1. California’s Bioenergy Programs – Update to Options for Bioenergy Facilities Paul Clanon & Judith Iklé California Public Utilities Commission January 2009 update (not presented) Bioenergy Working Group

2. #3514352 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)

3. #3514353 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

4. #3514354 Program Eligibility by Facility Capacity Facility Capacity (MW) NEM Tariff SGIPUtility Feed-In Tariff Utility Contract as a QF Utility Contract under RPS Solicitation Utility Contract under Bilateral Negotiation 0– 1.5YesYes*Yes (under AB 1969 and AB 1613) YesYes (uncommon) 1.5–20NoUp to 5MW* Yes (under AB 1613 only) Yes ≥ 20No Yes * Eligible technologies as of 1/1/08 are wind and fuel cells

5. #3514355 Biogas and biomass expected to be between 15% and 19% of the total RPS-eligible deliveries in 2010

6. #3514356 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.

7. #3514357 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.

8. #3514358 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)

9. #3514359 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

10. #35143510 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 ¢/kWhOff-PeakMid-PeakOn-Peak PG&E3.5 – 6.15.5 – 6.38.8 – 19.0 SCE9.7 – 12.712.7 – 18.8N/A – 19.4 SDG&E6.5 - 7.28.7 – 9.710.5 – 10.7 Ranges indicate Winter - Summer rates NEM credit rates effective 8/1/08

11. #35143511 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&ESCESDG&ETotal # facilities45110 Capacity (MW) 1.072.740.133.94 Current Enrollment* *As of 8/1/2008

12. #35143512 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.

13. #35143513 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*400 Capacity (MW)2.2500 Incentive Levels and Complete* Installations * as of 8/1/2008

14. #35143514 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.

15. #35143515 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 * - $/kWh Online Date 10-Year15-Year20-Year 2009.10043.10537.11126 2010.10175.10748.11390 2011.10400.11046.11730 *Adopted 12/18/2008 in Resolution E-4214.

16. #35143516 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) ¢/kWhSuper Off-PeakSummer Peak PG&E718 SCE631 SDG&E715 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.

17. #35143517 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.

18. #35143518 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&ESCESDG&ETotal # facilities35241069 Capacity (MW)50112425650 Current Enrollment for Bioenergy Qualifying Facilities* * As of August 2008. Includes biomass and landfill gas but not municipal solid waste.

19. #35143519 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

20. #35143520 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 MW 2. Includes 2 contract renewals for 8 MW

21. #35143521 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

22. #35143522 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.