BILL ANALYSIS �
AB 2196
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Date of Hearing: April 9, 2012
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Steven Bradford, Chair
AB 2196 (Chesbro) - As Amended: February 23, 2012
SUBJECT : Renewable Portfolio Standard: eligibility of pipeline
biomethane
SUMMARY : Confirms that pipeline biomethane used in California
generation facilities can be counted toward compliance
requirements in the Renewable Portfolio Standard (RPS).
Specifically, this bill :
1)Allows eligibility of a generation facility that uses landfill
gas, digester gas, or another renewable fuel delivered to the
facility through a common carrier pipeline.
2)Requires verification of the fuel transaction, including the
source of the fuel and delivery method, and requires the
generator to meet requirements similar to that which is
required for RPS-eligible electricity transactions.
3)Requires certification of the generation facility by the
California Energy Commission (CEC), similar to that which is
required for RPS-eligible electricity transactions.
EXISTING LAW
1)Requires increasing amounts of electricity generated per year
to be obtained from eligible renewable energy resources.
2)Specifies that California's Renewable Portfolio Standard is
33% by 2020.
3)Requires investor owned utilities (IOUs), publicly owned
utilities (POUs), and retail sellers to meet the RPS.
4)Requires all RPS-eligible facilities must be within the WECC,
Categories 1, 2 or 3.
5)Establishes procurement category requirements for eligible
generation and deadlines for reaching targets:
Category 1 : Directly connected or scheduled to a California
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Balancing Authority, at least:
50% by 12/2013
65% by 12/2016
75% by 12/2020 and thereafter
Category 2 : Must be located within the Western Electricity
Coordinating Council (WECC)
transmission grid and the electricity must be firmed and
shaped with substitute electricity to provide incremental
electricity that is scheduled into a California Balancing
Authority, no minimum or maximum
Category 3 : Unbundled renewable energy certificates, no more
than:
25% by 12/2013
15% by 12/2016
10% by 12/2020 and thereafter
1)Sets exposure limits for vinyl chloride, as well as testing
and Prop 65-type notice requirements, for landfill gas.
2)Prohibits gas corporations from knowingly and intentionally
exposing any customer, employee, or other person to gas from a
landfill if that gas contains any chemical known to the state
to cause cancer or reproductive toxicity without first giving
clear and reasonable warning to that individual.
FISCAL EFFECT : Unknown
COMMENTS :
1)According to the author, "If enacted, AB 2196 would override
the suspension and reinstate RPS eligibility for pipeline
biomethane going forward, under conditions comparable to other
renewable energy sources. In particular, the fuel source and
delivery method would be (1) considered in determining the
appropriate product content category under Section 399.16 and
(2) subject to verification."
2)Biomethane is a renewable fuel that is produced at several
types of facilities, including: dairy farms and landfills. The
gas can be collected and then transported to a generation
facility where it can be used to make electricity.
Transportation of biofuels via truck or rail is not
economically feasible. Transport via pipeline is the preferred
method.
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3)As a result of state law, the IOUs (Sempra and PG&E) will not
allow biomethane from landfills to be injected into the
pipelines they operate. Biomethane from dairies is tested and
allowed. Pipeline operators may or may not have similar
restrictions.
4)Electric generation facilities in California can use
biomethane blended with conventional natural gas. Natural gas
facilities typically provide baseload power, i.e., a natural
gas facility can produce power at any time of day and any day
of the year.
5)The definition used in the RPS for "renewable electrical
generation facility" is one that uses, among other
technologies and fuels, biomass, digester gas, and landfill
gas. These provisions have not changed since the law
establishing the RPS program was enacted in 2002.
6)The RPS does not define the terms "biomass," "digester gas,"
or "landfill gas," and is silent as to whether these fuels
must be used on the site of the fuel's production to generate
electricity for purposes of the RPS program. The law also
does not specify how these fuels, if produced offsite, should
be delivered to a power plant for purposes of generating
electricity.
7)RPS program eligibility of biomethane as a separate category
of renewable resources was first recognized by the CEC in 2007
and addressed using the natural gas pipeline system to
transport biomethane to a designated power plant for use in
generating electricity. In 2011 the CEC introduced the term
'pipeline biomethane" and clarified delivery requirements for
biomethane for use in an RPS-eligible generating facility.
8)A number of entities subject to the RPS requirements have
entered into contracts with biomethane suppliers and have
achieved Energy Commission certification of their facilities
for RPS compliance. The Energy Commission has also allowed
pre-certification of facilities that have not yet entered into
contracts with biomethane suppliers. These facilities cannot
achieve certification until the biomethane is actually
flowing.
9)Biomethane that is injected into a natural gas pipeline system
for delivery to a designated power plant may not displace
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in-state fossil fuel consumption. It may not be physically
delivered to the purchasing electric generation facility, or
even to the state, and may not be used to produce electricity.
This is because:
a) The natural gas pipeline system is a non-dedicated
transportation system. Once the biomethane is injected into
the pipeline system, it is commingled with fossil fuel
natural gas in the pipeline.
b) The gas within the pipeline does not consistently flow
in one direction.
c) There could be multiple extraction points on the
pipeline system between the point of injection of the
biomethane and extraction point for the designated electric
generation facility.
In addition, there is a possibility that the biomethane is
being disposed of through other means, such as flaring.
Flaring is a term used to describe gas that is burned and not
used on site or transported to another side for use.
1)The CEC has certified more than 30 California facilities using
biomethane. In addition, there are a number of facilities that
have pre-certified their California facilities that could be
certified pending completion of biomethane supplier contracts
and when the flow of biomethane begins.
2)As of March 2012, entities who have entered into contracts
with pipeline biomethane suppliers are:
POUs: Los Angeles Department of Water & Power, Pasadena
Water & Power, Burbank Water & Power, Sacramento Municipal
Utility District, Vernon, Imperial Irrigation District, and
Anaheim
Electric Service Providers: Pilot Power, Constellation,
Commerce Energy, Direct Energy, and Calpine Energy America.
1)Many of the actual biomethane contracts executed involve
sources that inject gas into pipelines flowing Eastward, i.e.,
there is no possibility that either the biomethane could
actually be delivered into California or that such
transactions will have any impact on the supply of natural gas
to California.
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2)In March 2012, the CEC suspended new requests to certify
facilities using pipeline biomethane for RPS compliance in
order to allow time for the Legislature to consider how
pipeline biomethane should be treated in the RPS program.
Specifically, if the biomethane is not actually delivered to
the designated power plant and the power plant instead uses
fossil fuel natural gas to generate electricity, are the
environmental benefits realized consistent with the RPS
program?
3)POUs have expressed concern that if pipeline biomethane is
disallowed for new RPS eligibility it will cause near-term
rate increases for their customers and impact their
reliability of service due to increased reliance on
intermittent and variable resources (such as wind or solar)
and charges that will be incurred as a result of terms agreed
to in the pipeline biomethane contracts, entered into good
faith. In addition, revisions made to the RPS program via SB 2
X1 (Simitian, Chapter 1, Statutes of 2011-12 First
Extraordinary Session) include requirements to demonstrate
progress toward compliance goals. These entities are already
in their first compliance periods but now lack certainty about
whether their procurement decisions are not only valid but how
this will impact their requirement to show reasonable progress
toward their compliance goals. POUs must annually demonstrate
an increase in procurement of electricity products of no less
than 1.5% in each year of the compliance period ending in
2016.
4)A wholesale marketing and trading company that is also an
Energy Service Provider ("ESP") in California sells natural
gas, power and environmental products, including wind, solar
energy and biomethane, to wholesale and retail customers in
the State. In their comments filed at the CEC workshop
regarding RPS eligibility of pipeline biomethane, Shell stated
that "Pipeline biomethane that is burned in a certified
RPS-eligible in-State generation facility is included in
"Bucket One" (in-State generation) because the electric
generating facility has its first point of interconnection
with a California balancing authority. In-State solar and wind
generation are not classified as "Bucket Three" products if
the solar panels and wind turbines are produced pipeline."
5)The estimated the maximum quantity of pipeline biomethane that
economically can be purchased for use in California
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RPS-eligible generation facilities over the next three-to-five
years is approximately 50,000 Million British Thermal Units
(MMBtu). Based on an average heat rate of 7200 Btu/cubic feet,
this available pipeline biomethane translates to approximately
300 MW of capacity on a 24-hour, 7-day/week basis.
REGISTERED SUPPORT / OPPOSITION :
Support
California State Pipe Trades Council
California State Association of Electrical Workers
Clean Power Campaign
Coalition of California Utility Employees
Large-Scale Solar Association
The Utility Reform Network (TURN)
Union of Concerned Scientists
Western States Council of Sheet Metal Workers
Opposition
None on file.
Analysis Prepared by : Susan Kateley / U. & C. / (916)
319-2083