BILL ANALYSIS �
SB 1122
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Date of Hearing: June 25, 2012
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Steven Bradford, Chair
SB 1122 (Rubio) - As Amended: June 18, 2012
SENATE VOTE : 38-0
SUBJECT : Energy: renewable biomass and biogas projects.
SUMMARY : Requires statewide procurement of up to 250MW of
renewable energy from small biomass or biogas technologies that
utilize low emission technologies. Specifically, this bill :
1)Requires the California Public Utilities Commission (PUC), by
June 1, 2013, to allocate 250 megawatts (MW) of biomass/biogas
procurement by the state's three major investor owned
utilities (IOUs).
2)Limits each project to no larger than 5 MW.
3)Allocates procurement by technology as follows:
a) Dairy digester gas, 85 megawatts
b) Biogas from wastewater treatment, 50 megawatts
c) Agricultural biomass and biogas, 50 megawatts
d) Biomass using byproducts of sustainable forest
management, 30 megawatts
e) Landfill gas and organic waste diversion, 35 megawatts
1)Strongly encourages Public Owned Utilities (POUs) to consider
and adopt, if appropriate, a procurement target for small and
community-scale biomass and biogas projects.
EXISTING LAW :
Existing law requires all IOUs and POUs that serve more than
75,000 retail customers, to develop a standard contract or
tariff (aka feed-in-tariff or FIT) available for renewable
energy facilities up to 3 megawatts (MWs). Statewide
participation is capped at 750 MWs. (399.20 and 387.6 Public
Utilities Code)
FISCAL EFFECT : Unknown
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COMMENTS :
1)Author's Statement. SB 1122 establishes a statewide
procurement requirement of 250 MW from small (less than 5 MW)
renewable biomass or biogas projects that utilize low-emission
technologies from landfills and organic waste diversion
facilities, waste water treatment plants, food and
agricultural processing facilities, animal waste facilities,
and farms. It requires the PUC to allocate the 250 MW among
the state's three major IOUs. The PUC's Decision revising the
Feed-in Tariff Program ignores market considerations for small
renewable biomass or biogas projects and fails to promote
diversity in resource technologies. Without differentiating
small renewable biomass and biogas projects from other
renewable distributed generation technologies, opportunities
for methane pollution reduction and clean energy generation
will not be realized. Unless and until the PUC accounts for
benefits to ratepayers and the environment from reducing air
pollution and global warming emissions by generating
electricity from small renewable biomass and biogas, a
separate procurement requirement for these technologies is
necessary.
As highlighted in a recent report from the California Energy
Commission (CEC), California's biopower industry has been
stagnant for over twenty years, a time period during which
wind and solar have performed strongly. When comparing
biopower results in the United States to leading biopower
markets around the world like Germany, the contrast is stark.
The intent of SB 1122 is to unleash a growth spurt in
California's biopower market, like what has been experienced
in leading biopower markets around the world.
2)What is a Feed-in-Tariff ? A FIT should be a simplified
contracting mechanism for small renewable generators to sell
power to a utility at predefined terms and conditions, without
contract negotiations. For the IOUs, the FIT operates as a
"must-take" contract in its portfolio. If the participant
generates the power, the IOU must take it and pay for
generation from the facility according to the terms of the FIT
contract.
3)Federal Law regulates wholesale electricity rates. Because a
FIT is a set rate that is paid for by utilities the
electricity generation, the PUC must consider federal law when
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establishing the FIT. The Federal Power Act grants the
Federal Energy Regulatory Commission (FERC) jurisdiction over
wholesale electric sales in interstate commerce, including
sales made entirely intrastate and sales delivered locally to
a distribution system. The PUC has litigated the issue of FIT
pricing. In FERC's ruling found, among other things that the
PUC "may take into account obligations imposed by the state
that, for example, utilities purchase energy from particular
sources of energy or for a long duration." (FERC Order 133
FERC 61,059, October 21, 2010, Ordering Paragraph 26).
4)FIT Procurement Contracts. Prior legislation (Yee, AB 1969,
2006) provided a small renewable generator FITs in the
territories of the three largest IOUs and provide a 10, 15, or
20-year fixed-price, non-negotiable contract for systems sized
up to 1.5 MW. The PUC has a rulemaking open to implement the
terms of SB 32 Negrete McLeod (Chapter 328, Statutes of 2009)
and expand the IOU FIT to 3 MWs. The total program allocation
between the three IOUs is approximately 500 MWs.
On May 24, 2012 the PUC approved a Decision on the SB 32 FIT
which provide price adjustments and separates the FIT into
three product types: as available, peaking, and non-peaking as
available. Stakeholders in the PUC proceeding requested a
set-aside for specific technologies, particularly biogas. The
PUC declined to adopt a technology specific set-aside because
the Legislature did not did not provide statutory direction to
do so. However, the three categories established in the PUC
do recognize the attributes of the technologies via the three
categories of procurement. Solar is generally a peaking
technology, wind is generally an as available technology, and
biogas/biomass are generally as available technologies.
If enacted, the 250 MW authorized by SB 1122 would be in
addition to those MW authorized pursuant to SB 32 and would be
limited to biogas and biomass technologies. However, biogas
and biomass technologies would also be able to bid into the SB
32 FIT. So there is some question regarding overlap between
these two procurement mechanisms. In addition, the SB 32 FIT
is a price-adjusting FIT. If the PUC adopts a fixed price for
the biogas/biomass FIT it will conflict with the price
adjustment mechanism and afford developers to 'forum shop' for
the best price available.
It is not clear why these facilities cannot compete for the
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currently authorized SB 32 FIT.
5)Standard Contracts and Ratepayer Incentives? SB 1122 requires
the PUC to coordinate any incentive or subsidy programs for
biogas and biomass with the solicitation.
It is not clear why these biomass/biogas facilities would need
both a standard contract and ratepayer incentives. The SB 32
FIT requires that projects not take ratepayer incentives.
6)Carve out for bioenergy? Opponents to this bill oppose a carve
out for bioenergy because they prevent fair competition among
renewable energy technologies. Supporter point out that
bioenergy provides baseload renewable energy and that the
program is small and will not impose undue costs on
ratepayers. The PUC's report on the RPS shows that there is
significant growth in contracts with solar photovoltaic and
wind technologies while biogas is at best, tepid growth.
Baseload technologies can address issues with intermittency
that have been raised about wind (only generates when the wind
is blowing) and solar (only generates when the sun shines).
Bioenergy fuels, particularly biogas, can provide a range of
energy services, not limited to generation. Biogas can also be
used to power natural gas vehicles and new efforts are
underway to provide conditioning that will allow biogas to be
safely injected into natural gas pipelines.
7)Suggested Amendments . The author may want to consider the
following amendments:
a) Amend 399.20 Public Utilities Code to direct the PUC to
add a fourth category to the contract categories
specifically for bioenergy projects.
b) Allocate 250MW of the 750MW allocation in 399.20 to
bioenergy projects and provide authority to the PUC to
increase the total 750MW cap to meet the 250MW bioenergy
goal.
c) Provide the PUC discretion to award projects using
either the renewable market adjusting tariff (Re-MAT) or a
competitive solicitation process and adjust the program
based on market response or environment.
d) Direct the PUC to develop a streamlined contract with
simplified terms and conditions in order to facilitate new
market entrants.
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Provide policy direction to the PUC to encourage programs
and services to facilitate the development of in-state
biogas and to facilitate the conditioning and upgrading of
biogas in order to permit it to be used for a broad range
of purposes, including injection into natural gas
pipelines, use for onsite power generation, and use at
compressed natural gas filling stations for alternative
fuel vehicles.
REGISTERED SUPPORT / OPPOSITION :
Support
Agricultural Council of California (Ag Council)
Agricultural Energy Consumers Association
Alliance of Western Milk Producers
American Biogas Council
Association of California Water Agencies (ACWA)
Biogas & Electric, LLC
California Association of Sanitation Agencies (CASA)
California Bioenergy
California Farm Bureau Federation
Caterpillar, Inc.
Clean Power Campaign
Clean World Partners
Clear Horizons, LLC
E3
Eastern Municipal Water District (EWMD)
Electrochaea
Energy Development Group of Idaho
Harvest Power
Hawthorne Power Systems
Milk Producers Council
Organic Waste Systems, Inc.
Peterson Power Systems
R-Qubed Energy, Inc.
Sanitation Districts of Los Angeles County
Solar Turbines Incorporated
South Coast Air Quality Management District (AQMD)
SUMA America, Inc.
Sustainable Conservation
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Tetra Tech, Inc.
Opposition
Division of Ratepayer Advocates (DRA)
Pacific Gas and Electric Company (PG&E)
Southern California Edison (SCE) (unless amended)
Analysis Prepared by : Susan Kateley / U. & C. / (916)
319-2083