Many environmentalists hope that biogas will help California meet its renewable-energy goals. Also called biomethane, it's sourced from landfills, dairies, and machines known as digesters that turn decomposing organic material into combustible-fuel sources for power plants. But in a little-noticed decision that could impact the future of some types of biogas statewide, the California Energy Commission on March 28 suspended the certification of new pipeline biogas suppliers. The suspension targets methane gas that is injected into regional pipeline systems and mixed with other gas sources intended to fuel power plants that supply the state's electricity grid.
The suspension could be a big deal because biogas supplied via pipelines across the western United States is expected to become an important source of renewable energy, and numerous companies have stepped up to develop and trade in the resource. Biogas is better for the environment than burning fossil fuels, like natural gas and coal, because it doesn't need to be mined from wells drilled thousands of feet into the earth — nowadays often by using "fracking" techniques. Biogas also can provide something other renewables can't: a steady base load of energy that isn't dependent on the whims of the weather that affect wind and solar production.
But the California Energy Commission and state legislators say the suspension is necessary to determine if supplies of piped methane gas actually achieve the goals of reducing greenhouse-gas emissions and our reliance on fossil fuels, as required by multiple state laws, and most recently affirmed by last year's signing of SBX1-2, a bill that ups California's commitment to fighting climate change. Legislators are also worried about the possibility of fraud due to the difficulty of tracking biogas injected into the same pipeline system that carries traditional natural-gas supplies.
Under the suspension, existing renewable-certified biogas suppliers are not affected. Also unaffected are biogas energy sources that extract and burn the resource on-site, without piping the gas to distant power plants — such as East Bay MUD's bio-digester in West Oakland.
According to data supplied by the California Public Utilities Commission, biogas currently accounts for approximately 12 percent of the state's eligible renewable energy. There are some 160 facilities producing energy from biogas spread across California, many of them concentrated near dairy farms in the Central Valley or other rural areas where municipal garbage is dumped. Most of these don't receive piped supplies of biomethane from distant sources, but the California Energy Commission expects the business to expand in coming years.
The use of biogas (both on-site and piped) has grown greatly in recent years to fill out part of the state's mandated renewable-energy requirements for the three investor-owned utilities that supply much of California's electricity — PG&E in the north, and Southern California Edison and San Diego Gas & Electric in the south. From 2009 to 2010, the total stock of biogas-energy resources nearly doubled from 4,500 to 8,800 megawatts. In 2011 it nearly doubled again to 17,000 megawatts. As of 2012, public utilities are also mandated to meet state renewable-energy requirements, thus the need for biogas is even greater.
Some energy suppliers like the Marin Energy Authority, California's first Community Choice Aggregator, already rely heavily on biogas because they made a policy decision to promote the development of renewable-energy resources. Most of Marin Energy's electricity comes from landfill gas plants in California's Central Valley that are unaffected by the suspension because they extract and burn biogas on-site. But Marin's contracted supplier of energy, Shell Energy North America, is a major player in the biogas pipeline business, and already transports supplies of biomethane via pipelines to customers in other states.
Jamie Tuckey, a spokesman for the Marin Energy Authority, said they're aware of the suspension: "We have confirmed that the issue will not affect our existing contracts but we will keep the issue in mind for our future procurement efforts and will continue to explore solar, wind, and other [renewable-energy] qualifying technologies." For other cities and counties contemplating forming their own energy authorities, such as Monterey, Santa Cruz, and San Luis Obispo, the suspension could make the acquisition of biogas electricity more expensive.
Critics of the suspension say the energy commission's move was hasty and potentially damaging, and also question the legal reasoning behind it. In a letter to his clients, Michael Carroll, an attorney with Latham & Watkins, a law firm representing energy companies and utilities, warned that "ultimately, the Legislature may act to resolve how biomethane can be used to satisfy [renewable-energy] requirements. Until that time, however, the suspension could result in higher ... compliance costs while jeopardizing millions of dollars in investments." Carroll and his colleagues at Latham & Watkins didn't respond to a request for further comment.
In support of the suspension, the authors of SBX1-2, State Senator Darrell Steinberg and Assemblymembers Nancy Skinner of Berkeley, Wesley Chesbro, and Steven Bradford identified what currently appears to be the biggest problem with biogas: the possibility that supplies shipped in pipelines to distant power plants, many which also burn conventional natural gas that is imported from as far away as New Mexico, will not result in the displacement of fossil fuels in generating electricity. The legislature and the energy commission are concerned that energy companies will game the system and obtain renewable-standards credits they don't deserve because the gas in question ends up somewhere else, being used for some other purpose, or that credits will be counted twice, undermining the greenhouse-gas-reduction goal.
"Unlike other renewable resources that are located at the site of the power plant, such as wind, solar, hydroelectric or geothermal resources," the energy commission wrote in its suspension notice, "biomethane originates offsite and is delivered to the power plant via a non-dedicated natural gas pipeline system. This makes its use for the RPS [renewable energy standard] more difficult or impossible to verify and introduces the possibility of fraud."
Adam Gottlieb of the California Energy Commission said the suspension is a "preemptive" move on the part of the state. "No fraud has yet occurred," said Gottlieb, but added that existing regulations "do not yet establish rigorous requirements to verify that the claimed quantity of biomethane was actually used by the designated power plant, or that the necessary biomethane attributes were transferred to the power plant operator for purposes of the RPS and not double counted for other purposes."
Although SB X1-2 had a long list of opponents, most of them are conservative business groups and oil and gas industry lobbyists that tend to oppose any new energy policies that aim to reduce the use of fossil fuels.
Many of the companies that have been most active in developing biogas energy facilities in California did not oppose the bill, nor have they chafed at the suspension, mostly because their projects develop and burn biomethane on-site, a business model that creates no tracking problems for state regulators. A representative of DTE Energy, a Detroit-based company that is building two large methane power plants in Solano and Los Angeles counties that will begin supplying PG&E with renewable certified electricity by next year, said the ruling doesn't impact their business. "The commission's ruling applies only to projects that put gas into the pipeline system," said John Austerberry of DTE Energy.
Gottlieb said the suspension is partly about protecting energy companies from wasting money on biogas projects that may ultimately be ruled ineligible for the state's renewal energy standard.
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