IN SUPPORT:
Supporters state that that the state must reduce our emission rates
substantially below those specified by SB 1368. They also state
that creating the new designation for peaker plants is critical
since they will be relied on for grid resiliency, renewable
integration and to meet peak demand, and that current law
effectively exempts all peaking plants from the EPS. They also note
that the bill will ensure that new power plants meets the highest
level of emissions standards possible, and that SB 180 will strongly
incentivize renewable technologies which produce less toxic air
pollution then the fossil fuel plants they will replace.
ARGUMENTS IN OPPOSITION:
Opponents state the SB 180 is an unnecessary approach that may place
reliability, affordability and carbon reductions at risk, as the
state continues to transition to more renewable energy generation.
They note that the purpose of establishing an EPS under SB 1368 was
to prohibit long term contracts with coal-fired generation
facilities and that SB 1368 is achieving those objectives. They
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also oppose SB 180 as a piecemeal mandate that increases costs and
further constrains an already complex system. They note there are
multiple energy and emission reduction policies that are already
cost-effectively reducing GHG emissions by electric utilities.
DOUBLE REFERRAL:
This measure was heard in Senate Energy, Utilities and
Communications Committee on April 7, 2015, and passed out of
committee with a vote of 8-3.
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