BILL ANALYSIS � 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
SB 771 - Kehoe Hearing Date:
April 5, 2011 S
As Amended: March 22, 2011 FISCAL B
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DESCRIPTION
Current law creates the California Alternative Energy and
Advanced Transportation Financing Authority (CAEATFA) to provide
bond financing for the development and commercialization of
competitive advanced transportation technologies and facilities
utilizing alternative methods and sources of energy. It is also
authorized to approve a sales and use tax exemption on tangible
personal property utilized for the design, manufacture,
production, or assembly of advanced transportation technologies
or alternative energy source products, components or systems.
The sales and use tax exemption sunsets January 1, 2021.
Current law defines, only for purpose of the CAEATFA, renewable
energy to include fuel sources such as wind, solar and
geothermal but also includes natural gas turbines and fuel
cells.
This bill expands the definition of renewable energy under
CAEATFA to include landfill gas turbines, digester gas turbines,
and microturbines.
Current law defines eligible renewable resources for purposes of
compliance with the Renewable Portfolio Standard and other
renewable programs as those technologies that use specified fuel
sources including digester and landfill gas.
Current law requires the state's electrical utilities to develop
a standard tariff (aka feed-in-tariff or FIT) to compensate a
generator of eligible renewable resources up to a maximum of 3
megawatts (MW).
This bill specifically categorizes as eligible under FIT
"continuous clean renewable energy resources" which are defined
as those technologies that utilize waste gases from landfills,
digesters, or wastewater treatment facilities, produce
electricity 8,000 hours a year, and have an emissions profile
equivalent or better than the waste gas emission standards
adopted by the State Air Resources Board that take effect on
January 1, 2013.
Current law creates the Emerging Renewables program which
directs the California Energy Commission to fund incentives for
small scale renewable technologies on the customer's side of the
meter and includes wind and fuel cells. The program sunsets on
January 1, 2012.
This bill increases the size of projects eligible for the
Emerging Renewables Program from 50 kW to 350 kW; exempts
"continuous clean renewable energy resources" from the
requirement that the resource offset the load on the customer's
side of the meter and defines those resources as those that
utilize waste gases from landfills, digesters, or wastewater
treatment facilities, produce electricity 8,000 hours a year,
and have an emissions profile equivalent or better than the
waste gas emission standards adopted by the State Air Resources
Board that take effect on January 1, 2013.
BACKGROUND
Feed-In-Tariff - These contracts present a simple mechanism for
customers and generators who generate eligible renewable
resources to sell power to a utility at predefined terms and
conditions, without contract negotiations. The FIT operates as
a "must take" contract in a utility's renewable portfolio. That
is, if the power is generated the utility must take it at
predefined terms and prices. The CPUC has implemented FITs for
systems sized up to 1.5 MW and is in the process of implementing
SB 32 (Negrete-McLeod, 2009) which expanded the eligible system
size up to 3 MW for 10, 15, or 20 year contract periods.
The program is a subset of the RPS program and relies on the
same definition in law for eligible renewable resources.
Emerging Renewables Program - The stated goal of this program is
to foster the development of emerging renewable technologies and
to use funds for a "multiyear, consumer-based program to foster
the development of emerging renewable technologies in
distributed applications" using "monetary rebates, buydowns, or
equivalent incentives" to offset the costs of installing
renewable generation on the customer's side of the meter. The
program is funded from the Public Goods Charge a portion of
which is directed to the Renewable Resources Trust Fund (RRTF).
Approximately $51 million from the RRTF is allocated to the
Emerging Renewables program each year which is administered by
the California Energy Commission and now funds wind technologies
on the customer's side of the meter. The Emerging Renewables
program and its funding source, the RRTF, sunset January 1,
2012. The New Solar Homes Partnership (NSHP), a subset of the
California Solar Initiative, which has a goal of installing 360
MW of solar photovoltaic on newly constructed homes, is also
funded from the RRTF.
California Alternative Energy and Advanced Transportation
Financing Authority - CAEATFA was created in 1980 with an
authorization of $200 million in revenue bonds to finance
projects utilizing alternative sources of energy, such as
cogeneration, wind and geothermal power. It was renamed in 1994
as currently titled and its charge expanded to include the
financing of "advanced transportation" technologies.
During the energy crisis of 2001, its authority was again
expanded, this time to provide financial assistance to public
power entities, independent generators, and others for new and
renewable energy sources, and to develop clean distributed
generation.
CAEATFA's authority is broad but in practice it has not been
utilized until recently. The State Treasurer has tried to
reinvigorate the authority and has launched a sales and use tax
exemption program to stimulate green manufacturing as authorized
by SB 71 (Padilla, 2010).
COMMENTS
1. Author's Purpose . The author cites a problem with
renewable programs and opines that as new technologies
evolve the renewable programs are not keeping pace leaving
some technologies that serve renewable goals ineligible for
specified programs particularly those that the author
categorizes as "clean continuous renewable energy
technologies."
2. Apples & Oranges . The foundation of the RPS and other
programs that promote the use of non-fossil fuels is the
fuel source used to generate the renewable electricity.
The specific technology is secondary and not generally
specified in statute. For instance, landfill and digester
gases are eligible resources but the turbines that use the
gas are not specified. A critical reason that the
technology is not usually specified is because some, such
as microturbines, can use renewable or fossil fuels to
create electricity. Additionally, technologies that use
these fuel sources do change and there are many.
It is not necessary to call out a specific technology in
statute for which the fuel source is already an eligible
renewable resource for purposes of the RPS program.
3. Feed-in-Tariff . Several programs are created in statute
and specifically rely on the RPS definition of eligible
renewable resources to define program eligibility. One
such program is the FIT program which relies on the RPS
definition for the fuel sources eligible for the pricing
contract established.
This bill deviates from the standard definition of eligible
renewable resources and calls out one technology, made by
one company, which operates at specified capacity and
emissions levels, to be eligible for the FIT. By
specifying this technology in the FIT, would that mean that
the technology and its fuel source are no longer RPS
eligible? Moreover, by including specified capacity and
emissions levels for landfill and waste gas under the FIT,
the bill may be interpreted to eliminate other technologies
that use the same fuel sources and are already eligible
under the program.
The technology defined in this bill is already RPS eligible
based on the fuel it uses (landfill or digester gas) and
therefore already eligible for the FIT, in fact the company
sponsoring this bill currently has four RPS power purchase
agreements contracts with Southern California Edison.
The author and committee may wish to consider eliminating
this section of the bill because the purpose of calling out
one technology in the FIT is not clear, is unnecessary, and
could obfuscate the definition of eligible renewable
resource under the RPS program.
4. Emerging Renewable Resources Program . In practice this
program currently funds small scale technologies using one
fuel source - wind - that are below 30 kW and used to
offset a customer's load also referred as being on the
customer's side of the meter. The Emerging Renewables
program sunsets at the end of this year and, based on
testimony heard by the committee at its March 29th hearing
on the Public Goods Charge, the program has outlived its
utility. The committee also heard that the program, which
draws from the same fund as the NSHP, may lack sufficient
funding to meet current and pending legislative mandates.
In effect this bill would make one technology, sized up to
350 kW and beyond the scope of the program, eligible for a
subsidy for a generation technology that will not go on the
customer's side of the meter as required by the current
program that will also sunset simultaneously with the
effective date of the bill.
This provision of the bill is inconsistent with the intent
of the program and also subsidizes a technology that is
already RPS eligible for a company that has four power
purchase agreements with an electric utility. The
foundation of generation procurement for electrical
generation - renewable or otherwise - is competitive
bidding. There are no direct external subsidies at the
state level for RPS technologies or any other generation
contacts.<1>
Moreover, the bill includes specific emissions and capacity
standards that it does not appear any other technology can
meet and therefore appears to only benefit one company to
the exclusion of all other technologies that use the same
fuel source, are currently RPS eligible, but may not be
able to meet an emissions standard set by CARB that doesn't
take affect for two more years and is not applicable to
local air quality districts unless specifically adopted by
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<1> Biomass and solar thermal facilities with contracts that
predate 1996 do receive a subsidy under the Existing Renewables
Program the authorization for which will expire January 1, 2010.
those districts.
The author and committee may wish to consider striking this
provision because this program sunsets and the defined
technology is not consistent with the purpose of the
Emerging Renewables program.
5. Double Referral . Should this bill be approved by the
committee, it should be re-referred to the Senate Committee
on Environmental Quality for its consideration.
POSITIONS
Sponsor:
Clean Power Campaign
Support:
Flex Energy, Inc.
Humboldt Waste Management Authority
Oppose:
None on file
Kellie Smith
SB 771 Analysis
Hearing Date: April 5, 2011