CEC proposes to cut biomethane projects from RPS

By Anna Austin | March 27, 2012

The American Biogas Council is working to convince the California Energy Commission of the negative effects of a proposed moratorium on renewable portfolio standard (RPS) qualification for biomethane projects.

The CEC issued a notice of consideration March 16, and will hold a hearing on March 28 to discuss suspending the previously adopted guidelines.

Meanwhile, the ABC has been urging industry stakeholders to submit comments to the CEC regarding the proposal. Along with many of its members, the ABC sent a joint letter to the CEC pointing out the tragic consequences the moratorium would have on the developing biogas industry, and the missed economic benefits to the state.

Patrick Serfass, ABC executive director, said while the moratorium wouldn’t exclude all biogas projects, it would eliminate high Btu/pipeline projects. “With biogas projects, you basically have two options to use the biogas: make electricity, or upgrade the gas to biomethane so it can be used as a renewable substitute for natural gas,” Serfass explained. “Currently both types of uses are incentivized in California to help the state meet its RPS goals, and as a result, the renewable electricity or renewable biomethane producers can get paid a little more for either product.”

Citing economic reasons, the CEC has proposed to strip RPS eligibility to any biomethane projects that don’t use biomethane directly on site, such as projects that transport it through the pipeline network to be used somewhere else. Serfass called the proposal ironic, and added that it has nothing to do with the renewable and environmental benefits biogas offers. “What’s ironic is that the economic reasons that have fueled this sudden rule change have to do with encouraging the development of renewable energy projects in California, but this rule change has a massive negative impact on biomethane projects that are being developed in California,” he said. “The most immediate problems are that if this proposal succeeds, it will stop biomethane project development in California in its tracks. Millions of dollars of financing per project will likely disappear and investors will be alienated; and most alarmingly, it sends an inaccurate and confusing message that biomethane projects don't deserve qualification as a top tier renewable energy option, which they do.”   

If there are any silver linings for some companies, one may be that in the long run, this proposed disruption will stop biomethane projects outside of California from competing with in-state projects because all biomethane project development will be stopped, according to Serfass. “Some believe that after this disruption that California will allow in-state producers to qualify again, but the CEC hasn't said so and many in the industry aren't sure whether the CEC can be trusted because of the sudden and unilateral nature of this proposed wholesale biomethane moratorium,” he said.

The second possible silver lining is that the proposal may give certain industry members a leg up. “Anyone producing biogas and turning it into electricity is not impacted by this proposal,” Serfass said. “So if you're in the gas turbine, fuel cell or engine business, your company would gain a competitive advantage inside and outside California until biomethane projects receive eligibility again, if this actually happens. While there are admittedly some pros and cons, we've reviewed the impacts of the proposed rule change extensively and for the vast majority of our 150 member companies the cons clearly outweigh the pros.”  

The American Biogas Council believes that the CEC's proposed wholesale moratorium on biomethane is the wrong way to solve the perceived problem. “The unfortunate result is that it will disrupt tens of millions of dollars of California economic activity and the temporary and permanent California jobs that come along with it,” Serfass added. “The reality is that if this rule change is made, biogas companies won't wait around to see if maybe biomethane projects will be allowed again in California; they will develop projects elsewhere. The California market is very large and important to the biogas industry, but at the same time, the ABC counts over 11,000 potential projects sites in the U.S. using organic waste from the agriculture, wastewater and urban waste industries. There are a lot of opportunities, and it would be a shame to see California squander theirs.”