California’s Bioenergy Programs – Update to Options for Bioenergy Facilities

Paul Clanon & Judith IkléCalifornia Public Utilities Commission

January 2009 update (not presented)Bioenergy Working Group

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CPUC Programs Available to Bioenergy Facilities Net Energy Metering (NEM) Tariff Self Generation Incentive Program (SGIP) Feed-In Tariff (FIT) – 2 options

AB 1969 (Yee, 2006) AB 1613 (Blakeslee, 2007)

Qualifying Facilities (QF) Renewable Portfolio Standard (RPS)

Solicitations Bilateral Power Purchase Agreements (PPA)

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Program Guidelines - Facility/Seller Options Net Energy Metering Tariff: Customer credited for onsite generation

up to their annual onsite load

Self Generation Incentive Program: Provides upfront incentive to offset the capital investment for system installation

Utility Feed-In Tariff : Generator paid for output of biogas facility for 10,15, or 20 years based on CPUC adopted fixed price at start of contract

Qualifying Facility Contract: Generator has access to the Grid and is paid the avoided cost of power as determined by the CPUC

Renewable Portfolio Standard Solicitation Contract: Utility chooses best bids and negotiates a price with the seller

Bilateral Power Purchase Agreements: Price negotiated between utility and seller outside an RPS solicitation

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Program Eligibility by Facility Capacity

Facility Capacity

(MW)

NEM Tariff

SGIP Utility Feed-In Tariff

Utility Contract as a QF

Utility Contract

under RPS Solicitation

Utility Contract

under Bilateral

Negotiation

0– 1.5 Yes Yes* Yes(under AB 1969 and AB 1613)

Yes Yes(uncommon)

Yes(uncommon)

1.5–20 No Up to 5MW*

Yes (under AB 1613 only)

Yes Yes Yes

≥ 20 No No No Yes Yes Yes

* Eligible technologies as of 1/1/08 are wind and fuel cells

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Biogas and biomass expected to be between 15% and 19% of the total RPS-eligible deliveries in 2010

IOU Actual and Forecasted RPS Generationby Fuel Type

0

10000

20000

30000

40000

50000

60000

70000

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

GW

h/y

r

expiring

solar

wind

geothermal

small hydro

biogas

biomass

34,864

Target: 20% of Expected IOU Retail Sales

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Gas Pipeline Interconnection for Biogas Resolution E-4083 was approved August 23, 2007

for Microgy to inject cleaned and pressurized pipeline-grade biogas into PG&E’s pipeline system

PG&E Advice Letter E-3132 asks to amend the Microgy contract to allow ¼ of the biogas (up to 1600 MMBTU) to be supplied by a facility in Texas

CPUC approved Advice Letter E-3132 on October 2, 2008.

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SDG&E & SoCalGas Biogas Interconnection

Proposals SDG&E and SoCalGas have sought to subsidize gas

interconnection costs for qualifying biogas projects by application and Advice Letter (AL).

In A.07-08-031 “Joint Climate Action Initiative”, SDG&E and SoCalGas proposed that all ratepayers pay to interconnect biogas projects that deliver over 500,000 cu. ft. gas per day.

On 6/27/08, SDG&E and SoCalGas filed a motion asking the CPUC to withdraw A.07-08-031 because of lack of activity and to avoid duplicating other climate-related proceedings.

In D.08-09-011, issued 9/4/08, the CPUC granted the utilities’ request and authorized the Energy Division to reject any advice letters related to the subject of A.07-08-031.

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Related Advice Letters –Biogas Interconnection On 3/26/08, SDG&E and SoCalGas filed ALs with the

interconnection subsidy proposal submitted in A 07-08-031.* Utilities filed ALs because of the alleged slow pace of A.07-08-031.

Division of Ratepayer Advocates (DRA) protested both ALs on grounds that the utilities did not justify the subsidy.

Southern California Generation Coalition (SCGC) protested SoCalGas’ AL asserting that an application or rulemaking is more appropriate for the requests.

Two biomethane suppliers supported the ALs re subsidy. The CPUC issued a Draft Resolution on 8/19/08 denying the ALs

because the proposals would modify a prior CPUC decision on interconnections. Therefore, an AL is inappropriate and an application is needed.

The Draft Resolution did not comment on the merits of the proposals. The Resolution is on the 9/18/08 Commission Meeting agenda.

*(SDG&E AL 1760-G and SoCalGas AL 3847)

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Additional Program Particulars Net Energy Metering Self Generation Incentive Program Feed In Tariffs Qualifying Facilities Renewables Portfolio Standard (RPS)

Programs Standard Offer Contracts under the RPS

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Net Energy Metering for Bioenergy Net Energy Metering:

Onsite generation provides customer with credit for net monthly power production at the generation portion of their rate

Helpful to customers whose renewable generating potential is comparable to their annual consumption

NEM Eligible Technologies: Biogas-fired generators and fuel cells Differs from other types of NEM because it does not offset the

distribution or transmission rate components

¢/kWh Off-Peak Mid-Peak On-Peak

PG&E 3.5 – 6.1 5.5 – 6.3 8.8 – 19.0

SCE 9.7 – 12.7 12.7 – 18.8 N/A – 19.4

SDG&E 6.5 - 7.2 8.7 – 9.7 10.5 – 10.7

Ranges indicate Winter - Summer rates

NEM credit rates effective 8/1/08

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Net Energy Metering – Eligibility and Enrollment Program Guidelines

Statewide cap 50 MW Facility capacity cap:

1 MW As pilot, 3 generating facilities statewide may be

from 1 to 10 MW

PG&E SCE SDG&E Total

# facilities 4 5 1 10

Capacity

(MW)

1.07 2.74 0.13 3.94

Current Enrollment*

*As of 8/1/2008

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Self-Generation Incentive Program (SGIP) for Bioenergy Incentive Program

Since 2001, SGIP has provided an incentive to offset the upfront capital costs for bioenergy facilities

Funding pays for cost of installing generation equipment Eligible Technologies

Through 12/31/2007 – biogas fueled Combined Heat and Power (CHP), internal combustion engines, small turbines, and fuel cells

After 1/1/2008 – fuel cells and wind turbines only AB 2778 (Lieber, 2006) limited the number of eligible technologies

Annual Funding $83 million/year per D.08-01-079.

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Pricing Characteristics of SGIP Incentive Limitations

Minimum system size 30 kW Systems up to 5 MW may apply for incentives, and Incentives are paid for the first 3 MW, per D.08-04-049.

Only the fuel cell option remains post-1/1/08. 1 MW plant is eligible for funding up to $4.5 million Second MW receives up to $2.25 million and third MW receives up to

$1.125 million

Eligible Technologies

Renewable Fuel Cells

30 kW to 1 MW

Renewable Fuel Cells

1 MW to 2 MW

Renewable Fuel Cells

2 MW to 5 MW

Incentive Offered ($/W)

$4.50/W up to

1 MW

$2.25/W up to

2 MW

$1.125/W up to

3 MW

# Facilities* 4 0 0

Capacity (MW) 2.25 0 0

Incentive Levels and Complete* Installations

*as of 8/1/2008

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Feed In Tariff for Bioenergy CPUC is authorized to require utilities to offer Feed-in

Tariffs (FITs) that apply to bioenergy under 2 scenarios Scenario 1: Applies to all renewable fueled generation < 1.5

MW AB 1969 (Yee, 2006) required utilities to purchase power from water/wastewater

treatment plants SB 380 expanded AB 1969 FIT to include any renewable generators and

increased the statewide cap from 250 MW to 500 MW. In R.08-08-009, the CPUC is currently considering whether to expand the FIT

to projects up to 20 MW in size.

Scenario 2: Applies to all CHP up to 20 MW AB 1613 (Blakeslee, 2007) requires utilities to purchase power from new (and

potentially, repowered) CHP facilities (included biogas fueled facilities) CPUC implementation is just starting—Energy Division Staff Proposal of the

tariff will be issued January 16, with workshops to follow.

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CPUC Adopts Market Price Referent Calculated annually for RPS Solicitations

Calculates levelized all-in market price deemed per se reasonable, i.e. recoverable through rates

Feed-In tariff program adopts MPR values for pricing

Adopted 2008 MPRs* - $/kWhOnline Date 10-Year 15-Year 20-Year

2009 .10043 .10537 .11126

2010 .10175 .10748 .11390

2011 .10400 .11046 .11730

*Adopted 12/18/2008 in Resolution E-4214.

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Pricing Characteristics of Feed-in Tariffs (Scenario 1: AB 1969)

Fixed price is determined by Market Price Referent (MPR), as adjusted by time of delivery and season

Price schedule extends 10-20 years and is listed in tariff Tariffs transfer Renewable Energy Credits (RECs) from generator

to utility Two options under tariff (depending on customer’s choice):

Full sale of production Excess sales (after onsite usage)

¢/kWh Super Off-Peak Summer Peak

PG&E 7 18

SCE 6 31

SDG&E 7 15

Sample Tariff Levels for AB1969 (Illustrative prices)*

*Adopted October 2007. These numbers are illustrative only, for a 15-year contract. There are a number of factors that will affect these the actual price such as the length of contract and year of initial commercial operation. This is an instantaneous price, not a weighted average.

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Feed-in Tariffs (Scenario 2: AB 1613) Fixed or variable price to be determined by the CPUC. CPUC

can require IOUs to purchase excess electricity. Price schedule extends to a maximum of 10 years CHP systems must be sized to the customer’s thermal load

(Sec. 2842). There is no requirement that CHP systems be sized to the

customer’s electric load. Thus, oversized systems (from an electric perspective) are permitted.

A 20 MW maximum size limit applies (Sec. 2840). Only new CHP systems (installed after January 1, 2008) are

eligible. (Sec. 2841). However, per AB1613, the CPUC is considering whether repowered CHP will be eligible.

A NOx standard of 0.07 pounds per MWh applies, with a credit to CHP customer-generators that are 60% efficient or better of 1 MWh per 3.4 MMBtu of waste heat recovered.

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Qualifying Facility Program for Bioenergy Public Utilities Regulatory Policy Act (PURPA) of 1978 established QFs

and outlined their payment according to the avoided cost of power QF is defined as non-utility generator with less than 80 MW capacity that

utilizes cogeneration and/or renewable fuels (for bioenergy, ≥ 95% biomass)

There are currently 69 bioenergy QFs Many bioenergy facilities came online as QFs in the 1980s

New standard offer contracts are currently being assembled. There has been little input from renewable energy representatives

PG&E SCE SDG&E Total

# facilities 35 24 10 69

Capacity (MW) 501 124 25 650

Current Enrollment for Bioenergy Qualifying Facilities*

*As of August 2008. Includes biomass and landfill gas but not municipal solid waste.

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Characteristics of RPS Contracts RPS statute mandates that IOUs, ESPs and CCAs procure an

additional 1% of retail sales per year from eligible renewable sources until 20% is reached no later than 2010 (SB 1078 and 107)

Contract Price Pricing of all RPS contracts is negotiated between buyer and

seller Contract Term

Contracts for 10,15, or 20 years are most common Short term contracts are also allowed

Renewable Energy Resources CEC determines what resources are RPS-eligible Bioenergy resources include agricultural waste, solid waste,

biogas, and others Utility owns the RECs from RPS generation

Commission is considering authorization of tradable RECs Prevents double counting of renewable attributes

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RPS Bioenergy Contracts* Since 2002, the CPUC has approved:

18 biomass projects (307 MW)1

18 biogas projects (46 MW)2

4 additional biogas contracts (7.4 MW) and 3 additional biomass contracts (95 MW) that were later canceled

58% of the biogas capacity and 39% of the biomass capacity is from new or re-started facilities

23 MW of new biogas facilities have come online Two re-started biomass facilities (26 MW) are online Many new biomass projects are delayed. Common barriers

are difficulties with fuel supply and/or site control 20 MW of new biomass capacity and request to extend

contracts for 44 MW of existing capacity pending approval at CPUC

* As of 1/7/2009

1. Includes 1 contract renewal for 49 MW2. Includes 2 contract renewals for 8 MW

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Bioenergy and Bilateral Power Purchase Agreements Renewable energy purchased at a negotiated price

from facilities of all sizes Opportunity for generators who might otherwise not

participate in an RPS Solicitation Generation can fulfill a Load-Serving Entity’s RPS

requirement In 2008, CPUC approved several bilateral PPAs for

bioenergy projects

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SCE’s Standard Offer Biomass Contracts SCE currently offers standard offer contracts for

bioenergy 0 -1 MW, 1-5 MW, and 5-20 MW facilities SCE recognized that smaller biomass projects have

had difficulties in participating in SCE’s annual solicitations.

By eliminating the complex negotiation process that is needed for larger projects, the program gives smaller projects the opportunity to execute contracts with SCE and contribute to the State’s RPS goals.

CPUC has approved 2 of these contracts.