Existing law requires the State Energy Resources Conservation and Development Commission to undertake various actions in furtherance of meeting the states clean energy and pollution reduction objectives. Existing law requires the commission to gather or develop, and publish on the commissions internet website, guidance and best practices to help building owners, the construction industry, and local governments overcome barriers to electrification of buildings and installation of electric vehicle charging equipment, as specified.

This bill would require the commission, on or before January 1, 2025, to submit to the Legislature an Industrial Heat Electrification Roadmap, which would, among other things, identify the industrial subsectors for various California facilities that use heat application equipment operating at or below 1,000 degrees Celsius and their locations and evaluate various issues related to industrial electrification, as specified. The bill would authorize the commission to consult with the State Air Resources Board to include in the roadmap an estimate of the reductions in emissions of greenhouse gases and criteria air pollutants, and commensurate health benefits, from electrifying the identified industrial subsectors.

Existing law requires the State Energy Resources Conservation and Development Commission to undertake various actions in furtherance of meeting the states clean energy and pollution reduction objectives. Existing law requires the commission to gather or develop, and publish on the commissions internet website, guidance and best practices to help building owners, the construction industry, and local governments overcome barriers to electrification of buildings and installation of electric vehicle charging equipment, as specified.

This bill would require the commission, on or before January 1, 2025, to submit to the Legislature an Industrial Heat Electrification Roadmap, which would, among other things, identify the industrial subsectors for various California facilities that use heat application equipment operating at or below 1000 1,000 degrees Celsius and their locations and evaluate various issues related to the electrification of facilities in those industrial subsectors. industrial electrification, as specified.

Existing law requires the State Energy Resources Conservation and Development Commission to undertake various actions in furtherance of meeting the states clean energy and pollution reduction objectives. Existing law requires the commission to gather or develop, and publish on the commissions internet website, guidance and best practices to help building owners, the construction industry, and local governments overcome barriers to electrification of buildings and installation of electric vehicle charging equipment, as specified.

This bill would require the commission, on or before January 1, 2025, to submit to the Legislature an Industrial Heat Electrification Roadmap, which would, among other things, identify the industrial subsectors for various California facilities that use heat application equipment operating at or below 1000 degrees Celsius and their locations and evaluate various issues related to the electrification of facilities in those industrial subsectors.

Existing law requires the State Energy Resources Conservation and Development Commission to undertake various actions in furtherance of meeting the states clean energy and pollution reduction objectives. Existing law requires the commission to gather or develop, and publish on the commissions internet website, guidance and best practices to help building owners, the construction industry, and local governments overcome barriers to electrification of buildings and installation of electric vehicle charging equipment, as specified.

This bill would require the commission, on or before June 30, 2024, January 1, 2025, to submit to the Legislature an Industrial Heat Electrification Roadmap, which would, among other things, identify various subsectors of industrial emissions in California industrial subsectors for various California facilities that use heat application equipment operating at or below 1000 degrees Celsius and their locations and identify barriers to industrial electrification. evaluate various issues related to the electrification of facilities in those industrial subsectors.

Existing law requires the State Energy Resources Conservation and Development Commission to develop and coordinate a program of research and development in energy supply, consumption, and conservation and the technology of siting facilities, and to give priority to those forms of research and development that are of particular importance to the state, as specified. undertake various actions in furtherance of meeting the states clean energy and pollution reduction objectives. Existing law requires the commission to gather or develop, and publish on the commissions internet website, guidance and best practices to help building owners, the construction industry, and local governments overcome barriers to electrification of buildings and installation of electric vehicle charging equipment, as specified.

This bill would make nonsubstantive changes to that provision. require the commission, on or before June 30, 2024, to submit to the Legislature an Industrial Heat Electrification Roadmap, which would, among other things, identify various subsectors of industrial emissions in California and their locations and identify barriers to industrial electrification.

Existing law requires the State Energy Resources Conservation and Development Commission to develop and coordinate a program of research and development in energy supply, consumption, and conservation and the technology of siting facilities, and to give priority to those forms of research and development that are of particular importance to the state, as specified.

This bill would make nonsubstantive changes to that provision.

SENATE COMMITTEE ON APPROPRIATIONS

Senator Anthony Portantino, Chair

2023 - 2024 Regular Session

AB 841 (Berman) - State Energy Resources Conservation and Development Commission: Industrial Heat Electrification Roadmap

Bill Summary:

This bill would require the California Energy Commission (CEC) to create a roadmap for electrifying industrial processes, including processes requiring heat, as specified.

Fiscal Impact:

• The CEC estimates one-time costs of about $1.9 million (Energy Resources Program Account [ERPA] or General Fund) to conduct multiple workshops, interview stakeholders, contract competitively with a firm to prepare the roadmap, and managing the development process, among other things.
• The California Air Resources Board (CARB) anticipates any costs would be minor and absorbable.

Background:

Industrial facilities are the second largest source of California’s emissions; however, existing programs aimed at lowering GHG emissions emphasize multiple pathways to decarbonizing industrial processes.

Cap-and-Trade. In 2006, the Legislature passed the California Global Warming Solutions Act of 2006 [Assembly Bill 32 (AB 32)], which created a comprehensive, multi-year program to reduce greenhouse gas (GHG) emissions in California. California’s Cap-and-Trade program is a key component of the state’s strategy to reduce GHG emissions. The program is intended to provide an economic incentive to reduce emissions on a sector-wide basis. Under existing law, CARB sets annual caps on major sources of emissions, and these annual caps decline over time. CARB produces allowances for units of emissions under the cap, and entities covered by the Cap-and-Trade program can purchase these allowances at auctions or through trades with other covered entities. As the cap declines, fewer allowances are issued and the cost for allowances increases. As a result, covered entities pay progressively more to continue emitting under the cap, incentivizing investments in decarbonization.

AB 32 Scoping Plan. AB 32 required the California Air Resources Board (CARB) to develop a Scoping Plan that describes the approach California will take to reduce GHGs to achieve the goal of reducing emissions to 1990 levels by 2020. The Scoping Plan was first approved by the Board in 2008 and must be updated at least every five years. Since 2008, there have been two updates to the Scoping Plan. Each of the Scoping Plans have included a suite of policies to help the State achieve its GHG targets, in large part leveraging existing programs whose primary goal is to reduce harmful air pollution.

Industrial sector GHG emissions. According to CARB’s 2022 update to the Scoping Plan, approximately 80 percent of the industrial sector’s emissions come from combustion-based processes, and 20 percent of its emissions come from fugitive emissions associated with chemical transformations inherent in some industrial processes. Currently, it is unclear how many of these processes can be electrified. Some studies have indicated that a substantial portion of the industrial sector’s processes can be electrified; however, these studies have acknowledged that electrification may only provide net emissions benefits where there is sufficient renewable generation to match the additional electrical load.

The Cap-and-Trade program and the Scoping Plan do not presume a single pathway to achieving emissions reductions.

The Energy Resources Program Account. ERPA, the CEC’s main funding source, has a significant structural deficit. The ERPA was established to provide funds for ongoing energy programs and energy projects, including the operations of the CEC. The ERPA fund is supported by a statutory surcharge on electricity consumption. The surcharge was increased to its statutory maximum - from $0.00029 to $0.0003 per kilowatt-hour (kWh) - by the CEC effective January 1, 2019. The surcharge generated approximately $67.5 million in 2017-18 and costs the average household $2.01 annually.

ERPA is in a structural deficit that has overspent revenues by more than $17.4 million since 2014-15. The structural deficit results from the CEC’s growing role in implementing aggressive climate policies that reduce electricity consumption thereby reducing ERPA revenues. California has the lowest per capita electricity usage in the nation - 44 percent lower than the average - due in part to the Energy Commission's efficiency and behind-the-meter solar programs. Even as revenues drop, ERPA is repeatedly tapped to support new programs and must cover increases in employee compensation and benefit contributions.

Proposed Law: This bill would require the CEC to create a roadmap for electrifying industrial processes, including processes requiring heat. Specifically, this bill would:

1. Require the CEC to submit a roadmap for industrial heat electrification to the Legislature by January 1, 2025.
2. Specify that the industrial heat electrification roadmap must do the following:
   1. Identify industrial subsectors that use equipment to create heat at or below 1,000 degrees Celsius.
   2. Assess the feasibility and costs associated with electrifying these industrial subsectors.
   3. Identify industrial facilities in under-resourced communities that can be electrified by January 1, 2030.
   4. Using information from the California Workforce Development Board, quantify the workforce necessary to support industrial electrification.
   5. In consultation with the CPUC and the ISO, estimate impacts to electricity reliability, including net peak load impacts, in scenarios where 25, 50, 75, and 100 percent of the industrial sector transitions to electric heat for processes occurring at 1,000 degrees Celsius.
   6. Using information from the CPUC, identify barriers to industrial electrification and solutions to reduce costs or delays of industrial electrification, including, but not limited to, incentives for deeliping and deploying thermophotovoltaic technologies, using distributed energy resources, electric system infrastructure upgrades, demand response programs, or accessing federal funding for industrial electrification.
   7. Calculate the effect of state and federal incentives, including tax credits, on industrial electrification to-date and estimate their effect through 2030.
3. Provide that the CEC may consult with CARB to include in the roadmap an estimate of the reductions in GHG and criteria air pollutants, and commensurate health benefits, as specified.

Related Legislation:

AB 209 (Committee on Budget, Chapter 251, Statutes of 2021) among other changes needed to implement the 2021 Budget Act, the bill required the CEC to establish the INDIGO program to provide incentives for projects at industrial facilities that provide significant benefits to the electrical grid, reduce emissions, and achieve the state’s energy goals.

SB 596 (Becker, Chapter 246, Statutes of 2021) required CARB to develop a comprehensive strategy for the state's cement sector to achieve net-zero GHG emissions no later than December 31, 2045.

Staff Comments:

Cap-and-Trade Program. As noted in the Senate Energy, Utilities and Communications Committee analysis, “Many industrial facilities that would be assessed in this bill’s roadmap are already covered entities for the purposes of the Cap-and-Trade program, and the Scoping Plan already discusses barriers to industrial heat electrification. Specifically, the 2022 Scoping Plan update notes that industrial sector electricity rates may provide an economic disincentive to electrification.”

The 2022 Scoping Plan update states, “Under current rate structures for industrial electricity and fossil gas in California, most projects to electrify a fossil gas-powered industrial process will face operating cost barriers and potential reliability concerns.” By requiring the CEC to create a separate roadmap for industrial electrification, this bill could create a separate set of decarbonization recommendations outside the Scoping Plan.

ERPA structural deficit. ERPA, the CEC’s main funding source, has a significant structural deficit. ERPA was established to provide funds for ongoing energy programs and energy projects, including the operations of the CEC. ERPA is supported by a statutory surcharge on electricity consumption. According to the CEC, as building and appliance energy efficiency and the increase of behind-the-meter solar produce customer savings and flatten statewide electricity consumption, ERPA revenues have decreased, and the costs have been borne by fewer and fewer customers. Even as revenues drop, ERPA is repeatedly tapped to support new programs and must cover increases in employee compensation and benefit contributions.

The CEC’s building and appliance standards have led to decreased energy consumption and reduced ratepayer bills, saving California consumers well over $100 billion over the last 40 years. However, these electricity reductions and consumer savings also reduce ERPA revenues. The CEC’s standards continue to save Californians more money than they pay through the ERPA surcharge.

In addition, behind-the-meter rooftop solar, wind, and non-utility generation are exempt from the ERPA surcharge. As behind-the-meter capacity grows, ERPA revenues decline correspondingly.

The surcharge generated approximately $69.1 million in 2020-21 and currently costs the average household about $2.13 annually (larger customers pay the same rate but pay more based on volume). Despite CEC efforts to reduce ERPA spending by more than $37 million over four years, a structural deficit remains and ERPA’s fund balance is projected to be in the red in 2024-25.

As part of the 2022-23 budget, the Legislature passed trailer bill language that raised the statutory cap on the ERPA surcharge, tied the statutory cap to the Consumer Price Index, and extended the surcharge to behind-the-meter electricity consumption.

-- END --

SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS

Senator Steven Bradford, Chair

2023 - 2024 Regular

Bill No: AB 841 Hearing Date: 7/3/2023

SUBJECT: State Energy Resources Conservation and Development Commission: Industrial Heat Electrification Roadmap

DIGEST: This bill requires the California Energy Commission (CEC) to create a roadmap for electrifying industrial processes, including processes requiring heat, as specified.

ANALYSIS:

Existing law:

1. Establishes the Cap-and-Trade program, which is market-based compliance mechanism administered by the California Air Resources Board (CARB) to enforce greenhouse gas (GHG) emissions limits and achieve specified feasible, cost-effective emissions reductions. Existing law requires CARB to approve a scoping plan for achieving these emissions reductions and update that scoping plan at least once every five years. (Health and Safety Code §38500 et. seq.)
2. Requires the CEC to establish the Industrial Decarbonization and Improvement of Grid Operations (INDIGO) program to provide incentives for projects at industrial facilities that help achieve the following:
   1. Enhance electrical grid reliability and enable effective industrial participation in certain load reduction programs.
   2. Electrify processes using gas or fossil fuels.
   3. Incorporate energy storage or renewable energy resources.
   4. Increase energy efficiency.
   5. Deploy novel decarbonization technologies and strategies. (Public Resources Code §§25662-25662.2)
3. Specifies that projects benefiting oil and gas processes are not eligible for INDIGO incentives. (Public Resources Code §25662.2)
4. Establishes preferences for INDIGO incentives and requires the CEC to consult with CARB to ensure that incentives provided by the INDIGO program are consistent with emissions reduction goals and Cap-and-Trade requirements. (Public Resources Code §25662.4)
5. Specifies that a project that receives an incentive from the INDIGO program is ineligible for incentives from the Food Production Investment Program. (Public Resources Code §25662.6)

This bill:

1. Requires the CEC to submit a roadmap for industrial heat electrification to the Legislature by January 1, 2025.
2. Specifies that the industrial heat electrification roadmap must do the following:
3. Identify industrial subsectors that use equipment to create heat at or below 1,000 degrees Celsius.
4. Using information from CARB, identify the emissions associated with each industrial subsector.
5. Assess the feasibility and costs associated with electrifying these industrial subsectors.
6. Identify industrial facilities in under-resourced communities that can be electrified by January 1, 2030.
7. Using information from CARB, quantify emissions reduction and health benefits from electrifying industrial subsectors.
8. Using information from the California Workforce Development Board, quantify the workforce necessary to support industrial electrification.
9. Estimate electrical load and impacts to net peak demand in scenarios where 25, 50, 75, and 100 percent of the industrial sector transitions to electric heat for processes occurring at 1,000 degrees Celsius.
10. Using information from the California Public Utilities Commission (CPUC), identify barriers to industrial electrification and solutions to reduce costs or delays of industrial electrification, including, but not limited to, expediting the direct connection of thermal energy storage facilities to renewable energy resources, facilitating wholesale market participation for dispatchable price-sensitive loads, and using distributed energy resources, infrastructure upgrades, demand response programs, or accessing federal funding for industrial electrification.
11. Calculate the effect of state and federal incentives, including tax credits, on industrial electrification to-date and estimate their effect through 2030.

Background

Bill emphasizes electrification as the pathway for industrial decarbonization. Industrial facilities are the second largest source of California’s emissions; however, existing programs aimed at lowering GHG emissions emphasize multiple pathways to decarbonizing industrial processes. This bill emphasizes electrification as a single pathway to decarbonizing the industrial sector, including industrial heat applications. According to CARB’s 2022 update to the Scoping Plan, approximately 80 percent of the industrial sector’s emissions come from combustion-based processes, and 20 percent of its emissions come from fugitive emissions associated with chemical transformations inherent in some industrial processes. Currently, it is unclear how many of these processes can be electrified. Some studies have indicated that a substantial portion of the industrial sector’s processes can be electrified; however, these studies have acknowledged that electrification may only provide net emissions benefits where there is sufficient renewable generation to match the additional electrical load. To the extent that this bill enables better planning for the electrical resources needed to match industrial electrification, this bill could help utilities better plan long lead time resources and distribution needs.

Scoping Plan vs. Electrification Roadmap: Who’s on first? California’s Cap-and-Trade program is a key component of the state’s strategy to reduce GHG emissions. The program is intended to provide an economic incentive to reduce emissions on a sector-wide basis. Under existing law, CARB sets annual caps on major sources of emissions, and these annual caps decline over time. CARB produces allowances for units of emissions under the cap, and entities covered by the Cap-and-Trade program can purchase these allowances at auctions or through trades with other covered entities. As the cap declines, fewer allowances are issued and the cost for allowances increases. As a result, covered entities pay progressively more to continue emitting under the cap, incentivizing investments in decarbonization. In addition to administering the Cap-and-Trade program, CARB also develops updates to the Scoping Plan, which identifies strategies to meeting the state’s GHG emissions reduction goals. The Cap-and-Trade program and the Scoping Plan do not presume a single pathway to achieving emissions reductions.

Many industrial facilities that would be assessed in this bill’s roadmap are already covered entities for the purposes of the Cap-and-Trade program, and the Scoping Plan already discusses barriers to industrial heat electrification. Specifically, the 2022 Scoping Plan update notes that industrial sector electricity rates may provide an economic disincentive to electrification. The 2022 Scoping Plan update states:

“Under current rate structures for industrial electricity and fossil gas in California, most projects to electrify a fossil gas-powered industrial process will face operating cost barriers and potential reliability concerns.” By requiring the CEC to create a separate roadmap for industrial electrification, this bill could create a separate set of decarbonization recommendations outside the Scoping Plan.

Some of the bill’s requirements are unclear and may not support electrification. This bill requires the CEC to focus the roadmap on the electrification of industrial heat applications below 1,000 degrees Celsius. Many studies note that few electrification options exist for industrial heat applications above 1,000 degrees Celsius. These applications include steel, glass, cement, and ceramic processes. While these hard-to-electrify facilities use heat applications above 1,000 degrees, the heat of these processes may vary above and below the threshold contained in this bill. It is not clear how the roadmap will address facilities with processes that fluctuate across the 1,000 degree threshold.

This bill requires the CEC to make specific recommendations regarding bidding in the wholesale electricity market, interconnection of specific technologies, ratepayer-supported demand response programs, and other electrification incentives. However, some of this bill’s terms for these recommendations are unclear. For example, this bill requires the CEC to work with the CPUC to identify solutions to reduce costs or delays in industrial electrification, including, “…the direct connection of thermal energy storage facilities to renewable energy resources, facilitating wholesale market participation for dispatchable price-sensitive loads.” While it is unclear what thermal energy and wholesale market resources would meet these specifications, it is also unclear whether these resources or market changes would reduce costs and timelines for industrial electrification.

Need for Amendments. As currently written, this bill requires agencies to consider technologies and strategies that are not well-defined or widely deployed. This bill also requires the CEC to create a roadmap for electrifying high heat industrial processes as part of a strategy to reduce emissions from the industrial sector. However, these portions of the industrial sector are also entities covered under the Cap-and-Trade program administered by CARB. Existing law requires CARB to regularly update its Scoping Plan to identify strategies to decrease emissions on a sector-wide basis. This bill would require a separate roadmap for electrification that is not incorporated into CARB’s planning process and may not be linked to the state’s sector-wide emissions reduction strategies.

As a result, the author and committee may wish to amend this bill to do the following:

• Shift the bill’s duties from the CEC to CARB.
• Consolidate the bill’s reporting requirements into the next update to the Scoping Plan.
• Require CARB to work with the CEC to assess the feasibility of electrifying industrial heat processes under high-electrification scenarios and the impact of that electrification on electrical reliability and rates.
• Conform certain terms to those used in the Health and Safety Code.
• Strike subdivision (b)(8) from this bill.

Double Referral. Should this bill be approved by this committee, it will be re-referred to the Senate Committee on Environmental Quality.

Prior/Related Legislation

AB 209 (Committee on Budget, Chapter 251, Statutes of 2021) among other changes needed to implement the 2021 Budget Act, the bill required the CEC to establish the INDIGO program to provide incentives for projects at industrial facilities that provide significant benefits to the electrical grid, reduce emissions, and achieve the state’s energy goals.

SB 596 (Becker, Chapter 246, Statutes of 2021) required CARB to develop a comprehensive strategy for the state's cement sector to achieve net-zero GHG emissions no later than December 31, 2045.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

SUPPORT:

Earthjustice, Co-sponsor

Industrious Labs, Co-sponsor
350 Bay Area Action
350 Humboldt: Grass Roots Climate Action
Asian Pacific Environmental Network
Breathe Southern California
California Environmental Voters
California Municipal Utilities Association
Center on Race, Poverty & the Environment
Central California Asthma Collaborative
Climate Action California
Community Environmental Council
Green Latinos
Menlo Spark
Natural Resources Defense Council
NextGen California
Peoples Collective for Environmental Justice
Rewiring America
Rondo Energy
Sierra Club California
SoCal 350 Climate Action
Southern California Edison
Sunflower Alliance
The Climate Center

The Climate Reality Project

OPPOSITION:

California Manufacturers and Technology Association, unless amended

ARGUMENTS IN SUPPORT: According to the author:

California is a leader in transitioning from combustion to zero-emission technologies in the electricity and transportation sectors, but industrial emissions have largely remained unaddressed. Industrial emissions make up 23 percent of greenhouse gas emissions in California, which is the second largest source behind transportation. Unfortunately, emissions reported from industrial sources have remained flat or even risen in recent years. Moreover, these same sources also emit large quantities of criteria air pollutants and toxic air contaminants that contribute to the heavy air pollution that burdens primarily under-resourced communities. It is time for California to begin electrifying the state’s industrial sector—a critical economic contributor to our state. AB 841 is a key first step for California to push the transition of our industrial sectors to zero-emission. This bill achieves this by tasking the California Energy Commission to prepare an Industrial Heat Electrification Roadmap. Planning for electrification will bring sustained economic growth to our industries and reduce heavy air pollution that burdens our most vulnerable communities.

ARGUMENTS IN OPPOSITION: In opposition, the California Manufacturers and Technology Association (CMTA) states:

CMTA fundamentally disagrees with the intent of the proposal as it relies heavily on industry-wide electrification which is not feasible. For a $310 billion sector of California’s economy that employs more than 1.2 million people, the challenges, opportunities, and technological capacity to achieve deep decarbonization will require a thorough analysis of how to achieve it. AB 841 is about a decade late for what the industry already attempts to incorporate. Still, California has an opportunity to minimize the regulatory, permitting, and financial hurdles that are stopping decarbonization projects today.

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 841

Author:(Berman)

As Amended Ver:May 18, 2023

Majority vote

SUMMARY

This bill requires the California Energy Commission (CEC) to identify various subsectors of industrial emissions in California including their locations, and identify barriers to industrial electrification, and submit to the Legislature an industrial heat electrification roadmap on or before January 1, 2025.

Existing Law:

Requires CEC to assess the potential for the state to reduce greenhouse gas (GHG) emissions from the state's residential and commercial building stock by at least 40% below 1990 levels by January 1, 2030. (Public Resources Code Section 25403)

Major Provisions

COMMENTS

Industrial Emissions. The California Air Resources Board (CARB) has reported that the industrial sector accounts for 20% of GHG emissions, which represents the second largest source of emissions after transportation. Emissions in the industrial sector are largely driven by fuel combustion from sources such as refineries, oil and gas production, heat energy used for heating and cooling and cement manufacturing. Refineries and hydrogen production contribute 35% of the sector's total emissions – the largest individual source – in the industrial sector.

2022 California Energy Code. Adopted in 1976 and updated every three years by CEC, the Energy Code, ensures new and existing buildings achieve water and energy efficiency, and lower carbon footprints. As climate change fuels increased extreme weather events, CEC updated the 2022 Energy Code standards for newly constructed residential and commercial buildings, as additions and alterations to existing buildings went into effect January 2023. Part of the focus on the new standards entails the use of electric heat pumps for space heating, water heating, and use of photovoltaic(PV systems) and battery storage for commercial buildings.

Food Production Investment Program (FPIP). CEC has reported that the food processing industry is one of California's largest energy users and a major producer of GHG emissions. In 2018, CEC established FPIP to provide grants that will help food producers adopt energy and decarbonization technologies to help reduce GHG emissions.

Federal Roadmap & Investments. In September 2022, the United States Department of Energy released the industrial decarbonization roadmap that identifies strategies to reduce GHG emissions in the industrial sector including the use of advanced heat pumps. To support this effort, the Inflation Reduction Act and the Infrastructure Investment and Jobs Act provides over $10 billion in manufacturing tax credits for industrial facilities with low-or zero-carbon process heat systems.

Alignment with State & Federal Decarbonization Efforts. The industrial sector is reportedly one of the most difficult industries to decarbonize and yet California does not have a comprehensive industrial decarbonization roadmap. The goals of the industrial heat electrification roadmap as proposed by the bill seem to align with statewide and federal industrial decarbonization efforts.

According to the Author

According to the author, "California is a leader in transitioning from combustion to zero-emission technologies in the electricity and transportation sectors, but industrial emissions have largely remained unaddressed. AB 841 is a key first step for California to push the transition of our industrial sectors to zero-emission. This bill achieves this by tasking the California Energy Commission to prepare an Industrial Heat Electrification Roadmap. Planning for electrification will bring sustained economic growth to our industries and reduce heavy air pollution that burdens our most vulnerable communities."

Arguments in Support

This bill is supported by Sierra Club California, among others, which assert, "A roadmap for the industrial sector can also help guide our investments in identifying facilities that are easiest to achieve short-term emission reductions needed for California to meet its 2030 GHG target and improve air quality for communities that need it the most. Clean energy investments for our industrial sector can create good paying jobs while also strengthening California industries globally and maintain California's leadership in this space by positioning the state for sustained economic growth."

Arguments in Opposition

None on file.

FISCAL COMMENTS

According to the Assembly Appropriations Committee, CEC estimates it will need two two-year limited-term positions at a total cost of $586,000, plus $500,000 in consulting fees (Energy Resources Programs Account). CEC warns it would not complete work on the roadmap till 2027. There will be minor, absorbable costs to CARB, CPUC and California Workforce Development Board.

VOTES

ASM UTILITIES AND ENERGY: 15-0-0

YES: Garcia, Calderon, Wendy Carrillo, Chen, Connolly, Dixon, Holden, Mathis, McKinnor, Muratsuchi, Reyes, Santiago, Schiavo, Ting, Wallis

ASM NATURAL RESOURCES: 11-0-0

YES: Luz Rivas, Flora, Addis, Friedman, Hoover, Mathis, Muratsuchi, Pellerin, Ward, Wood, Zbur

ASM APPROPRIATIONS: 11-0-5

YES: Holden, Bryan, Calderon, Wendy Carrillo, Mike Fong, Hart, Lowenthal, Papan, Pellerin, Weber, Ortega

ABS, ABST OR NV: Megan Dahle, Dixon, Mathis, Robert Rivas, Sanchez

UPDATED

VERSION: May 18, 2023

CONSULTANT: Lina Malova / U. & E. / (916) 319-2083 FN: 0000762

Date of Hearing: May 17, 2023

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Chris Holden, Chair

ABPCA Bill Id:AB 841

Author:(Berman) – As Amended Ver:April 17, 2023

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill requires the California Energy Commission (CEC)—in consultation with the Air Resources Board (ARB), the California Public Utilities Commission (CPUC) and the Workforce Development Board (WDB), as appropriate—to develop and submit a report to the Legislature, the Industrial Heat Electrification Roadmap, on the potential and feasibility of use of zero-emission electric technology in industrial heat applications.

The bill requires CEC to submit the report to the Legislature by January 1, 2025, and specifies topics and considerations CEC is to include in the report, including, among other things, (1) identification of industrial subsectors that use heat application equipment operating at or below 1,000 degrees Celsius and the emissions associated with each subsector, as well as facility locations; (2) assessment of the heat electrification feasibility and associated costs of electrifying heat application equipment; identification of industrial facilities in under-resourced communities that may be electrified by January 1, 2030; (3) quantification of (a) emissions of greenhouse gases (GHGs) and criteria air pollutants, and commensurate health benefits, from electrifying the industrial subsectors and (b) the workforce necessary to support industrial electrification; (4) an estimate of electrical load growth associated with various levels of industrial heat electrification; and (5) identification of barriers to industrial heat electrification and possible state solutions.

FISCAL EFFECT:

Costs to CEC to develop the Industrial Heat Electrification Roadmap.

The CEC estimates it will need two two-year limited-term positions at a total cost of $586,000, plus $500,000 in consulting fees (Energy Resources Programs Account). CEC warns it would not complete work on the roadmap till 2027.

Minor, absorbable costs to ARB, CPUC and WDB.

COMMENTS:

1. Purpose. The author intends this bill to focus the state’s efforts to reduce GHG emissions and other air pollutants on electrification of the industrial sector. According to the author:

Industrial emissions make up 23 percent of greenhouse gas emissions in California, which is the second largest source behind transportation. Unfortunately, emissions reported from industrial sources have remained flat or even risen in recent years. Moreover, these same sources also emit large quantities of criteria air pollutants and toxic air contaminants that contribute to the heavy air pollution that burdens primarily under-resourced communities. It is time for California to begin electrifying the state’s industrial sector—a critical economic contributor to our state. AB 841 is a key first step for California to push the transition of our industrial sectors to zero-emission.

1. Background. California has ambitious climate goals: a reduction of statewide GHG emissions to 40% below the 1990 level by 2030 and carbon neutrality as soon as possible, but no later than 2045. The state has many regulations and efforts to achieve these GHG emissions reductions and carbon neutrality. Principal among them is ARB’s scoping plan, a reoccurring document, adopted by ARB, that lays out how the state is to, in ARB’s words, achieve significant reductions in fossil fuel combustion by deploying clean technologies and fuels, further reductions in short-lived climate pollutants, support for sustainable development, increased action on natural and working lands to reduce emissions and sequester carbon and the capture and storage of carbon.

The scoping plan describes the state’s effort to decarbonize the industrial sector. Among the efforts described in the scoping plan is CEC’s energy efficiency standards for appliances, which regulate the energy performance of numerous residential and commercial appliances sold in California.

In addition, the Legislature recently established a program at CEC, which CEC calls the Industrial Decarbonization and Improvement of Grid Operations program, or INDIGO. The program is to provide financial incentives for the implementation of projects at industrial facilities to provide significant benefits to the electrical grid, reduce emissions of GHGs and achieve the state’s clean energy goals and to exceed compliance requirements. CEC is in the process of implementing the program.

Given these CEC efforts, it would seem to make sense to require CEC to prepare a report on industrial heat electrification. However, as described by the author, the bill is focused on reducing GHG emissions and air pollution that often harms those living near industrial facilities the most. ARB, not CEC, leads the state’s efforts to reduce and control air pollution, including GHG emissions. The author may want to consider charging ARB with producing the Industrial Heat Electrification Roadmap, in consultation, of course, with CEC.

Analysis Prepared by: Jay Dickenson / APPR. / (916) 319-2081

Date of Hearing: April 24, 2023

ASSEMBLY COMMITTEE ON NATURAL RESOURCES

Luz Rivas, Chair

ABPCA Bill Id:AB 841 (

Author:Berman) – As Amended Ver:April 17, 2023

SUBJECT: State Energy Resources Conservation and Development Commission: Industrial Heat Electrification Roadmap

SUMMARY: Requires the California Energy Commission (CEC) to identify various subsectors of industrial emissions in California and identify barriers to industrial electrification. Requires CEC to submit to the Legislature an industrial heat electrification roadmap (Roadmap) on or before January 1, 2025.

EXISTING LAW:

1. Requires the Air Resources Board (ARB), pursuant to California Global Warming Solutions Act of 2006 [AB 32 (Núñez), Chapter 488, Statutes of 2006], to adopt a statewide GHG emissions limit equivalent to 1990 levels by 2020 and adopt regulations to achieve maximum technologically feasible and cost-effective GHG emission reductions. AB 32 authorizes ARB to permit the use of market-based compliance mechanisms to comply with GHG reduction regulations once specified conditions are met. Requires ARB to approve a statewide GHG emissions limit equivalent to 85% below the 1990 level by 2045. (Health and Safety Code (HSC) 38500-38599.11)
2. Requires ARB to prepare, adopt, and update an inventory of GHG emissions from different sectors, including estimates for carbon dioxide, methane, nitrous oxide, and fluorinated gases with high global warming potential. (Public Resources Code (PRC) 39607.4)
3. Establishes the Industrial Decarbonization and Improvements to Grid Operations (INDIGO) Program to provide incentives for the implementation of projects that provide significant benefits to the electrical grid, reduce GHG emissions, achieve the state’s clean energy goals, and exceed compliance requirements. (PRC 25662-25662.6)
4. Requires the Public Utilities Commission (CPUC) to establish a renewable portfolio standard (RPS) requiring all retail sellers, as defined, to procure a minimum quantity of electricity products from eligible renewable energy resources, as defined, so that the total kilowatt hours of those products sold to their retail end-use customers achieves 44% of retail sales by December 31, 2024, 52% by December 31, 2027, and 60% by December 31, 2030. (Public Utilities Code (PUC) 399.11)
5. Establishes that the policy goal of the state that eligible renewable energy resources and zero-carbon resources supply 100% of all retail sales of electricity to California end-use customers and 100% of electricity procured to serve all state agencies by December 31, 2045. (PUC 454.53)
6. Defines under-resourced communities as disadvantaged communities pursuant to HSC 39711, low-income communities pursuant to HSC 39713, or disadvantaged communities pursuant to PRC 75005. (PRC 71130)

THIS BILL:

1. Requires CEC, on or before January 1, 2025, to submit the Roadmap to the Legislature.
2. Requires the Roadmap to, at a minimum:
   1. Identify the industrial subsectors for various California facilities that use heat application equipment operating at or below 1,000 degrees Celsius and the facilities’ locations;
   2. Identify, in consultation with ARB, the emissions associated with each industrial subsector identified;
   3. Assess the heat electrification feasibility and associated costs of electrifying heat application equipment and processes for each industrial subsector identified;
   4. Identify, in consultation with the California Public Utilities Commission (CPUC), industrial facilities in under-resourced communities that are able to be electrified by January 1, 2030;
   5. Quantify, in consultation with ARB, potential reductions in GHG emissions and toxic air pollutants, and commensurate health benefits, from electrifying the industrial subsectors identified;
   6. Quantify, in consultation with the California Workforce Development Board, the workforce necessary to support industrial electrification;
   7. Estimate electrical load growth under scenarios where 25%, 50%, and 75% of the facilities in subsectors identified transition to electric heat application equipment and processes; and,
   8. Identify, in consultation with the CPUC, barriers to industrial electrification and possible state agency solutions to reduce costs or reduce delays of industrial electrification that may include, but not be limited to, the use of distributed energy resources, infrastructure upgrades, and demand response programs, or accessing federal funding for industrial electrification. Authorizes CEC to consult, where feasible, with federal agencies to identify federal funding that may aid in reducing industrial electrification costs.
3. Requires the Roadmap to be submitted in accordance with state law, as specified.
4. States legislative findings and declarations regarding industrial heat emissions.
5. Sunsets the bill’s provisions on January 1, 2028.

FISCAL EFFECT: Unknown

COMMENTS:

1. Author’s statement:

California is a leader in transitioning from combustion to zero-emission technologies in the electricity and transportation sectors, but industrial emissions have largely remained unaddressed. Industrial emissions make up 23 percent of greenhouse gas emissions in California, which is the second largest source behind transportation. Unfortunately, emissions reported from industrial sources have remained flat or even risen in recent years. Moreover, these same sources also emit large quantities of criteria air pollutants and toxic air contaminants that contribute to the heavy air pollution that burdens primarily under-resourced communities. It is time for California to begin electrifying the state’s industrial sector—a critical economic contributor to our state. AB 841 is a key first step for California to push the transition of our industrial sectors to zero-emission. This bill achieves this by tasking the California Energy Commission to prepare an Industrial Heat Electrification Roadmap. Planning for electrification will bring sustained economic growth to our industries and reduce heavy air pollution that burdens our most vulnerable communities.

1. Industrial emissions. ARB’s GHG Emissions Inventory estimates the GHG emissions from major sectors in the state. According to the Inventory, from 2000-2020, industrial emissions comprised 23% of GHG total GHG emissions in the state, second only to the transportation sector, which accounted for 38%. Other major sectors included electricity (16%), agriculture and forestry (9%), residential (8%), and commercial (6%). Emissions from industrial sector are largely driven by fuel combustion from sources like refineries, oil and gas production, cement plants, and the portion of cogeneration emissions attributed to thermal energy output. Refineries and hydrogen production are the largest individual source within this sector, contributing 54% of the sector’s total emissions. Industrial GHG emissions are trending downward. According to ARB, industrial sector emissions have declined by 9% since 2020, but additional reductions will be necessary to achieve the state’s emissions reduction goals.
2. Industrial Decarbonization and Improvements to Grid Operations. The INDIGO Program was established by AB 209 (Budget), Chapter 251, Statutes of 2022, to contribute to economy-wide decarbonization by providing incentives for projects that enhance grid reliability, electrify processes that rely on fossil fuels, incorporate renewable resources, increase energy efficiency, or develop and deploy novel decarbonization technologies.
3. Food Production Investment Program. Established in 2018, the Food Production Investment Program (FPIP) provides grants to reduce GHG emissions at food production facilities through the adoption of advanced energy technologies. According to CEC, the food processing industry is one of California’s largest energy users and a significant producer of GHG emissions. FPIP’s goals include helping food producers achieve a low-carbon future, demonstrating the reliability and effectiveness of advanced energy decarbonization technologies and strategies, enhance the electric grid, especially during peak periods, and benefit or improve public health and the environment.
4. Cement decarbonization. Cement is one of the most widely manufactured products in the world, and its production is extremely energy intensive to achieve the necessary tempteratures. Cement production is hard to decarbonize because a majority of emissions result from the chemical process of limestone calcination (removing carbon from limestone-calcium carbonate), rather than the combustion of fuels. Cement plans are also one of the few remaining markets for coal in the state. ARB is required to develop a comprehensive strategy, by July 1, 2023, to achieve a GHG emissions intensity 40% below baseline levels by 2035, and net-zero by 2045.
5. The federal roadmap. In September 2022, the United States Department of Energy published the Industrial Decarbonization Roadmap, which focuses on the five major sources of industrial emissions nationally: chemical manufacturing, petroleum refining, iron and steel manufacturing, food and beverage production, and cement production. The federal roadmap identifies strategies to significantly reduce GHG emissions in these sectors, including electrification of process heat using induction, radiative heating, or advanced heat pumps; electrification of high-temperature range processes such as those found in iron, steel, and cement making; and, replacing thermally-driven processes with electrochemical ones.
6. This bill. A significant source of emissions within the industrial sector is heat generation. From industrial bakeries to cement plants, heating processes require large amounts of energy. This bill is intended to create a strategy, the Roadmap, to reduce GHG emissions generated by the industrial sector by transitioning the sector from fossil fuels to electricity, which, under the state’s ambitious goals, will be 60% renewable by 2030.
7. Double referral. This bill was approved by the Assembly Utilities and Energy Committee on April 12 with a vote of 15-0.

REGISTERED SUPPORT / OPPOSITION:

Support

350 Bay Area Action

350 Humboldt

Breathe Southern California

California Environmental Voters

Central California Asthma Collaborative

Climate Action California

Community Environmental Council

Edison International and Affiliates, including Southern California Edison

GreenLatinos

Menlo Spark

Natural Resources Defense Council

NextGen California

People’s Collective for Environmental Justice

Sierra Club California

SoCal 350 Action

Sunflower Alliance

The Climate Center

Opposition

None on file

Analysis Prepared by: Elizabeth MacMillan / NAT. RES. /