BILL ANALYSIS �
SB 1139
Page 1
Date of Hearing: June 23, 2014
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Steven Bradford, Chair
SB 1139 (Hueso) - As Amended: May 27, 2014
SENATE VOTE : 21-11
SUBJECT : Energy: California Renewables Portfolio Standard
Program
SUMMARY : Mandates that retail sellers procure a proportionate
share of a statewide total of 500 megawatts of electricity
generated by baseload geothermal powerplants constructed after
January 1, 2015. Specifically, this bill :
1)Stipulates that no later than June 30, 2015, the California
Energy Commission (CEC) shall determine the proportionate
share of the 500 megawatts of electricity that each retail
seller is required to procure based on the forecast of retail
sales for the year 2018.
2)Requires that no later than January 1, 2016, each retail
seller shall file with the California Public Utilities
Commission (PUC) a plan for complying with the mandate.
3)Specifies that plans shall require each retail seller to
procure at least one-half of its proportionate share by
December 31, 2019 and the full allotment by December 31, 2024.
Plans may authorize a retail seller to aggregate its
proportionate share with the proportionate share of another
retail seller in order to minimize administrative and
contracting costs.
4)States that CEC shall review and approve, modify, or reject
plans filed by retail sellers.
5)States that electricity procured pursuant to this mandate
shall not count toward meeting the requirements of the
California Renewable Portfolio Standard (RPS).
6)Stipulates that electricity procured pursuant to this mandate
shall be procured to reasonably minimize costs.
EXISTING LAW :
SB 1139
Page 2
a)Requires that all rates for any service or product charged by
an electrical corporation be just and reasonable. (Public
Utilities Code � 451)
b)Establishes short-term and long-term goals electricity
procurement guidelines for electrical corporations which are
filed with the PUC for approval. (Public Utilities Code
�454.5)
c)Requires, pursuant to the California Renewables Portfolio
Standard, requires investor-owned utilities (IOUs), community
choice aggregators (CCAs), and energy service providers (ESPs)
(collectively defined as retail sellers), and publicly-owned
utilities (POUs), to increase purchases of renewable energy
such that at least 33% of total retail sales are procured from
renewable energy resources by December 31, 2020. In the
interim each entity would be required to procure an average of
20% of renewable energy for the period of January 1, 2011
through December 31, 2013 and 25% by December 31, 2016.
(Public Utilities Code � 399.11 et seq.)
d)Defines as RPS eligible, electric generation resources from
biomass, solar thermal, photovoltaic, wind, geothermal, fuel
cells using renewable fuels, small hydroelectric generation of
30 megawatts (MWs) or less, digester gas, landfill gas, ocean
wave, ocean thermal, tidal current, and municipal solid waste
conversion that uses a non-combustion thermal process to
convert solid waste to a clean-burning fuel. (Public
Resources Code � 25741)
e)Establishes the Geothermal Resources Development Account into
which federal revenues are deposited to fund grants to
eligible local jurisdictions and private entities for projects
and activities that promote development geothermal energy
resources, mitigate any adverse impacts caused by geothermal
development, or help local jurisdictions offset the costs of
providing public services necessitated by geothermal
development. (Public Resources Code � 3800 et seq.)
FISCAL EFFECT : Unknown.
COMMENTS : According to the author, "geothermal is a renewable,
abundant and affordable source of clean energy. Increasing
reliance on this power source will help our state reach its goal
SB 1139
Page 3
of reducing greenhouse gas emissions while securing grid
reliability.
For economically depressed regions throughout our great state,
this energy policy translates into hundreds of high paying jobs
and investments toward meaningful economic development. SB 1139
has the potential to generate over $38M per year in revenue to
assist our local communities. Furthermore, one of the mineral
byproducts of geothermal brine, which is lithium, creates an
indigenous resource, opening new market opportunities and paving
the way for a low-carbon future.
All of these benefits, resilience, and reliability to our
current energy system for a small procurement of less than 1% of
the current energy portfolio. This bill creates the kind of
smart development we desperately need in California to produce
new skilled construction and operation jobs, hedge against fuel
price increases and reduce greenhouse gas and fossil fuel
emissions."
1)Background : Geothermal energy is thermal energy generated and
stored in the Earth. It is a clean, renewable resource that
provides energy in the United States and around the world
through a variety of applications and types of resources.
Large-scale geothermal plants utilizing deep resource
temperatures between ~200F and 700F have been producing
commercial power in the United States since the 1960s.
California has 25 Known Geothermal Resource Areas (KGRAs), 14
of which have temperatures of 300 degrees Fahrenheit or
greater.
Electricity can be generated from high temperature geothermal
resources by using the thermal (heated) water and steam to
move turbines that in turn run electrical generators and
produce electricity. There are several types of geothermal
power plants that can be used to generate electricity,
including dry steam, flash or double flash, and binary cycle
power plants.
The most developed of the high-temperature geothermal resource
areas in the state is the Geysers. Located north of San
Francisco, the Geysers was first tapped as a geothermal
resource to generate electricity in 1960. It is one of only
two locations in the world where a high-temperature, dry steam
resource is found that can be directly used to move turbines
SB 1139
Page 4
and generate electricity.
Other major geothermal electrical production locations in the
state include the Salton Sea area in Imperial County, the Coso
Hot Springs area in Inyo County, and the Mammoth Lakes area in
Mono County. It is estimated that the state has a potential
for more than 4,000 megawatts of additional power from
geothermal energy, using current technologies.
2)Geothermal projects in California : According to the CEC's
website, in-state electric generation has not grown. In fact,
between 2001 and 2013 generation averaged 13,000 gigawatt
hours. As of 2013, generation was estimated at 12,485 gigawatt
hours. Installed in-state generation capacity for geothermal
over the same time period ranged between 2,600 - 2,700
megawatts.
The PUC's analysis notes a report from the Geothermal Energy
Association which includes data on the quantity and capacity
of geothermal projects (on the supply-side) under development
in California. The report indicates there are approximately 31
geothermal projects under development for a total capacity of
an estimated 1,100 megawatts. It is unknown when these
projects will be completed and fully operational.
By the end of 2013, an estimated 17,400 MWs of RPS-eligible
renewable energy capacity were operating in California of
which approximately 15,500 MWs were sold to a utility or the
market (wholesale) and an additional 1,900 MWs was
self-generation. Of the 15,500 MWs of wholesale generation,
46 projects are geothermal resources and represent 2,782 MWs
of capacity which is 4.4% of generation capacity. However,
geothermal produces approximately 25% of the renewable
electricity supplied to California retail customers.
The distribution of the 46 online projects which serve
California load is:
Imperial County, 20 projects; 705 MWs;
Inyo County, 3 projects; 302 MWs;
Lake County, 6 projects; 418 MWs;
Mono County, 4 projects; 54 MWs;
Sonoma County, 12 projects; 1,238 MWs; and
State of Nevada, 1 project; 65 MWs.
SB 1139
Page 5
Projects under development include eight projects totaling
618 MWs have received environmental permits but are not yet
operational.
This bill does not allow existing geothermal resources to
count toward the 500MW procurement mandate. Calpine
Corporation, owner and operator of 725 MW at The Geysers
(geothermal energy resource located in Lake and Sonoma
Counties) claims this measure jeopardizes its ability to
recontract approximately 650 MW of existing geothermal
capacity due to expire between 2017 and 2021. Furthermore,
Calpine notes that it has made investments to develop and
permit two geothermal projects at The Geysers with project
labor agreements for each.
3)Programs that promote specific renewable technologies : This
bill mandates that no later than December 31, 2024, the IOUs
procure a proportionate share of a statewide total of 500 MW
of electricity generated by baseload geothermal powerplants
constructed after January 1, 2015. Opponents to this measure
argue that it is bad public policy to mandate procurement of a
preferred renewable resource. However, there are many
"carve-out" programs for certain renewable technologies
created by the Legislature. These policies were envisioned to
incentivize market transformation for emerging technologies
where ratepayer funds may return long-term benefits to all
Californian's. The CPUC's analysis notes that geothermal
technology, on the other hand, has been commercially available
for decades and may not reasonably be considered an emerging
technology. See information below detailing the many
"carve-out" programs for specific renewable technologies:
Self-Generation Incentive Program (SGIP) provides
financial incentives for customer installation of energy
storage devices, wind turbines, fuel cells, combined heat
power generators, pressure reduction turbines, and waste
heat capture applications. Incentives are paid for up to
3 megawatts of capacity. Approximately 483 projects
totaling 1,583 megawatts have been developed to date in
this program.
Authorized capacity is based on available funding. (AB
970, Ducheny, 2000)
California Solar Initiative (CSI) provides
California's electric utility customers incentives for
SB 1139
Page 6
on-site solar electric systems on homes, businesses and
public sites. Since its creation, 135,588 projects
totaling 1,500 megawatts have been developed. Authorized
capacity is 3,000 MW. (SB 1, Murray, 2006)
Community Renewable Program provides mechanism where
customers can procure renewable generation for their home
or business. Authorized capacity is 600 MW. Most of this
will not count toward the investor-owned utilities (IOUs)
RPS requirements. (SB 43, Wolk, 2013)
The Energy Storage Procurement Framework and Design
Program adopted in October 2013 requires 1,325 megawatts
of storage to be procured by the IOUs by 2020 with
installations no later than 2024. Storage itself is not
explicitly a renewable technology, but it could be
combined with renewable technologies. (AB 2514, Skinner,
2009)
The Bioenergy Feed-in Tariff program requires the
IOUs to procure a combined total of 250 megawatts from
bioenergy projects. Procurement must be from projects
that are 3 megawatts or smaller that achieve operation
after June 1, 2013. No projects have been developed to
date. (SB 1122, Rubio, 2011)
Combined Heat and Power (CHP), referred to as
cogeneration, is the simultaneous generation of useful
heat and electricity from a single fuel source. Two
projects, for a combined total of 103.68 megawatts have
been developed thus far. Authorized capacity is 3,000 MW.
(AB 1613, Blakeslee, 2009)
The Feed-in tariff (FiT)/Renewable Market Adjusting
Tariff (Re-MAT) program is a simplified procurement
mechanism for small renewable generators (3 megawatts or
less) to sell power to a utility at predefined terms and
conditions. This program applies to the IOUs. The first
program period of FiT/ReMAT program began in October
2013. No projects have been developed to date.
Authorized capacity is 500 MW. (SB 32, Negrete-McLeod,
2009)
The Renewable Auction Mechanism (RAM) is a
simplified market-based procurement mechanism for
SB 1139
Page 7
renewable generation projects greater than 3 MW and up to
20 MW. The program requires PG&E, SCE, and SDG&E to
procure a combined total of 1,330 MW of renewable energy
over a three year period. The first RAM auction
contracts were approved in April 2012. No projects have
been developed to date. Authorized capacity is 1,000 MW
(CPUC Decision D.10-12-048)
IOUs are required to offer Net Energy Metering until
they reach a cap of 5% of the electrical corporations'
peak capacity. NEM projects are also exempt from
interconnection studies and costs.
1)Race to achieve 33% RPS: Utilities Report Card: Due to the RPS
and prices for renewable generation that are increasingly
competitive with natural gas generation, renewable
technologies are providing much larger amounts of electricity
in California. However, due to the performance characteristics
of the technologies, heavy reliance on intermittent and
variable renewable resources (wind energy is available when
the wind blows and solar energy is available when the sun
shines) must be balanced with generation and/or storage. The
majority of RPS procurement has been intermittent and variable
renewable resources.
The PUC Legislative analysis notes that since the inception of
the RPS program, the IOUs have contracted for 390 megawatts
with new geothermal capacity located within California. Of the
390 megawatts, one 50 megawatt project achieved commercial
operation, one 30 megawatt project is delayed in meeting its
commercial operation date, and nine contracts totaling 310
megawatts of project capacity have been terminated.
The table below is based on data reported by Pacific Gas &
Electric Company (PG&E), San Diego Gas & Electric Company
(SDG&E), and Southern California Edison (SCE) in the most
recent compliance reports. With forecasts extended out to
2020, the data for all three large IOUs generally show a large
shift toward solar PV and wind, with a corresponding decrease
in geothermal and biopower. SDG&E shows the most dramatic
trend from 2011 to 2020, with a large shift from 0.1% solar PV
to 51.9%, and a decrease in geothermal from 23.2% to 0%. The
other IOUs display similar, although not as dramatic trends.
The percentages below represent the percentage of
SB 1139
Page 8
megawatt-hours, by technology each utility has contracted with
to meet RPS goals. The data shows that by 2020 the IOUs
estimated they will procure geothermal resources at half of
today's levels.
----------------------------------------------------------------
| RPS Procurement: August 1, 2013 Compliance Reports |
----------------------------------------------------------------
---------------------------------------------------------------
| | PG&E | SDG&E | SCE |
---------------------------------------------------------------
|---------+---------+---------+---------+---------+---------+---------+---------+---------+---------|
|Energy | 2011 | 2012 | 2020 | 2011 | 2012 | 2020 | 2011 | 2012 | 2020 |
|source | | | | | | | | | |
|---------+---------+---------+---------+---------+---------+---------+---------+---------+---------|
|Biopower | 24.4% | 23.9% | 11.1% | 16.8% | 25.0% | 2.8% | 5.5% | 4.1% | 0.5% |
|---------+---------+---------+---------+---------+---------+---------+---------+---------+---------|
|Geotherma| 25% | 26.0% | 10.2% | 23.2% | 28.1% | 0.0% | 46.8% | 43.4% | 20% |
|l | | | | | | | | | |
|---------+---------+---------+---------+---------+---------+---------+---------+---------+---------|
|Small | 18.2% | 12.4% | 9.2% | 0.0% | 0.0% | 0.3% | 5.1% | 3.2% | 3.3% |
|Hydro | | | | | | | | | |
|---------+---------+---------+---------+---------+---------+---------+---------+---------+---------|
|Conduit | 0.0% | 0.0% | 0.0% | 0.5% | 0.6% | 0.1% | 0.8% | 1.0% | 0.5% |
|Hydro | | | | | | | | | |
|---------+---------+---------+---------+---------+---------+---------+---------+---------+---------|
|Solar | 1.4% | 8.0% | 33.4% | 0.1% | 0.1% | 51.9% | 0.7% | 1.1% | 33.1% |
|Photovolt| | | | | | | | | |
|aic | | | | | | | | | |
|---------+---------+---------+---------+---------+---------+---------+---------+---------+---------|
|Solar | 0.0% | 0.0% | 14.4% | 0.0% | 0.0% | 0.0% | 5.7% | 5.8% | 3.2% |
|Thermal | | | | | | | | | |
|---------+---------+---------+---------+---------+---------+---------+---------+---------+---------|
|Wind | 31.0% | 29.7% | 21.8% | 59.4% | 46.2% | 44.9% | 35.4% | 41.5% | 39.5% |
---------------------------------------------------------------------------------------------------
|Ocean/Tid| 0.0% | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% |
|al | | | | | | | | | |
|---------+---------+---------+---------+---------+---------+---------+---------+---------+---------|
|Fuel | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% |0.0% |
|Cells | | | | | | | | | |
SB 1139
Page 9
---------------------------------------------------------------------------------------------------
2)Is there a need for more baseload power ? Proponents of this
bill argue that California could benefit from the additional
procurement of new geothermal power as it supplies the state
with baseload renewable power. Recent events such as the
retirement of the San Onofre Nuclear Generating Station
(SONGS) and Once Through Cooling (OTC) Power Plants, and older
inland gas plants create a need for more energy supply and
reliability in the state - particularly Southern California
region. Retirement of these projects may create the need to
replace this generation in order to manage the state's energy
demands. However, geothermal facilities may not be located in
areas where transmission can provide power into the area
affected by the SONGs and OTC closures.
According to May 19, 2014 letter replying to a protest of
Southern California Edison's RPS portfolio, SCE stated:
SCE is genuinely and justifiably concerned that in
2020, SCE will not have enough baseload generation to
manage the increasing amounts of intermittent
renewable generation provided by wind and solar."
3)Geothermal costs in comparison to other renewable
technologies : According to the CPUC Legislative analysis, for
geothermal projects approved since 2003 pursuant to the RPS
program, the weighted average post-time of delivery (TOD)
adjusted price is $8.84 cents per megawatt hour. The weighted
average post-TOD adjust price paid by the three IOUs in 2013
was 7.03 cents/kilowatthour.
Recent market data from the IOUs 2013 RPS solicitation shows a
significant difference in the average price for contracts
offered to the IOUs across technologies. Particularly, the
average price for a new solar photovoltaic project was
approximately $73 per megawatt hour compared to the average
price for a new geothermal project of approximately
155/Megawatt-hour. One geothermal developer claims the PUC's
evaluation process fails to properly take into account the
benefits and costs of all fuels (renewables and gas). It has
a bid under consideration between $0.09 and $0.10 per kWh.
Even with the high upfront capital costs, proponents of this
measure argue that geothermal is a competitive renewable
SB 1139
Page 10
energy source that essentially generates around the clock. A
contributing factor to this price difference may be that the
CPUC mandates a value of zero for any costs related to
integrating renewable resources to the grid.
4)Opportunities for geothermal development : The author and
sponsors claim roughly 50 percent of California's identified
geothermal resources are not being utilized. The Salton Sea
Known Geothermal Resource Area (SSKGRA), in particular,
provides one of the greatest opportunities for geothermal
energy development in the United States. According to the
Geothermal Energy Association, the Imperial Irrigation
District forecasts estimate 2,900 megawatts of geothermal
generation are ultimately possible at the Salton Sea field.
Other regions of the state show promise as well, particularly
in Northern California.
5)If you build it, they will come : Parties opposed to the
measure claim there are deliverability barriers for
transmitting geothermal resources from Imperial Valley to the
Los Angeles basin. According to Imperial Irrigation District
(IID), its system can accommodate the exportation of 200 MW of
renewable resources should a project be ready to go on-line
today. For a mid-term outlook, IID Path 42 upgrades are
underway and are scheduled to be completed by May 2015 which
will increase the transmission deliverability from IID to the
California Independent System Operator (CAISO) by 900MW. In
addition, IID claims it is currently in the process of
implementing its Strategic Transmission Expansion Plan (STEP)
that will increase the deliverability of energy from IID to
CAISO at the Imperial Valley substation by another 800 MW by
the end of 2018. The first phase of IID's STEP will also
include a 184 mile 500 kV DC line running from the Salton Sea
allowing for export of an additional 1,100 MW between 2021 and
2024, if approved by CAISO.
6)If you don't plan for it, it won't get built. Geothermal
developers complain that if the procurement process precludes
consideration of geothermal then the state has effectively
decided that it will not procure from geothermal resources.
7)Mandate should count toward RPS goals : This bill would exclude
procurement from these new geothermal facilities from counting
toward the state's RPS program. However, geothermal is an
RPS-eligible resource and procurement of this resource should
SB 1139
Page 11
count towards the state's RPS mandate. This is inconsistent
with existing state policy. Therefore, the committee may wish
to amend the bill to authorize the PUC to determine whether
the procurement mandate should count toward the RPS program .
8)Cost containment provisions are missing from this bill : There
is a potential that mandated generation would undermine
competitive bidding in the procurement process. The PUC is
currently conducting a proceeding to establish cost
containment for generation procured through the RPS program.
Therefore, the committee may wish to add a provision in the
findings and declaration section expressing the intent that
the Legislature would agree if the PUC imposed the same RPS
cost containment for geothermal procurement pursuant to this
statute.
9)Support and opposition. Supporters state development of 500 MW
of geothermal power will deliver numerous benefits to
California, including a reduction in greenhouse gas emissions
without negatively impacting system reliability. Further
argued is that the expansion of geothermal will "create tens
of thousands of high-paying construction jobs in area [sic] of
the state suffering from some of the highest rates of
employment", and that the plants will generate millions in tax
revenues and lease payments. Other supporters claim this bill
will provide greater balance to the state's energy portfolio
by increasing renewable base load generation.
Opponents argue that this bill burdens ratepayers with high
energy costs relative to the market, disregards current
renewable energy policy, ignores a competitive solicitation
process, and unevenly applies a statewide policy. Others claim
it would allow geothermal developers to bypass market
competition, and thus adversely impact the ability for
California to meet its renewable energy goals while ensuring
just and reasonable rates. Yet others state that requirements
in the bill would be costly and almost impossible to
implement.
REGISTERED SUPPORT / OPPOSITION:
Support
Audubon California
SB 1139
Page 12
Calexico Chamber of Commerce Board of Directors
California Chapters of the National Electrical Contractors
Association (NECA)
California Coalition of Utility Employees (CCUE)
California Labor Federation
California Legislative Conference of the Plumbing, Heating and
Piping Industry (CLC)
California State Association of Electrical Workers
California State Council of Laborers
California State Pipe Trades Council
Calipatria Chamber of Commerce
Center for Energy Sustainability at San Diego State's
University's Imperial Valley Campus
City of Holtville
Coachella Valley Water District (CVWD)
Defenders of Wildlife
Geothermal Energy Association
Geothermal Resources Council (GRC)
GreenFire Energy, Inc.
Imperial County Board of Supervisors
Imperial County Building Construction Trades Council
Imperial County Workforce Development Office
Imperial Irrigation District (IID)
Imperial Valley Economic Development Corporation (IVEDC)
Imperial Valley Small Business Development Center
Individual Letters (5)
LightSource Renewables
MidAmerican Geothermal
MidAmerican Renewables
Nature Conservancy
Ormat
Salton Sea Action Committee
Salton Sea Authority
Simbol Materials
State Building and Construction Trades Council, AFL-CIO
Western Line Constructors
Western States Council of Sheet Metal Workers
Opposition
California Biomass Energy Alliance California (CBEA) (unless
amended)
California Chamber of Commerce
California Manufacturers & Technology Association (CMTA)
California Public Utilities Commission (CPUC) (unless amended)
SB 1139
Page 13
Calpine Corporation (unless amended)
EDF Renewable Energy
Independent Energy Producers Association (IEP)
Office of Ratepayer Advocates (ORA)
Pacific Gas and Electric Company (PG&E)
PacifiCorp (unless amended)
San Diego Gas & Electric Company (SDG&E) (unless amended)
Southern California Edison (SCE)
The Utility Reform Network (TURN)
Analysis Prepared by : DaVina Flemings / U. & C. / (916)
319-2083