Existing law establishes the California Renewables Portfolio Standard Program, which requires the Public Utilities Commission to implement annual procurement targets for the procurement of eligible renewable energy resources, which is defined as an electrical generating facility that meets the definition of renewable electrical generation facility subject to certain conditions, for all retail sellers, as defined, and requires local publicly owned electric utilities to adopt and implement a renewable energy resources procurement plan to achieve the targets and goals of the program.

This bill would include a facility that uses renewable hydrogen, as defined, meeting certain requirements, including a requirement that sellers and purchasers of renewable hydrogen comply with a system for tracking and verifying the use of renewable hydrogen, as a renewable electrical generation facility for purposes of the California Renewables Portfolio Standard Program.

Under existing law, a violation of the Public Utilities Act or any order, decision, rule, direction, demand, or requirement of the commission is a crime.

Because certain provisions of this bill would be a part of the act and because a violation of an order or decision of the commission implementing its requirements would be a crime, the bill would impose a state-mandated local program by creating a new crime.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law establishes the California Renewables Portfolio Standard Program, which requires the Public Utilities Commission to implement annual procurement targets for the procurement of eligible renewable energy resources, which is defined as an electrical generating facility that meets the definition of renewable electrical generation facility subject to certain conditions, for all retail sellers, as defined, and requires local publicly owned electric utilities to adopt and implement a renewable energy resources procurement plan to achieve the targets and goals of the program.

This bill would include a facility that uses renewable hydrogen, as defined, meeting certain requirements, including a requirement that sellers and purchasers of renewable hydrogen comply with a system for tracking and verifying the use of renewable hydrogen, as a renewable electrical generation facility for purposes of the California Renewables Portfolio Standard Program.

Under existing law, a violation of the Public Utilities Act or any order, decision, rule, direction, demand, or requirement of the commission is a crime.

Because certain provisions of this bill would be a part of the act and because a violation of an order or decision of the commission implementing its requirements would be a crime, the bill would impose a state-mandated local program by creating a new crime.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law, until January 1, 2024, requires the state board to aggregate and make available certain information regarding hydrogen-fueled vehicles, to evaluate, based on that information, the need for additional publicly available hydrogen-fueling stations for the actual and projected number of hydrogen-fueled vehicles, the geographic areas where fuel will be needed, and station coverage, and to report the finding of the evaluation to the State Energy Resources Conservation and Development Commission. Existing law states the intent of the Legislature that the California Environmental Protection Agency and the state board, as part of the implementation of the California Hydrogen Highway Blueprint Plan, include in their priorities the deployment of hydrogen or clean hydrogen blend fueled transit buses. Existing law authorizes the Governors Office of Business and Economic Development to undertake measures that are necessary or useful to prepare and submit an application to receive federal funding from the regional clean hydrogen hubs program or otherwise participate in the clean hydrogen hubs program.

This bill would state the intent of the Legislature to enact subsequent legislation related to clean hydrogen.

 THIRD READING  

Bill No: SB 663

Author: Archuleta (D), et al.

Amended: 5/18/23

Vote: 21

SENATE ENERGY, U. & C. COMMITTEE: 17-0, 4/18/23

AYES: Bradford, Dahle, Ashby, Becker, Caballero, Dodd, Durazo, Eggman, Gonzalez, Grove, McGuire, Min, Newman, Rubio, Seyarto, Skinner, Wilk

NO VOTE RECORDED: Stern

SENATE ENVIRONMENTAL QUALITY COMMITTEE: 7-0, 4/26/23

AYES: Allen, Dahle, Gonzalez, Hurtado, Jones, Menjivar, Skinner

SENATE APPROPRIATIONS COMMITTEE: 7-0, 5/18/23

AYES: Portantino, Jones, Ashby, Bradford, Seyarto, Wahab, Wiener

SUBJECT: California Renewables Portfolio Standard Program: renewable hydrogen

SOURCE: Green Hydrogen Coalition

DIGEST:

This bill defines renewable hydrogen and adds renewable hydrogen as a renewable energy resource under the Renewable Portfolio Standard (RPS). This bill also establishes criteria for renewable hydrogen acquired from a dedicated or on-site pipeline to meet RPS standards.

ANALYSIS:

Existing law:

1. Defines a “ renewable electrical generation facility” as a facility that uses biomass, solar thermal, photovoltaic, wind, geothermal, fuel cells using renewable fuels, small hydroelectric generation of 30 megawatts (MW) or less, digester gas, municipal solid waste conversion, landfill gas, ocean wave, ocean thermal, or tidal current. To meet the definition of a renewable electrical generation facility, the facility must be in state, have its first point of connection to the transmission network of a balancing authority area primarily located within the state, or has its first point of interconnection to the transmission network outside the state, within the Western Electricity Coordinating Council and meets certain specified requirements. (Public Resources Code §25741)
2. Defines an “eligible renewable energy resource” as an electrical generating facility that meets the definition of a “renewable electrical generation facility” in the Public Resources Code, subject to specified conditions. (Public Resources Code §399.12)
3. Establishes the RPS program and establishes a goal of procuring at least 60 percent of total retail sales of electricity from renewable energy resources by December 31, 2030, with specified benchmarks up to that date. Existing law requires the California Public Utilities Commission (CPUC) to oversee electrical corporations’ compliance with renewable energy procurement mandates and requires the California Energy Commission (CEC) to oversee publicly owned electric utility renewable energy procurement compliance. (Public Utilities Code §399.11 et. seq.)
4. Defines a renewable energy credit (REC) and requires the CEC to design and implement an accounting system to verify electric utilities’ compliance with the RPS, to ensure that electricity generated by an eligible renewable energy resource is counted only once for the purpose of meeting the RPS, to certify RECs produced by eligible renewable energy resources, and to verify retail product claims. (Public Utilities Code §399.25)
5. Defines “green electrolytic hydrogen” as hydrogen gas produced through electrolysis and does not include hydrogen gas manufactured using steam reforming or any other conversion technology that produces hydrogen from a fossil fuel feedstock. (Public Utilities Code §400.2)
6. Requires the CPUC, CEC and California Air Resources Board (CARB) to consider green electrolytic hydrogen an eligible form of energy storage and consider its potential uses. (Public Utilities Code §400.3)
7. Requires CARB to evaluate by June 1, 2024, market barriers to accelerate the use of green hydrogen, potential beneficial uses of hydrogen, and an estimate of greenhouse gas (GHG) emissions reductions that can be achieved through deploying green hydrogen in various settings. Requires CARB’s evaluation to include an analysis of life-cycle GHG emissions from various forms of hydrogen, including green hydrogen. (Health and Safety Code §38561.8)
8. Requires the CEC to administer a program to provide financial incentives to hydrogen projects that produce, process, deliver, store, or use hydrogen. Existing law specifies that hydrogen projects are only eligible for these incentives if the hydrogen is derived from water using RPS-eligible energy resources, or hydrogen derived from RPS-eligible energy resources. Specifies that the CEC may only provide these financial incentives to projects that help reduce sector-wide emissions, as determined by the CEC. (Public Resources Code §25664 – 25664.1)
9. Authorizes the Governor’s Office of Business and Economic Development (GO-Biz) to take steps necessary to apply for federal regional clean hydrogen hubs funding. Defines “clean hydrogen” for the purposes of the clean hydrogen hub funding as hydrogen produced from RPS-eligible energy resources and otherwise consistent with federal law for the clean hydrogen hub program. (Government Code §12100.161 – 12100.162)

This bill:

1. Defines “renewable hydrogen” as hydrogen meeting all the following conditions:
   1. The hydrogen is derived or produced from water using electricity from an RPS-eligible electric generation facility and is derived or produced from new and incremental renewable energy resources.
   2. The hydrogen’s manufacture does not result in resource shuffling.
   3. The hydrogen’s manufacture does not use unbundled RECs.
2. Adds renewable hydrogen as an RPS-eligible resource used in renewable electric generation facilities.
3. Requires facilities that use renewable hydrogen to meet all of the following criteria:
   1. The use of renewable hydrogen must result in a net decrease in emission of oxides of nitrogen or other air pollutants and GHGs from the electrical sector.
   2. The procurement and use of renewable hydrogen must align with best practices regarding hydrogen production, distribution, storage and use, including leak mitigation.
   3. Any RECs or other environmental attributes associated with the feedstock and energy used to produce the renewable hydrogen are not produced, or are retired and not claimed under any program, except the federal Renewable Fuel Standard Program and the Cap-and-Trade Program.
4. Establishes criteria by which renewable hydrogen obtained from a dedicated or on-site pipeline can meet the definition of an RPS-eligible resource.

Background

The hydrogen rainbow: many colors, many attributes. The vast majority of hydrogen currently used is “gray hydrogen,” which is produced from steam methane reforming. This process uses methane and high temperature steam to produce hydrogen. However, it also creates carbon dioxide, which is released into the atmosphere. Other, cleaner forms of hydrogen production exist, including “blue hydrogen,” (which captures the carbon emissions emitted from steam methane reforming), the emerging “turquoise hydrogen” (which can use natural gas to split methane gas into hydrogen and solid carbon) and “green hydrogen” (which is produced using only renewable forms of feedstock, including renewable electricity, solar energy, and biomass). While many different colors of hydrogen exist, only green electrolytic hydrogen has a statutory definition in state law. Under existing law, green electrolytic hydrogen includes hydrogen produced through the use of electricity to split water into hydrogen and oxygen. The relative environmental benefits of different forms of hydrogen depend on which fuels are displaced by the hydrogen and the economy-wide emissions reductions associated with different feedstocks and hydrogen production processes.

Power-to-Gas-to-Power: Is the juice worth the squeeze? This bill aims to establish criteria by which electricity produced from power plants that use renewable hydrogen can qualify as an RPS resource. While making a resource RPS-eligible generally incentivizes utility procurement of that resource, it is not clear that adding electricity from renewable hydrogen is necessary to meet California’s RPS goals. The CPUC’s most recent RPS annual report indicates that most electric utilities are already on track to meet RPS procurement requirements. It is also unclear if inclusion of electricity from renewable hydrogen will substantially help the state meet its overall emissions reduction goals.

While renewable hydrogen may be able to reduce emissions from natural gas facilities, those emissions savings may be relatively low when blending hydrogen with natural gas. While turbine and engine manufacturers are seeking ways to increase the amount of hydrogen these facilities use, near-term inclusion of hydrogen in the power sector will likely remain a relatively low blend of hydrogen into mostly natural gas. While this bill restricts renewable hydrogen to electrolytic hydrogen produced from new renewable energy resources, this hydrogen would still be blended into natural gas when used to repower a natural gas facility. To the extent that this bill makes electricity generated from renewable hydrogen and natural gas blends RPS-eligible, this bill may enable electricity largely produced from natural gas to obtain RPS eligibility. Since hydrogen gas is less energy-dense than natural gas, combustion facilities may use more natural gas blended with renewable hydrogen to obtain the same amount of energy output provided by unblended natural gas.

Bill’s definition of renewable hydrogen is limited to electrolytic hydrogen made from new renewable electric generation. This bill defines renewable hydrogen as hydrogen that meets all the following criteria:

• The hydrogen is produced from electrolysis using only electricity from RPS-eligible electric generating facilities and that hydrogen is derived or produced from new and incremental renewable energy resources.
• The hydrogen’s manufacture does not result in resource shuffling.
• The manufacture of the hydrogen does not use unbundled RECs.

While this bill does not define “new and incremental renewable energy resources,” the RPS guidebook defines incremental generation as the electricity generated by the facility in excess of the historical baseline. The RPS guidebook establishes requirements for RPS certification of incremental generation. Under these guidelines, existing excess electric generation does not qualify as new or incremental generation; the guidebook specifies that only new electrical generation resulting from facility upgrades may be considered incremental generation. For an energy resource to qualify as incremental generation, the guidebook establishes a process by which the facility operator may certify that the new generation is the direct result of capital improvements to the facility and not a result of other, inadvertent changes (for example, changes to the weather or water input). Since this bill specifies that renewable hydrogen can only be made from new and incremental renewable energy resources, renewable hydrogen may only be made at existing RPS-eligible electric generation facilities that undergo capital improvements to both install hydrogen production and storage facilities and add new, additional renewable electric generation units. This bill further specifies that the manufacture of renewable hydrogen cannot result in resource shuffling or use unbundled RECs.

Bill extends certain pipeline biomethane RPS criteria to renewable hydrogen. Biomethane has long existed as an RPS-eligible resource; however, the process of counting biomethane procured from natural gas pipeline systems has not been without controversy. Unlike other resources produced on a specific site, biomethane obtained through pipelines is hard to track. In some cases, California entities have procured pipeline biomethane created out-of-state, and it is unclear whether these procurements were ever delivered in-state. In other cases, it is unclear if biomethane injected into pipelines has helped displace other harmful emissions. These concerns and subsequent legislation led the CEC to suspend RPS-eligibility for biomethane in March 2012. In response to the suspension, the Legislature passed AB 2196 (Chesbro, Chapter 605, Statutes of 2012) to address stakeholders’ concerns about verifying pipeline biomethane’s RPS eligibility and ensuring that ratepayers did not incur additional costs from the abandonment of procurement contracts that had already been completed. Consequently, pipeline biomethane procured after March 29, 2012, must meet certain requirements to increase the likelihood that the biomethane is physically used within the state.

This bill applies extend existing RPS procurement criteria for biomethane obtained from dedicated and on-site pipes to hydrogen procured from dedicated and on-site pipes. Hydrogen can embrittle and crack certain metals, and it can increase combustion resulting from flares and leaks. In studies reviewed by the National Renewable Energy Laboratory, injecting up to 25 percent hydrogen into natural gas systems increases explosion risks in confined areas and raises the probability of fires. Mitigating these risks would likely require additional investments in upgrading natural gas infrastructure.

Related/Prior Legislation

AB 324 (Pacheco, 2023) would have established a definition of renewable hydrogen and require the CPUC to consider establishing renewable hydrogen procurement goals for gas corporations and core transport agents. The bill was held in the Assembly Appropriations Committee.

SB 1075 (Skinner, Chapter 363, Statutes of 2022) required CARB and the CEC to analyze options for using hydrogen as part of decarbonization strategies.

AB 157 (Committee on Budget, Chapter 570, Statutes of 2022) authorized GO-Biz to take steps to prepare and submit an application to receive federal funding from the regional clean hydrogen hubs program. The bill also establishes a definition of clean hydrogen.

AB 209 (Committee on Budget, Chapter 251, Statutes of 2022) among other provisions, established a hydrogen funding program at the CEC to support projects that produce, process, deliver, store, or use hydrogen. The bill includes a definition of hydrogen identical to the definition of “clean hydrogen” in AB 157.

SB 733 (Hueso, 2022) would have established a definition of renewable hydrogen and required the CPUC to consider establishing hydrogen procurement targets for gas corporations. The bill was held in the Assembly Appropriations Committee.

SB 18 (Skinner, 2021) would have required CARB, CPUC and the CEC to incorporate green electrolytic hydrogen into various decarbonization strategies, and would have required CARB to analyze and provide recommendations regarding potential uses of hydrogen to reduce economy-wide emissions. The bill was held in the Assembly Appropriations Committee.

SB 1369 (Skinner, Chapter 567, Statutes of 2018) established a definition of green electrolytic hydrogen, required the CEC and CPUC to incorporate green electrolytic hydrogen as a resource that may be considered for procurement to reach state clean energy goals, and required the CPUC, CEC, and CARB to consider green electrolytic hydrogen an eligible form of energy storage.

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

According to the Senate Appropriations Committee, unknown ongoing costs, likely in the hundreds of thousands of dollars annually (ratepayer funds) for the California Public Utilities Commission to address increased workload related to RPS planning and program management, compliance, and inter- and intra-agency coordination.

SUPPORT: (Verified 5/18/23)

Green Hydrogen Coalition (source)

Aquahydrex

Bioenergy Association of California

Brad Thompson Company

California Hydrogen Business Council

California Hydrogen Coalition

HCycle

Los Angeles County Sanitation Districts

Mainspring Energy

Mitsubishi Power

NewHydrogen, Inc.

Northeast-Western Energy Systems

NovoHydrogen

Raven SR

San Joaquin Renewables

Southern California Gas Company

State Building and Construction Trades Council of California

Stellar J

TSS Consultants

USA Water and Power

OPPOSITION: (Verified 5/18/23)

Climate Action California

ARGUMENTS IN SUPPORT: According to the author:

Renewable hydrogen is necessary for California to meet its ambitious climate and decarbonization goals. It can be used as a fuel for electricity production and transportation, as well as energy intensive, hard-to-decarbonize industrial sectors such as agriculture, steel manufacturing, cement production, and even aviation. California’s Renewable Portfolio Standard’s current approach to hydrogen is limited since it excludes important commercially available technologies that can convert hydrogen to electricity. As a result, this restricts the flexibility needed to meet the state’s increasing renewable hydrogen demand. In recognition of this critical need, SB 663 seeks to establish a renewable hydrogen definition and Renewable Portfolio Standard (RPS) eligibility.

ARGUMENTS IN OPPOSITION: Climate Action California opposes this bill because it argues that hydrogen would be an expensive and inefficient resource when compared to battery storage. In opposition, Climate Action California states:

… there is a significant energy penalty for employing hydrogen as an energy transfer medium where battery electricity could be easily used. A recent journal article showed that the round trip efficiency of renewable electricity powering a battery electric vehicle was 73 percent, vs. 22 percent for a hydrogen fuel cell vehicle. Because making hydrogen is highly energy intensive, and making “green hydrogen” from renewable sources is expensive and might displace other uses of renewable electricity, it should be seen as a climate solution to fill specific niches, not a competitor of solar and wind battery storage.

Prepared by: Sarah Smith / E., U. & C. / (916) 651-4107

5/25/23 13:07:35

**** END ****

SENATE COMMITTEE ON

Senator Anthony Portantino, Chair

2023 - 2024 Regular Session

SB 663 (Archuleta) - California Renewables Portfolio Standard Program: renewable hydrogen

Bill Summary:

This bill would make electrical generation facilities using renewable hydrogen eligible for certification under the Renewables Portfolio Standard (RPS) Program, and would define “renewable hydrogen.”

*********** ANALYSIS ADDENDUM – SUSPENSE FILE ***********

The following information is revised to reflect amendments

adopted by the committee on May 18, 2023

Fiscal Impact:

• Unknown ongoing costs, likely in the hundreds of thousands of dollars annually (ratepayer funds) for the California Public Utilities Commission to address increased workload related to RPS planning and program management, compliance, and inter- and intra-agency coordination.

Committee Amendments:

These amendments would ensure RECs are not double counted and that energy used to make hydrogen is additional.

-- END --

SENATE COMMITTEE ON

Senator Anthony Portantino, Chair

2023 - 2024 Regular Session

SB 663 (Archuleta) - California Renewables Portfolio Standard Program: renewable hydrogen

Bill Summary:

This bill would make electrical generation facilities using renewable hydrogen eligible for certification under the Renewables Portfolio Standard (RPS) Program, and would define “renewable hydrogen.”

Fiscal Impact:

• The California Public Utilities Commission (CPUC) estimates ongoing costs of $211,000 (ratepayer funds) to address increased workload related to RPS planning and program management, compliance, and inter- and intra-agency coordination.

Background:

The Renewables Portfolio Standard (RPS) Program. RPS requires all load-serving entities in California to procure a portion of their electricity sales from eligible renewable resources. The procurement goal was most recently updated by SB 100 (de León, Chapter 312, Statutes of 2018) to 60% of energy procured by electric load serving entities be from eligible renewable energy resources by 2030. The California Public Utilities Commission (CPUC) and the California Energy Commission (CEC) jointly implement the RPS program. The CEC certifies facilities that generate renewable energy as eligible for the RPS. The CEC’s RPS certification of a facility means the facility can generate electricity that may be used by a retail seller or publicly owned utility (POU) to satisfy its RPS procurement requirements.

Some of the myriad categories of RPS-eligible electricity sources (i.e. biomass, solar thermal, photovoltaic, wind, geothermal, fuel cells using renewable fuels, small hydroelectric generation of 30 megawatts or less, digester gas, municipal solid waste conversion, landfill gas, ocean wave, ocean thermal, or tidal current) have resource-specific requirements. Hydrogen fuel cells are one: there are requirements on where the hydrogen used in the fuel cell may be sourced. It must come from non-fossil fuel feedstocks or other RPS-eligible electricity, and must not be double-counted. In other words, you cannot use a fuel cell to turn a non-RPS-eligible energy into RPS-eligible energy.

Hydrogen to store and generate electricity. Hydrogen can be used to generate power, making it a plausible method of medium- to long-term energy storage. Power can be generated from fuel cells or by burning hydrogen. Some natural gas power plants have experimented with blending hydrogen into natural gas but no equipment to combust pure hydrogen for energy generation is commercially available yet.

Hydrogen can be used as a form of energy storage, in which renewable energy such as solar or wind could produce hydrogen via electrolysis (using an electric current to split water into hydrogen and oxygen) and that hydrogen can then be used to generate energy during a time when renewable energy resources are in short supply (e.g. nighttime or wintertime). However, this kind of intermittent electrolyzer use is not currently an economically viable option. Hydrogen as energy storage may have benefits over storage in batteries as it could provide longer-term storage at lower cost and using fewer resources. However, using renewable energy to produce hydrogen via electrolysis and then using the hydrogen to generate power is not very efficient. When possible, using the renewable energy directly would result in less energy lost.

Proposed Law:

This bill would make electrical generation facilities using renewable hydrogen eligible for certification under the RPS Program, and would define “renewable hydrogen.” Specifically, this bill would:

1. Add facilities using renewable hydrogen to the list of facilities considered a “renewable energy generation facility” for the purpose of the Renewable Energy Resources Program.
2. Define “renewable hydrogen” as hydrogen derived from water using eligible renewable energy resources, as defined in Section 399.12 of the Public Utilities Code, or produced from those eligible renewable energy resources.
3. Apply the RPS regulations regarding the procurement of biomethane to the procurement of renewable hydrogen.

Related Legislation:

SB 414 (Allen, 2023) would require ARB, in consultation with the CEC and CPUC, to develop an assessment of hydrogen use for specified applications including electricity generation. This assessment would include cost, energy efficiency, and health, safety, environmental, and climate risks.

AB 324 (Pacheco, 2023) would establish a definition of “renewable hydrogen,” and requires the CPUC to consider renewable hydrogen procurement goals for each gas corporation and transporter, as specified, on a proportionate basis.

AB 1550 (Bennett, 2023) would require, on and after January 1, 2045, that all hydrogen produced and used in California for the generation of electricity or fueling of vehicles be green hydrogen (undefined).

SCR 21 (Archuleta, 2023) recognizes the importance of hydrogen as part of the clean energy transition, recognizes the Alliance for Renewable Clean Hydrogen Energy Systems (ARCHES) and its application for IIJA funding as a regional hydrogen hub, and urges ARCHES to prioritize renewable, clean hydrogen and ensure leakage risk is minimized. It states that the state will need best practices regarding hydrogen production, distribution, storage, and use.

AB 209 (Committee on Budget, Chapter 251, Statues of 2022) among other things, directs the CEC to establish a Hydrogen Program to provide financial incentives to in-state hydrogen projects for the demonstration or scale-up of the production, processing, delivery, storage, or end use of hydrogen, and defines hydrogen projects eligible for the Hydrogen Program as hydrogen projects that produce, process, deliver, store, or use hydrogen derived from water using RPS-eligible renewable energy resources or produced from these eligible renewable energy resources.

SB 1075 (Skinner, Chapter 363, Statutes of 2022) directs CARB, in consultation with the CPUC and CEC, to develop an evaluation by June 1, 2024 which includes, among other topics, policy recommendations regarding the use of green hydrogen in the state, an estimate of reduced GHG emissions achievable through the use of green hydrogen, the cost of green hydrogen, the potential use for other forms of hydrogen (not green hydrogen), health and environmental impacts of various forms of hydrogen, and strategies to support hydrogen infrastructure.

SB 1369 (Skinner, Chapter 567, Statutes of 2018) requires the CPUC, CARB, and CEC to consider green electrolytic hydrogen an eligible form of energy storage, and to consider other potential uses of green electrolytic hydrogen. It defines “green electrolytic hydrogen” as hydrogen gas produced for electrolysis, excluding hydrogen gas manufactured using steam reforming or any other technology using a fossil fuel feedstock.

SB 100 (de León, Chapter 312, Statues of 2018) states that it is the policy of the state that eligible renewable energy resources and zero-carbon resources supply 100 percent of all retail sales of electricity to California end-use customers and 100 percent of electricity procured to serve all state agencies by December 31, 2045.

-- END --

SENATE COMMITTEE ON ENVIRONMENTAL QUALITY

Senator Allen, Chair

2023 - 2024 Regular

Bill No: SB 663

SUBJECT: California Renewables Portfolio Standard Program: renewable hydrogen

DIGEST: This bill would make electrical generation facilities using renewable hydrogen eligible for certification under the Renewables Portfolio Standard (RPS) Program. This bill offers a definition for “renewable hydrogen.”

ANALYSIS:

Existing law:

1. Under the Global Warming Solutions Act of 2006 and updates thereof, requires the California Air Resources Board (CARB) to ensure that statewide GHG emissions are reduced to at least 40% below the 1990 level by 2030 (SB 32, Pavley, 2016). (Health and Safety Code (HSC) § 38500 et seq.)
2. Under the California Climate Crisis Act (AB 1279, Muratsuchi, 2022), states that it is the policy of the state to achieve net zero GHG emissions no later than 2045, and to ensure that by 2045 statewide anthropogenic GHG emissions are reduced to at least 85% below the 1990 level. (HSC § 38562.2)
3. Establishes a Renewables Portfolio Standard (RPS) Program requiring certain percentages of electricity retail sales to be served by renewable resources, most recently increased by SB 100 (de León, 2018) to 60% by 2030 (PUC § 399.11 et seq.)
4. States that is the goal of the state to procure 100% of electricity from eligible renewable energy resources and zero-carbon resources by December 31, 2045. (PUC § 454.53)
5. Establishes a Renewable Energy Resources Program administered by the Energy Commission and defines a “renewable electrical generation facility” as a facility that uses biomass, solar thermal, photovoltaic, wind, geothermal, fuel cells using renewable fuels, small hydroelectric generation of 30 megawatts or less, digester gas, municipal solid waste conversion, landfill gas, ocean wave, ocean thermal, or tidal current and sets certain requirements for these facilities. (PRC § 25741)

This bill:

1. Adds facilities using renewable hydrogen to the list of facilities considered a “renewable energy generation facility” for the purpose of the Renewable Energy Resources Program.
2. Places certain requirements upon energy generation facilities using renewable hydrogen:
   1. If the facility combusts hydrogen, controls and regulations must avoid increased emissions of NOx or other air pollutants compared to combusting methane.
   2. Hydrogen produced through electrolysis must not result in increased GHG emissions in the grid under the control of the Western Electricity Coordinating Council (WECC) of the North American Electric Reliability Corporation or result in resource shuffling.
   3. Any certificates or other environmental attributes associated with the production of renewable hydrogen may not also count under any other programs, including Cap-and-Trade.
3. Defines renewable hydrogen as hydrogen meeting any of the following criteria:
   1. Hydrogen produced using electricity consistent with the RPS Program or non-electrical energy produced from resources listed as eligible under the Renewable Energy Resources Program in statute (#5 in “Existing law” section), with the addition of linear generators using renewable hydrogen and gas turbines using renewable hydrogen.
   2. Hydrogen produced using a material feedstock that is water or a material identified under the Renewable Energy Resources Program (#5 in the “Existing Law” section).
   3. In the case of production using landfill gas, biomass, or digester gas as a feedstock or energy input, the production of that gas is consistent with RPS requirements for biomethane procurement. In the case of production using biomass as an energy source or feedstock, the production of energy or feedstock is by biomass conservation as defined in statute and is consistent with RPS guidelines regarding using byproducts of sustainable forest management.
   4. Hydrogen produced by any other process using only renewable inputs as determined by the CEC.
4. Applies the RPS regulations regarding the procurement of biomethane to the procurement of renewable hydrogen.

Background

1. The Renewables Portfolio Standard (RPS) Program. The Renewables Portfolio Standard (RPS) requires all load-serving entities in California to procure a portion of their electricity sales from eligible renewable resources. The procurement goal was most recently updated by SB 100 (de León, Chapter 312, Statutes of 2018) to 60% of energy procured by electric load serving entities be from eligible renewable energy resources by 2030. The California Public Utilities Commission (CPUC) and the California Energy Commission (CEC) jointly implement the RPS program. The CEC certifies facilities that generate renewable energy as eligible for the RPS. The CEC’s RPS certification of a facility means the facility can generate electricity that may be used by a retail seller or publicly owned utility (POU) to satisfy its RPS procurement requirements.

Some of the myriad categories of RPS-eligible electricity sources (i.e. biomass, solar thermal, photovoltaic, wind, geothermal, fuel cells using renewable fuels, small hydroelectric generation of 30 megawatts or less, digester gas, municipal solid waste conversion, landfill gas, ocean wave, ocean thermal, or tidal current) have resource-specific requirements. Hydrogen fuel cells are one: there are requirements on where the hydrogen used in the fuel cell may be sourced. It must come from non-fossil fuel feedstocks or other RPS-eligible electricity, and must not be double-counted. In other words, you cannot use a fuel cell to turn a non-RPS-eligible energy into RPS-eligible energy.

1. Hydrogen to store and generate electricity. Hydrogen can be used to generate power, making it a plausible method of medium- to long-term energy storage. Power can be generated from fuel cells or by burning hydrogen. Some natural gas power plants have experimented with blending hydrogen into natural gas but no equipment to combust pure hydrogen for energy generation is commercially available yet.

Hydrogen can be used as a form of energy storage, in which renewable energy such as solar or wind could produce hydrogen via electrolysis (using an electric current to split water into hydrogen and oxygen) and that hydrogen can then be used to generate energy during a time when renewable energy resources are in short supply (e.g. nighttime or wintertime). However, this kind of intermittent electrolyzer use is not currently an economically viable option. Hydrogen as energy storage may have benefits over storage in batteries as it could provide longer-term storage at lower cost and using fewer resources. However, using renewable energy to produce hydrogen via electrolysis and then using the hydrogen to generate power is not very efficient. When possible, using the renewable energy directly would result in less energy lost.

1. Hydrogen definitions. Today, most hydrogen is produced from methane contained in natural gas, a non-renewable resource, using a process called natural gas reforming. In the pursuit of carbon-neutral hydrogen production, U.S. and California law use the terms “green,” “clean,” “renewable,” and “green electrolytic” to describe various potentially emission-free hydrogen production. In brief, some notable definitions (or lack thereof) include:
   1. “Green hydrogen” is not defined in state law; SB 439 (Archuleta, 2021) would have defined it as hydrogen not produced from fossil fuel feedstock sources, with a range of possible production methods.
   2. Current law defines “green electrolytic hydrogen” as hydrogen gas produced through electrolysis and does not include hydrogen gas manufactured using steam reforming or any other conversion technology that produces hydrogen from fossil fuels (PUC § 400.2).
   3. Current law defines “clean hydrogen” as hydrogen produced from eligible renewable energy resources. (Government Code (GOV) § 12100.161).
   4. Federal law defines “clean hydrogen” in the Infrastructure Investment and Jobs Act (IIJA) as hydrogen produced with a carbon intensity equal to or less than 2 kg of carbon dioxide-equivalent produced at the site of production per kilogram of hydrogen produced (IIJA Sec. 40315 (a)).
   5. In CARB’s 2022 Scoping Plan, “renewable hydrogen” and “green hydrogen” are interchangeable and are not limited to only electrolytic hydrogen produced from renewables.
   6. There is a definition of “renewable hydrogen” in the California Code of Regulations: hydrogen derived from (1) electrolysis of water or aqueous solutions using renewable electricity; (2) catalytic cracking or steam methane reforming of biomethane; or (3) thermochemical conversion of biomass, including the organic portion of municipal solid waste. (California Code of Regulations (CCR) § 95481).
   7. AB 209 (Committee on Budget, 2022) defines hydrogen projects eligible for the Hydrogen Program created by that bill as hydrogen derived from water using RPS-eligible renewable energy resources or produced from these eligible renewable energy resources (PRC § 25664).
   8. AB 324 (Pacheco, 2023) defines “renewable hydrogen” as hydrogen derived from water or bioenergy feedstocks using electricity derived from resources consistent with the RPS. As of the writing of this analysis, AB 324 is set to be heard in the Assembly Natural Resources Committee on April 24.

In short, defining and distinguishing the type of hydrogen the state should seek to prioritize has been shown to be an arduous and complicated task.

Comments

1. Purpose of Bill. According to the author, “SB 663 modernizes our Renewable Portfolio Standard (RPS) code to allow for additional technologies to utilize renewable hydrogen to produce electricity for the RPS, and, to allow for the repurposing of existing power plants as hydrogen turbines to achieve clean firm dispatchable power and an affordable, reliable 100% renewable power sector.

“Without renewable hydrogen and without SB 663 we will continue our reliance on natural gas to ensure grid reliability.”

1. EU&C Amendments. The author recently committed to amendments during this bill’s April 18^th hearing in the Senate Energy, Utilities, and Communications Committee. The amendments are extensive and expected to be in print, should the committee choose to pass the bill out today, in the Senate Appropriations Committee. These amendments:
   1. Conform the bill’s definition of renewable hydrogen to the definition of hydrogen used by the CEC’s Clean Hydrogen Program (AB 209, Committee on Budget, 2022): hydrogen derived from water using RPS-eligible renewable energy resources or produced from these eligible renewable energy resources.
   2. Remove references to renewable hydrogen in common carrier pipelines where the bill had previously applied the same rules for biomethane procurement to renewable hydrogen.
   3. Requires that the usage of renewable hydrogen by electric generation facilities shall result in a net decrease in oxides of nitrogen, GHGs, or other air pollutants in the power sector. This replaces subparagraphs in § 25741(a)(5)(A) and (a)(5)(B) that previously required a facility using renewable hydrogen to control combustion processes to avoid increased emissions of oxides of nitrogen or other air pollutants as compared to emissions resulting from methane combustion (subparagraph A) and required that procurement of renewable hydrogen did not increase net GHG emissions in the grid under the control of the WECC of the North American Electric Reliability Corporation or result in resource shuffling.

The EU&C Committee amendments remove RPS-eligibility for hydrogen procured through common carrier pipeline but allow it for dedicated and on-site pipelines. Removing the common carrier pipeline portions of this bill avoids a cart-before-the-horse situation: hydrogen currently is not allowed in common carrier pipelines in California and more information is needed before this is a viable option, including the availability of pipeline designs that avoid hydrogen leakage and hydrogen-induced embrittlement. Hydrogen leakage not only risks losing a valuable product, it is also concerning because hydrogen acts as an indirect GHG through its reactions with other gases in the atmosphere.

These amendments now require a net decrease in emissions of oxides of nitrogen (NOx) and other air pollutants rather than the bill’s original requirement not emit more NOx or other air pollutants than methane (the main component of natural gas). This is an improvement to the air quality standards in the bill and better aligns with the intention of the state’s clean energy goals. With this amendment, the air quality standards apply to any use of renewable hydrogen by an electric generation facility. These standards are important: burning hydrogen releases NOx, which can damage heart and respiratory function and impair lung growth in children, as well as contribute to atmospheric warming directly and indirectly. Research has predicted that burning pure hydrogen may emit more than six times as much NOx as burning methane. Burning hydrogen for power generation, therefore, could still burden neighboring communities, failing to end the legacy of public health harm from fossil fuel industries.

1. GHG emissions. The bill with its EU&C amendments requires a net decrease of GHG emissions from the power sector resulting from the use of renewable hydrogen for electric generation. To ensure that hydrogen use is truly a net benefit for the climate, it’s important this net decrease extends to upstream processes as well, including the hydrogen’s production. The bill also requires no “resource shuffling” to occur. This refers to when a process uses renewable energy but in doing so, leaves other uses to use fossil fuel-derived energy if supply is not sufficient. This is a notable concern as the state is going to need a huge amount of renewable energy to electrify transportation and other major sectors and hydrogen production will be a major new consumer of clean electricity.
   
   The Internal Revenue Service and the United States Treasury Department are currently developing rules for administering the Inflation Reduction Act’s hydrogen production tax credits. The appropriate accounting needed to ensure the additionality and deliverability of renewable energy used for hydrogen production is a major topic of discussion. A recent study from Princeton University found that hourly energy tracking is necessary, or electrolytic hydrogen could even result in higher GHG emissions than hydrogen produced from steam methane reforming (“gray hydrogen”), the fossil fuel-based method currently used to produce the vast majority of hydrogen.
   
   It will be vitally important to prevent resource shuffling in cleaning up the state’s energy mix. We must ensure that GHG emissions decrease through the production and use of hydrogen and that no renewable energy used for hydrogen production is being diverted from other energy users who then will need to use dirtier energy. The RPS program should promote energy production that truly helps us meet our climate goals.
2. Will this be clean enough? Electrical generation facilities using hydrogen fuel cells are already RPS-eligible. This bill seeks to add other methods of electrical generation using hydrogen that are likely combustion. There are no commercially available power plant turbines or linear generators yet that can burn pure hydrogen and there are significant technical challenges to retrofitting gas plants to run on hydrogen.
   
   Current electrical generation using hydrogen combustion uses a hydrogen-natural gas blend. Blending hydrogen into natural gas only lowers GHG emissions by a modest amount: a 20% blend of hydrogen will only reduce emissions by 6 to 7% because hydrogen’s energy per unit volume is much lower than that of methane. Any blending, even at high hydrogen concentrations, still does not decarbonize energy generation if fossil fuel gas is used.
   
   Blending hydrogen with a significant amount of natural gas should not be treated as though it is a renewable form of energy. Current statute seems, for the purposes of receiving energy credits under RPS, to limit the amount of nonrenewable fuel (e.g. natural gas) that can be used to generate electricity in conjunction with a renewable fuel (e.g. renewable hydrogen) to 2%, with an adjustment to 5% possible in certain cases. This is an important restriction if the RPS program is expanded to include new uses of hydrogen.
3. Is this too soon? The infrastructure and technological ability to produce, transport, and use hydrogen for electrical generation this bill hopes to add to the RPS Program do not yet exist.

Hydrogen’s energy density (one-third of fossil gas), molecular size (the smallest of all molecules), flam­mability, and flame speed (an order of magnitude fast­er than fossil gas) all pose challenges to retrofitting gas plants to run on hydrogen. No turbines, generators, or other equipment that could repurpose natural gas power generation infrastructure are commercially available yet that can run off pure hydrogen. All existing hydrogen gas power generation uses hydrogen mixed with natural gas, which is a nonrenewable resource. Using 100% hydrogen for non-fuel cell electricity generation may be possible in the future, but it isn’t technologically or economically viable today.

Extensive pipeline retrofitting or new construction will need to occur before we can move hydrogen at large scales. Building a hydrogen pipeline can cost up to 68% more per mile than a conventional fossil gas pipeline. Developing all of this infrastructure will take money and time.

The extent of the progress that needs to be made before the hydrogen energy generation this bill aims to add to the RPS program is viable begs the question of whether it is too soon to include such energy generation under RPS with so many questions yet to be answered. The bill’s supporters contend that RPS inclusion for energy generation using hydrogen before it is commercially viable is important to encourage the development of a market for renewable hydrogen. The protections included by the previous committee and recommended here can work together to help ensure that the path to a commercially viable, environmentally sustainable hydrogen system in the future is not beset by regrettable actions that increase pollution today. Previous recent legislation, SCR 21 (Archuleta, 2023), was amended in this committee to acknowledge the need to be responsible with hydrogen, including minimizing leakage risk. Best practices regarding hydrogen production, distribution, storage, and use are needed but, like the technology referred to in this bill, do not yet exist. It may be wise to couple the addition of future technology to the RPS program with future best practices regarding hydrogen to ensure its use for energy generation aligns with the state’s statutory intentions for a clean energy transition. The committee may wish to amend the bill to express the need for hydrogen use by electric generation facilities to meet best practice standards and for leakage risk to be minimized.

1. Double-counting? Claiming environmental credits for the same action in two different places (“double-counting”) has been a problem in the past resulting in progress toward meeting climate goals being overstated. For energy production using hydrogen, double-counting should especially be prevented in a case where renewable energy credits could be claimed for renewable energy, that energy used to make hydrogen, that hydrogen used to make more energy, and renewable energy credits received again. The bill states that for electrical generation facilities using renewable hydrogen, no renewable energy certificates or other environmental attributes may be associated with the feedstock or energy used to produce the renewable hydrogen. However, the bill explicitly allows environmental attributes to be additionally counted under Cap-and-Trade and the federal Renewable Fuel Standard Program. This is modeled after the Low Carbon Fuel Standard (LCFS) guidelines (California Code of Regulations Title 17 § 95488.8). These exemptions may be appropriate if they are applicable for hydrogen used to generate electricity rather than as fuel, and they do not result in a climate benefit being counted twice. Should the committee advance this measure, they may wish to direct the author to continue to work with committee staff to ensure these exemptions are appropriate.
2. Committee amendments. Staff recommends the committee adopt the bolded amendment contained in comment 5 above.

Related/Prior Legislation

SB 414 (Allen, 2023) would require CARB, in consultation with the CEC and CPUC, to develop an assessment of hydrogen use for specified applications including electricity generation. This assessment would include cost, energy efficiency, and health, safety, environmental, and climate risks. This bill is being heard in the Senate Environmental Quality Committee during the same hearing as this bill.

AB 324 (Pacheco, 2023) would establish a definition of “renewable hydrogen,” and requires the CPUC to consider renewable hydrogen procurement goals for each gas corporation and transporter, as specified, on a proportionate basis. This bill was passed by the Assembly Utilities and Energy Committee and will be heard in the Assembly Natural Resources Committee on April 24.

AB 1550 (Bennett, 2023) would require, on and after January 1, 2045, that all hydrogen produced and used in California for the generation of electricity or fueling of vehicles be green hydrogen (undefined). This bill was passed by the Assembly Utilities and Energy Committee and will be heard in the Assembly Natural Resources Committee and will be heard in the Assembly Natural Resources Committee on April 24.

SCR 21 (Archuleta, 2023) recognizes the importance of hydrogen as part of the clean energy transition, recognizes the Alliance for Renewable Clean Hydrogen Energy Systems (ARCHES) and its application for IIJA funding as a regional hydrogen hub, and urges ARCHES to prioritize renewable, clean hydrogen and ensure leakage risk is minimized. It states that the state will need best practices regarding hydrogen production, distribution, storage, and use. This resolution is currently eligible for a Senate Floor vote.

AB 209 (Committee on Budget, Chapter 251, Statues of 2022) among other things, directs the CEC to establish a Hydrogen Program to provide financial incentives to in-state hydrogen projects for the demonstration or scale-up of the production, processing, delivery, storage, or end use of hydrogen, and defines hydrogen projects eligible for the Hydrogen Program as hydrogen projects that produce, process, deliver, store, or use hydrogen derived from water using RPS-eligible renewable energy resources or produced from these eligible renewable energy resources.

SB 1075 (Skinner, Chapter 363, Statutes of 2022) directs CARB, in consultation with the CPUC and CEC, to develop an evaluation by June 1, 2024 which includes, among other topics, policy recommendations regarding the use of green hydrogen in the state, an estimate of reduced GHG emissions achievable through the use of green hydrogen, the cost of green hydrogen, the potential use for other forms of hydrogen (not green hydrogen), health and environmental impacts of various forms of hydrogen, and strategies to support hydrogen infrastructure.

SB 1369 (Skinner, Chapter 567, Statutes of 2018) requires the CPUC, CARB, and CEC to consider green electrolytic hydrogen an eligible form of energy storage, and to consider other potential uses of green electrolytic hydrogen. It defines “green electrolytic hydrogen” as hydrogen gas produced for electrolysis, excluding hydrogen gas manufactured using steam reforming or any other technology using a fossil fuel feedstock.

SB 100 (de León, Chapter 312, Statues of 2018) states that it is the policy of the state that eligible renewable energy resources and zero-carbon resources supply 100 percent of all retail sales of electricity to California end-use customers and 100 percent of electricity procured to serve all state agencies by December 31, 2045.

DOUBLE REFERRAL:

This measure was heard in the Senate Energy, Utilities, and Communications Committee on April 18, 2023 and passed out of committee with a vote of 17-0.

SOURCE:

Green Hydrogen Coalition

SUPPORT:

Aquahydrex
Bioenergy Association of California
California Hydrogen Business Council
California Hydrogen Coalition
Green Hydrogen Coalition
Hcycle
Los Angeles County Sanitation Districts
Mainspring Energy
Mitsubishi Power
Newhydrogen, INC.
Novohydrogen, INC.

OPPOSITION:

None received

ARGUMENTS IN SUPPORT:

According to the Green Hydrogen Coalition, “Expanding RPS eligibility in this way is strategically important to helping California establish a robust market for renewable hydrogen, as power sector use of renewable hydrogen is not only needed as long duration storage solution, but it is also one of the few scalable near term applications that can help drive down renewable hydrogen costs which will in turn accelerate renewable hydrogen adoption in adjacent, high polluting sectors such as goods movement, maritime shipping and aviation. In short, power sector use of renewable hydrogen is one of the few near-term applications that can scale demand for renewable hydrogen – key to establishing a scaled, low-cost renewable hydrogen economy and to achieving economy wide decarbonization.”

ARGUMENTS IN OPPOSITION:

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SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS

Senator Steven Bradford, Chair

2023 - 2024 Regular

Bill No: SB 663 Hearing Date: 4/18/2023

SUBJECT: California Renewables Portfolio Standard Program: renewable hydrogen

DIGEST: This bill defines renewable hydrogen and adds renewable hydrogen as a renewable energy resource under the Renewable Portfolio Standard (RPS). This bill also establishes criteria for renewable hydrogen acquired from a pipeline to meet RPS standards.

ANALYSIS:

Existing law:

1. Defines a “ renewable electrical generation facility” as a facility that uses biomass, solar thermal, photovoltaic, wind, geothermal, fuel cells using renewable fuels, small hydroelectric generation of 30 megawatts (MW) or less, digester gas, municipal solid waste conversion, landfill gas, ocean wave, ocean thermal, or tidal current. To meet the definition of a renewable electrical generation facility, the facility must be in state, have its first point of connection to the transmission network of a balancing authority area primarily located within the state, or has its first point of interconnection to the transmission network outside the state, within the Western Electricity Coordinating Council (WECC) and meets certain specified requirements. (Public Resources Code §25741)
2. Defines an “eligible renewable energy resource” as an electrical generating facility that meets the definition of a “renewable electrical generation facility” in the Public Resources Code, subject to specified conditions. (Public Resources Code §399.12)
3. Establishes the Renewable Portfolio Standard (RPS) program and establishes a goal of procuring at least 60 percent of total retail sales of electricity from renewable energy resources by December 31, 2030, with specified benchmarks up to that date. Existing law requires the California Public Utilities Commission (CPUC) to oversee electrical corporations’ compliance with renewable energy procurement mandates and requires the California Energy Commission (CEC) to oversee publicly owned electric utility renewable energy procurement compliance. (Public Utilities Code §399.11 et. seq.)
4. Defines a renewable energy credit (REC) and requires the CEC to design and implement an accounting system to verify electric utilities’ compliance with the RPS, to ensure that electricity generated by an eligible renewable energy resource is counted only once for the purpose of meeting the RPS, to certify RECs produced by eligible renewable energy resources, and to verify retail product claims. (Public Utilities Code §399.25)
5. Defines “green electrolytic hydrogen” as hydrogen gas produced through electrolysis and does not include hydrogen gas manufactured using steam reforming or any other conversion technology that produces hydrogen from a fossil fuel feedstock. (Public Utilities Code §400.2)
6. Requires the CPUC, CEC and California Air Resources Board (CARB) to consider green electrolytic hydrogen an eligible form of energy storage and consider its potential uses. (Public Utilities Code §400.3)
7. Requires CARB to evaluate by June 1, 2024, market barriers to accelerate the use of green hydrogen, potential beneficial uses of hydrogen, and an estimate of greenhouse gas (GHG) emissions reductions that can be achieved through deploying green hydrogen in various settings. Existing law requires CARB’s evaluation to include an analysis of life-cycle GHG emissions from various forms of hydrogen, including green hydrogen. (Health and Safety Code §38561.8)
8. Requires the CEC to administer a program to provide financial incentives to hydrogen projects that produce, process, deliver, store, or use hydrogen. Existing law specifies that hydrogen projects are only eligible for these incentives if the hydrogen is derived from water using RPS-eligible energy resources, or hydrogen derived from RPS-eligible energy resources. Existing law specifies that the CEC may only provide these financial incentives to projects that help reduce sector-wide emissions, as determined by the CEC. (Public Resources Code §25664 – 25664.1)
9. Authorizes the Governor’s Office of Business and Economic Development (GO-Biz) to take steps necessary to apply for federal regional clean hydrogen hubs funding. Existing law defines “clean hydrogen” for the purposes of the clean hydrogen hub funding as hydrogen produced from RPS-eligible energy resources and otherwise consistent with federal law for the clean hydrogen hub program. (Government Code §12100.161 – 12100.162)

This bill:

1. Defines “renewable hydrogen” as any of the following:
2. A resource produced from either RPS-eligible electricity or from energy, other than electricity, produced from biomass, solar thermal, photovoltaic, wind, geothermal, fuel cells using renewable hydrogen, linear generators using renewable hydrogen, gas turbines using renewable hydrogen, small hydroelectric generation of 30 MW or less, digester gas, municipal solid waste conversion, diverted organic waste, landfill gas, ocean wave, ocean thermal, or tidal current.
3. A resource produced from feedstock that is either water or a material from biomass, solar thermal, photovoltaic, wind, geothermal, fuel cells using renewable hydrogen, linear generators using renewable hydrogen, gas turbines using renewable hydrogen, small hydroelectric generation of 30 MW or less, digester gas, municipal solid waste conversion, diverted organic waste, landfill gas, ocean wave, ocean thermal, or tidal current.
4. For a production process that uses landfill gas, biomass, or digester gas as feedstock consistent with certain existing guidelines.
5. Any other process yielding hydrogen from only renewable inputs, as determined by the commission.
6. Adds renewable hydrogen as an RPS-eligible resource used in renewable electric generation facilities.
7. Requires facilities that use renewable hydrogen to meet all of the following criteria:
   1. If the facility uses combustion to generate electricity, the combustion process is controlled and regulated to avoid higher air pollutants when compared to emissions resulting from methane combustion.
   2. The procurement of electrolytic renewable hydrogen does not result in resource shuffling or increase the net emissions of GHG emissions within the WECC.
   3. RECs are not produced, claimed, or retired for the feedstock or energy used to produce the renewable hydrogen.
8. Establishes criteria by which renewably hydrogen obtained from a pipeline can meet the definition of an RPS-eligible resource.

Background

The hydrogen rainbow: many colors, many attributes. The vast majority of hydrogen currently used is “gray hydrogen,” which is produced from steam methane reforming. This process uses methane and high temperature steam to produce hydrogen. However, it also creates carbon dioxide, which is released into the atmosphere. Other, cleaner forms of hydrogen production exist, including “blue hydrogen,” (which captures the carbon emissions emitted from steam methane reforming), the emerging “turquoise hydrogen” (which can use natural gas to split methane gas into hydrogen and solid carbon) and “green hydrogen” (which is produced using only renewable forms of feedstock, including renewable electricity, solar energy, and biomass). While many different colors of hydrogen exist, existing state law only defines green electrolytic hydrogen, which includes hydrogen produced through the use of electricity to split water into hydrogen and oxygen. The relative environmental benefits of different forms of hydrogen depend on which fuels are displaced by the hydrogen and the economy-wide emissions reductions associated with different feedstocks and hydrogen production processes.

Bill’s definition of renewable hydrogen may or may not be renewable and may or may not be hydrogen. This bill establishes a definition of renewable hydrogen for the purposes of including renewable hydrogen in the list of RPS-eligible resources. However, this bill’s definition of renewable hydrogen is broad and defines renewable hydrogen based on the processes used to create the resource. As a result, potentially any form of hydrogen created through these processes would be RPS-eligible under this bill, regardless of the emissions resulting from that hydrogen’s production. Additionally, this bill broadly defines renewable hydrogen as any resource produced from water or a specified list of other resources, including gas turbines and linear generators using renewable hydrogen. Since natural gas and hydrogen may be blended and linear generators may use a variety of fuels, it is not clear that linear generators and gas turbines that primarily use fossil fuels would not qualify as an RPS-eligible resource under this bill.

Bill may encourage the production of hydrogen using out-of-state energy resources. The WECC is one of six regional entities federally-authorized to conduct reliability planning activities. California is one of several states covered by WECC. Existing law specifies that an electric generation facility can only be RPS-eligible if that facility is one of the following:

• Located in California.
• Located near the California border with a first point of connection to the transmission network of a balancing authority primarily located in California.
• Located out of the state and has its first point of interconnection to a transmission system within the WECC and satisfies certain other requirements.

Under existing law, the CEC administers a system to track California RPS compliance across the WECC, including tracking the status of utilities’ RECs. For electric generation facilities seeking to generate RPS-eligible electricity using renewable hydrogen, this bill retains the WECC interconnection requirements. However, this bill’s definition of renewable hydrogen does not specify that hydrogen used to re-power natural gas facilities must be created using energy resources that have a first point of transmission interconnection within WECC. While this bill sets some emissions restrictions on and prohibits resource shuffling by facilities using renewable hydrogen, no mechanism exists for the CEC to track RECs or the environmental attributes of energy produced outside the WECC. As a result, this bill may permit electric generators to use renewable hydrogen to produce RPS-eligible electricity made from energy resources that increase emissions elsewhere.

Bill extends pipeline biomethane RPS criteria to renewable hydrogen. Biomethane has long existed as an RPS-eligible resource; however, the process of counting biomethane procured from natural gas pipeline systems has not been without controversy. Unlike other resources produced on a specific site, biomethane obtained through pipelines is hard to track. In some cases, California entities have procured pipeline biomethane created out-of-state, and it is unclear whether these procurements were ever delivered in-state. In other cases, it is unclear if biomethane injected into pipelines has helped displace other harmful emissions. These concerns and subsequent legislation led the CEC to suspend RPS-eligibility for biomethane in March 2012. In response to the suspension, the Legislature passed AB 2196 (Chesbro, Chapter 605, Statutes of 2012) to address stakeholders’ concerns about verifying pipeline biomethane’s RPS eligibility and ensuring that ratepayers did not incur additional costs from the abandonment of procurement contracts that had already been completed. Consequently, pipeline biomethane procured after March 29, 2012, must meet certain requirements to increase the likelihood that the biomethane is physically used within the state.

This bill would apply these pipeline biomethane requirements to pipeline renewable hydrogen, setting criteria for pipeline renewable hydrogen to be RPS-eligible. While this bill specifies criteria for pipeline renewable hydrogen to be RPS-eligible procurements, it is not clear whether the existing gas pipeline and storage system is appropriately equipped for hydrogen. Hydrogen can embrittle and crack certain metals, and it can increase combustion resulting from flares and leaks. In studies reviewed by the National Renewable Energy Laboratory (NREL), injecting up to 25 percent hydrogen into natural gas systems increases explosion risks in confined areas and raises the probability of fires. Mitigating these risks would likely require additional investments in upgrading natural gas infrastructure to facilitate hydrogen transportation.

Need for amendments. As currently drafted, this bill’s definition of renewable hydrogen does not clearly identify which resources would meet the definition. While this bill specifies that no resource shuffling is permitted for electric generation facilities using renewable hydrogen, it may encourage the use of hydrogen produced from unverifiable resources outside of the WECC. Additionally, this bill establishes criteria for procuring RPS-eligible renewable hydrogen injected into natural gas pipelines without ensuring the safety of hydrogen injection into common carrier pipelines. As a result, the author and committee may wish to amend this bill to conform this bill’s definition of renewable hydrogen to the definition of hydrogen used by the CEC’s Clean Hydrogen Program and delete section 2 of the bill.

Dual 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 324 (Pacheco, 2023) would establish a definition of renewable hydrogen and require the CPUC to consider establishing renewable hydrogen procurement goals for gas corporations and core transport agents. The bill is currently pending in the Assembly.

SB 1075 (Skinner, Chapter 363, Statutes of 2022) required CARB and the CEC to analyze options for using hydrogen as part of decarbonization strategies.

AB 157 (Committee on Budget, Chapter 570, Statutes of 2022) contained provisions substantially similar provisions previously contained in this bill regarding the creation of a hydrogen hub funding program. The bill authorizes GO-Biz to take steps to prepare and submit an application to receive funding from the regional clean hydrogen hubs program or to otherwise participate in the regional clean hydrogen hubs program. The bill also establishes a definition of clean hydrogen.

AB 209 (Committee on Budget, Chapter 251, Statutes of 2022) among other provisions, establishes a hydrogen funding program at the CEC to support projects that produce, process, deliver, store, or use hydrogen. The bill adopts a definition of hydrogen identical to the definition of “clean hydrogen” in AB 157.

SB 733 (Hueso, 2022) would have established a definition of renewable hydrogen and required the CPUC to consider establishing hydrogen procurement targets for gas corporations. The bill was held in the Assembly Appropriations Committee.

SB 18 (Skinner, 2021) would have required CARB, CPUC and the CEC to incorporate green electrolytic hydrogen into various decarbonization strategies, and would have required CARB to analyze and provide recommendations regarding potential uses of hydrogen to reduce economy-wide emissions. The bill was held in the Assembly Appropriations Committee.

SB 697 (Hueso, 2021) would have required CARB to establish a Green Hydrogen Credit Program to provide industrial facilities that produce green hydrogen with an additional Cap-and-Trade GHG allowance of 10 tons for every metric ton of green hydrogen produced during a compliance period. The bill was held in the Senate Appropriations Committee.

SB 1122 (Skinner, 2020) would have required CARB to incorporate planning and recommendations for green electrolytic hydrogen into the scoping plan. The bill contained provisions substantially similar to some of those contained in this bill. The bill died in the Senate.

SB 1369 (Skinner, Chapter 567, Statutes of 2018) established a definition of green electrolytic hydrogen, required the CEC and CPUC to incorporate green electrolytic hydrogen as a resource that may be considered for procurement to reach state clean energy goals, and required the CPUC, CEC, and CARB to consider green electrolytic hydrogen an eligible form of energy storage.

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

SUPPORT:

Green Hydrogen Coalition, Sponsor

AquaHydrex

Bioenergy Association of California

California Hydrogen Business Council

California Hydrogen Coalition

HCycle

Los Angeles County Sanitation Districts

Mainspring Energy

Mitsubishi Power

NewHydrogen, Inc.

NovoHydrogen

OPPOSITION:

None received

ARGUMENTS IN SUPPORT: According to the author:

Renewable hydrogen is necessary for California to meet its ambitious climate and decarbonization goals. It can be used as a fuel for electricity production and transportation, as well as energy intensive, hard-to-decarbonize industrial sectors such as agriculture, steel manufacturing, cement production, and even aviation. California’s Renewable Portfolio Standard’s current approach to hydrogen is limited since it excludes important commercially available technologies that can convert hydrogen to electricity. As a result, this restricts the flexibility needed to meet the state’s increasing renewable hydrogen demand. In recognition of this critical need, SB 663 seeks to establish a renewable hydrogen definition and Renewable Portfolio Standard (RPS) eligibility.

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