BILL ANALYSIS Ó
SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS
Senator Ben Hueso, Chair
2015 - 2016 Regular
Bill No: SB 539 Hearing Date: 4/21/2015
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|Author: |Hueso |
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|Version: |4/14/2015 As Amended |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Jay Dickenson |
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SUBJECT: Renewable energy resources: geothermal
DIGEST: This bill (1) requires the California Energy
Commission (CEC), in consultation with the California Public
Utilities Commission (CPUC) and the Independent System Operator
(ISO), to report to the Legislature on barriers to developing
new baseload in-state renewable electrical generation
facilities, including geothermal facilities; and (2) deletes a
provision of existing law that authorizes the CPUC to prohibit
an investor-owned utility (IOU) from curtailing the generation,
production, or transmission of electricity from a geothermal
powerplant operated the IOU.
ANALYSIS:
Existing law:
1. Directs the California Energy Commission (CEC) to
continually assess energy consumption trends and to analyze
the social, economic, and environmental consequences of
these trends. (Public Resources Code §25200 et seq.)
2. Grants, via the California Constitution, the CPUC
authority to fix rates charged by public utilities under
its jurisdiction. (Article XII, Section 6, California
Constitution.)
3. Authorizes the CPUC, upon request of a geothermal energy
producer, prohibit any IOU from curtailing the generation,
production, or transmission of electricity from a
geothermal powerplant operated the IOU if the CPUC deems
SB 539 (Hueso) Page 2 of ?
that such curtailment is not in the public interest.
This bill:
1. Requires the CEC, by January 1, 2021, in consultation
with the CPUC and the ISO, to conduct a study on barriers,
and solutions to them, to developing new baseload in-state
renewable electrical generation facilities, including
geothermal electrical generating facilities, and
maintaining existing contracts with baseload in-state
renewable electrical generation facilities.
2. Deletes a provision of existing law that authorizes the
CPUC, upon a complaint by a geothermal energy producer, to
prohibit IOU from curtailing the generation, production, or
transmission of electricity from a geothermal powerplant
operated the IOU if the commission deems that such
curtailment is not in the public interest.
Background
Geothermal energy is heat from the Earth. It is considered a
renewable resource because the heat emanating from the interior
of the Earth is practically limitless. To develop electricity
from geothermal resources, wells are drilled into a geothermal
reservoir. The wells bring the geothermal water to the surface,
where its heat energy is converted into electricity at a
geothermal power plant. Geothermal generation currently meets
approximately 25percent of the state's renewable portfolio.
However, several contracts in the generation portfolios of
Southern California Edison and Pacific Gas & Electric will
expire in the next five years. San Diego Gas & Electric has no
geothermal in its portfolio.
Last year, the author, in response to the likely relative
decline in geothermal's role as a source of power in California,
carried a bill - SB 1139. That bill would have required
electric utilities to procure specified percentages of their
electricity from geothermal resources. In support of that bill,
the author provided the following statement to this committee:
California and the Western United States have uniquely high
quality solar and geothermal resources. California
utilities are dramatically increasing their utilization of
solar resources, but not effectively increasing utilization
SB 539 (Hueso) Page 3 of ?
of geothermal resources. In fact, only a fraction of the
geothermal resources that could be supplying California
consumers are currently being tapped, and there has been
very little increase in geothermal generation capacity
during the past decade?This is a wasted opportunity of such
a valuable resource. The long term electric supply
portfolio serving California consumers should include much
greater reliance on geothermal resources so that we have a
balanced portfolio as we move toward a carbon-free
generation supply.
The bill passed the Senate but did not pass the Assembly.
The author continues his belief that California should achieve
its climate goals through greater reliance on geothermal
resources - and baseload renewable resources, in general. This
bill seeks to further that goal in two ways.
First, the bill directs the CEC, in consultation with the CPUC
and the ISO, to conduct a study on the barriers to developing
new baseload in-state renewable electrical generation
facilities, including geothermal facilities and possible
solutions to those barriers. The CEC will report its findings to
the Legislature by January 1, 2021.
There is nothing inherently wrong with requiring CEC to study
barriers that prevent baseload renewable generation development.
Such a study might result in insight and recommendations that,
over the long term, increase the likelihood that new in-state
baseload renewable electrical generation facilities are
developed. However, utilities are making decisions on long-term
procurement contracts today. The fact that CEC is formally
studying barriers to baseload renewable electrical generation
facilities development may discourage the utilities from
procuring electricity from such facilities until the conclusion
of the CEC study in 2021. Therefore, the author and committee
may wish to amend the bill to delete the study requirement, the
merits of such a study notwithstanding.
Second, the bill deletes a provision of existing law that
authorizes the CPUC, upon a complaint by a geothermal energy
producer, to prohibit IOU from curtailing the generation,
production, or transmission of electricity from a geothermal
SB 539 (Hueso) Page 4 of ?
powerplant operated the IOU if the commission deems that such
curtailment is not in the public interest. The author reports
that he, during his efforts to promote geothermal resources,
learned that (1) this decades-old provision of law has never
been used and (2) it may violate the federal government's
authority over wholesale electricity. The author expresses
concern that this provision, seemingly protective of geothermal
energy resources, may discourage their development. This is
because, according to the author, the protection that seems to
be granted to geothermal may lead utilities to view the resource
as constraining their operational flexibility, thereby
discouraging their procurement of it.
The author is correct that the federal government retains
exclusive authority overall aspects of wholesale electricity
sales. Specifically, the federal power act, 16 USC 824(b)
grants Federal Energy Regulatory Commission (FERC) exclusive
jurisdiction over the "transmission of electric energy in
interstate commerce," and over the "sale of electric energy at
wholesale in interstate commerce," and over "all facilities for
such transmission or sale of electric energy." Whether the
provision the author seeks to delete hampers geothermal
development is an open question; its conflict with federal law
is not.
Prior/Related Legislation
SB 1139 (Hueso) would have required the IOUs and all other
retail sellers of electricity, by 2024, to procure a
proportionate share of a statewide total of 500 megawatts of
electricity generated by baseload geothermal powerplants that
began being constructed after January 1, 2015.
FISCAL EFFECT: Appropriation: No Fiscal
Com.: Yes Local: No
SUPPORT:
None received
OPPOSITION:
None received
SB 539 (Hueso) Page 5 of ?
ARGUMENTS IN SUPPORT: Current law, while seemingly protective
of geothermal resources, may actually make their procurement
less likely. California should remove unnecessary barriers to
ensure geothermal plays a greater role in achievement of the
state's renewable energy and climate change goals.
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