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Renewable Biogas: Pipeline Biomethane

Hal Snyder Vice President of Customer Solutions NARUC Staff Subcommittee on Gas July 18, J l 18 2010

Pipeline Biomethane & The Utility of Tomorrow

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Drivers of Biomethane Production

­ California Regulatory Environment * Renewable Portfolio Standard of 20%, maybe 33% * Assembly Bill 32: cap-and-trade to return to 1990 emission levels (i.e. 30% vehicle GHG emissions reductions by 2016, overall 30% state reduction from 2020 projected emissions, target high global warming potential gases) * Low Carbon Fuel Standard: 10% reduction in carbon content of passenger vehicle fuels by 2020 ­ Large demand for in-state renewable fuels for on-site distributed generation, central generation, and vehicles to meet Green House Gas (GHG) reduction targets ­ A il bilit of feedstocks th t currently vent or flare methane Availability f f d t k that tl t fl th ­ Potential under cap-and-trade for credit/offset value from captured GHG emissions

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California Feedstock and Significant Resource Potential

Renewable gas for pipeline or electricity y

6,500 M Mcf/Day (California Natural Gas Consumption)

Other 1.7% Kern River 25.0% 25 0% CA prod. 12.7%

Biomethane 16%

Mojave 0.4%

El Paso 25.7%

GTN 21.8%

Transwest. 12.7%

Source: California Bioenergy Working Group

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Current Biogas Fuel Applications: On-site Generation & Transportation

Land Fill CNG reduces GHG Emissions; On-site generation: available federal/state incentives, i.e. CA Self-Generation Incentive Program Wheelst toWell (W WTW) GHG E Emissions ( (gCO2e/MJ J) GHG Emissions Comparison Across Trans Fuels GHG E i i C i A T F l

110

90

TanktoWheels (TTW) emissions WelltoTank (WTT) emissions

70

50

30

10

10

30

50 Gasoline Diesel Ethanol (Corn) Ethanol Hydrogen Electricity Biodiesel Ethanol (Sgrcane) (SMR NG) (CA Avg) (Soy) (Cellulosic) CNG LF CNG

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The Biomethane Opportunity / Benefits

­ A Competitive Renewable Fuel: large scale biogas production facilities, e.g., wastewater treatment facilities (WWTF) can be compared to other renewables without incentives (WWTF), ­ Storable & Dispatchable: maximizes existing infrastructure ­ Proven Gas Conditioning Technology to meet pipeline gas quality standards ­ Reduces Existing Emissions/Flaring Air Permitting Emissions/Flaring, ­ Environmental Bang-for-the-Buck: Methane, a high global warming potential gas that would otherwise be flared or vented, can be converted to a renewable source that offsets 21x the vented GHG potential of CO2.

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Conditioning to Pipeline Quality Can Be Cost-effective at Scale

Dairies & Small / Medium WWTF's

Illustrative

Large WWTF's

Production Cost of Biomet thane

Only Large WWTFs and Cow Herds get toward the flat part of the curve

Economic Range

0

20,000

40,000

60,000

80,000

Herd Size (# of cows) ( )

· Scale economies (>1.1 mcf/m or 20,000 cows) · Availability and cost of capital · Availability of monetized GHG credits

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Existing Infrastructure to Store and Transport Biomethane

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The Challenges of Pipeline Biomethane

Current Situation in California ­ Biomethane is not being injected locally `yet' yet ­ Small to Medium scale bio-gas production facilities are not economical but could be justified with incentives less than those currently provided to alternative renewables ­ Unlike alternative renewables, no subsidies or tax credits are currently available to , y biomethane producers for pipeline injection, making economics hard to justify Biomethane requires a buyer willing to p y a sufficient p q y g pay price ­ Economic range is >1.1 mcf per minute raw biogas: Most wastewater plants in California are one-forth of this size ­ Subsidies required to develop biomethane for small scale Wastewater plants want to sell `not market' energy ­ For the gas market, the volumes are small ( g 800 mcf / day finished) g , (e.g. y )

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What are We Doing About It

Successful Renewable Projects (on-site generation) ­ Gills Onion (Fuel Cell) and Enertech (Fuel Pellets) ­ Investing in RD&D: Escondido WasteWater Treatment Plant ­ Supporting Biogas in Existing Programs (Self Generation Incentive Program ­ 4 renewable fuel cells in territory) Pipeline Biomethane Injection Readiness - Adapting Gas Quality Requirements ­ Rule 30 Guidance Document for biogas released September 2009 ­ Participating in Gas Technology Institute (GTI) studies - first dairy biogas, currently landfill gas Positioning the Company f Commercially Viable Projects P iti i th C for C i ll Vi bl P j t ­ Currently working with multiple developers on project feasibility assessments ­ Conditioning biogas to pipeline quality with utility owned and operated equipment ­ R i i t iff to support d l Revising tariffs t t development f t from multiple f d t k sources; ii.e. gas d i d f lti l feedstock derived from all renewable organic sources

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Regulatory Actions

Support biomethane as a competitive and cost-effective resource. Encourage utility participation and expertise to kick start in the development of renewable biomethane. Support even-handed federal and state regulatory incentives and policies for biomethane as another viable alternative to wind and solar Support appropriate credit for avoided methane emissions. Streamlined, coordinated permitting and regulatory approval's to facilitate interest, investments and development

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