BILL ANALYSIS Ó
SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS
Senator Ben Hueso, Chair
2015 - 2016 Regular
Bill No: SB 687 Hearing Date: 4/7/2015
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|Author: |Allen |
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|Version: |2/27/2015 As Introduced |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Jay Dickenson |
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SUBJECT: Renewable gas standard.
DIGEST: This bill establishes the renewable gas standard
(RGS). The RGS requires 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 ten
percent of the natural gas supplied is "renewable gas."
ANALYSIS:
Existing law:
1. Directs the California Air Resource Board (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 investor-owned utilities (IOU), community
choice aggregators (CCAs), and electric service providers
(ESPs) (collectively referred to as retail sellers) and
local publicly-owned utilities (POU) to increase purchases
of renewable energy such that at least 33 percent of total
retail sales are procured from renewable energy resources
by December 31, 2020. This is known as the Renewables
Portfolio Standard (RPS).
3. Defines a renewable electrical generation facility and
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includes in that definition a facility that uses landfill
gas or digester gas delivered through a common carrier
pipeline if the source and delivery of the fuel can be
verified by the California Energy Commission (CEC).
4. Requires the CPUC to adopt standards that specify the
concentrations of constituents of concern that are found in
biomethane, and to adopt monitoring, testing, reporting,
and recordkeeping protocols, to ensure the protection of
human health and the integrity and safety of pipelines and
pipeline facilities. (Health & Safety Code §25421 et seq.)
5. Requires the CPUC to adopt pipeline access rules that
ensure that each gas corporation provides nondiscriminatory
open access to its gas pipeline system to any party for the
purposes of physically interconnecting with the gas
pipeline system and effectuating the delivery of gas.
(Public Utilities Code §784.)
6. Requires the CEC to hold public hearings to identify in
its Integrated Energy Policy Report 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 the ARB, on or before June 30, 2016, and in
consultation with the CEC and the CPUC, to adopt a
carbon-based renewable gas standard (RGS) that requires
each gas seller to provide a certain percentages of
"renewable gas" to retail end-use customers. The
requirement adopted by ARB will conform to a compliance
schedule so that, by December 31, 2029, and thereafter,
each gas seller supplies at least 10 percent "renewable
gas" to retail end-use customers.
2. Limits "renewable gas" that qualifies under the RGS to
gas that is:
Used onsite by an end-use customer in California.
Used by an end-use customer in California and
delivered through a dedicated pipeline.
Delivered to end-use customers in California through
a common carrier pipeline and: (1) the source of
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renewable gas injects the renewable gas into a common
carrier pipeline that physically flows within California
or toward the end-use customers for which the renewable
gas was procured under the purchase contract; and (2) the
source of renewable gas did not inject the renewable gas
into a common carrier pipeline prior to March 29, 2012,
or the source commenced injection of sufficient
incremental quantities of renewable gas after March 29,
2012, to satisfy the purchase contract requirements; and
(3) the seller or purchaser of the renewable gas
demonstrates that the capture and injection of renewable
gas into a common carrier pipeline directly results in
specified environmental benefits in California.
1. The bill requires the ARB notify all gas sellers in
California how to comply with the RGS; maintain a list of
eligible "renewable gas" providers; and adopt "flexible
compliance mechanisms," such as tradable "renewable gas"
credits.
Background
What Is Renewable Gas ? 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.
Biogas is a gas produced by converting biomass to a gaseous
mixture 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.
Biogas can be used directly to produce electricity or can be
converted to biomethane by removing carbon dioxide and other
impurities. Biomethane can replace fossil sources of natural gas
in homes and factories and compressed or liquefied natural gas
used in vehicles. Biomethane can also be used to produce
renewable hydrogen in fuel cells. <1>
This bill defines "renewable gas" as biogas produced from
organic waste or other renewable resources organic waste or
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<1> 2012 Bioenergy Action Plan (
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organic materials.
Why is Biogas Considered Low Carbon ? Combustion of biogas
produces carbon dioxide (CO2), just like the combustion of
natural gas. However, the combustion of biogas destroys
methane, a gas which is a much more potent GHG than is CO2. In
addition, biogas can be used to displace the use of fossil
fuels, such as natural gas, thereby further decreasing its
carbon intensity.
Mind the Gap . There are many state programs that, directly or
indirectly, encourage or the use of "renewable gas." Utilities
can meet the RPS through the use of biogas if produced from
qualifying renewable resources. Recently enacted statute (SB
1122, Rubio, 2012) requires IOUs to collectively procure at
least 250 MW of generation eligible for the RPS from bioenergy
generation projects, including biogas projects. The CEC has
invested more than $49 million in 13 biomethane feasibility,
demonstration and production projects throughout the state. And
biogas can be used to help satisfy the requirements of the ARB's
Low-Carbon Fuels Mandate, which requires a reduction of at least
10 percent in the carbon intensity of California's
transportation fuels by 2020.
In addition, efforts are underway that should ease the further
development and commercialization of "renewable gas." The IOUs
have been wary of injecting biogas into their natural gas
pipelines for fear of introduction of contaminants that could
damage the pipelines or harm human health. In response, the
Legislature in 2012 enacted AB 1900 (Gatto). That bill directs
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. The CPUC is still in the process of
completing this work.
The Legislature, also in 2012, enacted related legislation (AB
2196, Chesbro). That bill ensures that biogas qualifies for RPS
credit, provided its production, delivery and use meet certain
conditions.
The bill's proponents, despite these various state programs
supporting and encouraging biogas development and use, contend
there is a gap in the state's clean energy and climate policies.
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As evidence of that gap, the proponents point to the continued
low use of renewable natural gas as a proportion of the state's
overall natural gas use, which produces about one-quarter of the
state's emissions of GHG. Proponents further contend that the
state needs a statewide policy commitment that provides
long-term certainty to the biogas market. The author intends
this bill to provide that certainty.
Using the RPS as a model, this bill, in its current form, would
establish a RGS that would require "gas sellers" to provide
specific percentages of "renewable gas" to end use customers in
California, according to the following schedule:
January 1, 2016, to December 31, 2019 - not less than 1
percent.
January 1, 2020, to December 31, 2022 - not less than 3
percent.
January 1, 2023, to December 31, 2024 - not less than 5
percent.
January 1, 2025, to December 31, 2029, and thereafter -
not less than 10 percent.
The bill would task the ARB, in consultation with the CEC and
CPUC, to adopt the RGS. The bill also includes language similar
to existing statute, contained in 2012's AB 2196, to ensure the
environmental and economic benefits of the use of "renewable
gas" accrue to California. The bill further directs ARB to
adopt flexible compliance mechanisms and to develop an
investment plan that directs any resulting monies to the state's
alternative fuel and energy program (the CEC-administered
Alternative Fuel and Vehicle Technology Program) and related
air-quality program (the ARB-administered Air Quality
Improvement Program).
Proponents cite numerous benefits that they conclude will flow
from successful implementation of the RGS. Those benefits
include:
Additional reduction of GHG emissions.
Reduced landfilling of organic wastes.
Improved air quality and public health.
Reduction of wildfires and burning of agricultural
waste.
Job creation.
Reduced dependence on fossil fuels, especially
out-of-state natural gas.
Market certainty that drives down the cost of "renewable
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gas."
The author has proposed amendments that recast the RGS from a
relative-volume-based standard to a "carbon-intensity standard."
The main difference between the current version of the bill and
the proposed amendments is a change in the compliance
obligation. Under the amendments, a gas seller would be
required to reduce the average carbon intensity of its natural
gas sales, rather than provide specific percentages of
"renewable gas" as part of its natural gas sales.
Too Much ? According to the CEC, 358 megawatts (MW) is
potentially available from new biogas development. Despite this
potential, it is not clear there will be enough "renewable gas"
available to meet the admittedly modest schedule required by
this bill. Proponents believe the RGS will drive down the cost
of "renewable gas" just as the bill's model - the RPS - has
driven down the cost of renewable electricity. However,
shortages of "renewable gas" could drive up the cost of
compliance significantly.
The RPS legislation includes numerous cost-containment "off
ramps". These off ramps allow RPS-covered entities to be
excused from their RPS obligations if the cost of procuring
electricity from renewable resources exceeds statutorily defined
limits. The author and the committee may wish to amend the bill
to include similar cost-containment "off ramps" to the RGS.
Too Soon ? The bill directs ARB to adopt the RGS by June 30,
2016. Depending upon when the bill were to be signed by the
Governor, that schedule might provide the ARB less than one year
to develop and adopt the RGS. The author and committee may wish
to delay the bill's implementation schedule to allow ARB and the
other state agencies sufficient time to comply with the
implementation deadlines.
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
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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. And Senator Pavley has
introduced SB 32, which would require ARB to adopt a very
ambitious GHG emissions limit for 2050. It is worth considering
how this bill fits in to this complex, evolving clean-energy
context.
The author and proponents accurately note that California cannot
meet its GHG reduction targets, especially the targets
envisioned in the Senate's climate package, without
significantly reducing GHG emissions from the natural gas
sector. However, the ARB has, under existing law, broad
authority to require a wide variety of GHG reduction measures,
including, presumably a biogas standard like the RGS proposed by
this bill. The committee should consider this bill in the
context of that existing authority, as well as any expanded
authority it is contemplating, as it evaluates the necessity and
use of this bill.
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 360 (Cannella) would authorize the CPUC to consider providing
the option to all gas corporations to engage in competitive
bidding and direct investment in ratepayer financed biomethane
collection equipment in California. The bill has been referred
to this committee for consideration.
AB 1900 (Gatto, Chapter 602, Statutes of 2012) directs 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) ensures that
biogas qualifies for RPS credit, provided its production,
delivery and use meet certain conditions.
SB 1122 (Rubio, Chapter 612, Statutes of 2012) requires IOUs to
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collectively procure at least 250 MW of generation eligible for
the RPS from bioenergy generation project, including biogas
projects.
FISCAL EFFECT: Appropriation: No Fiscal
Com.: Yes Local: No
SUPPORT:
American Biogas Council
Bioenergy Association of California
Biosynthetic Technologies
Clean Energy and Clean Energy Renewable Fuels
Eisenmann Corporation
Harvest Power, Inc.
Hitachi Zosen Inova U.S.A. LLC
Las Gallinas Valley Sanitary District
Organic Waste Systems
Phoenix Energy
TSS Consultants
OPPOSITION:
Agricultural Council of California
Agricultural Energy Consumers Association
California Citrus Mutual
California Cotton Ginners and Growers Associations
California Dairies Inc.
California Farm Bureau Federation
California Fresh Fruit Association
California League of Food Processors
California Municipal Utilities Association
California Poultry Federation
California Tomato Growers Association
Milk Producers Council
Nisei Farmers League
Western Agricultural Processors Association
Western Growers Association
ARGUMENTS IN SUPPORT: Proponents contend the state needs a
statewide "renewable gas" policy to provide certainty to the
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market. Such certainty will incentivize "renewable gas"
development and innovation to bring down costs. Ultimately,
proponents argue, expanded use of "renewable gas" will help to
state meet it GHG reduction goals, improve public health through
cleaner air, reduce the state's dependence on fossil fuels, keep
billions of dollars in state, and create jobs
ARGUMENTS IN OPPOSITION: Opponents primarily argue that this
bill will increase industrial costs - such as the cost to
process foods - by requiring the purchase of relatively
expensive "renewable gas." Opponents note that the state
already has a robust clean-energy policy that encourages the use
of biogas. Some opponents also contend that the RGS represents
"double taxation," in that they would pay a premium for
"renewable gas" in addition to the premium they already must pay
as part of the AB 32 cap-and-trade program to offset their
natural gas use.
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