Activities at the Legislature and CPUC Affecting Hydrogen Development in California

Today, amidst a substantial suite of climate-related bills, Governor Newsom signed Senate Bill (“SB”) 1075. This bill is indicative of the Legislature’s hopes for future deployment of hydrogen in the state, particularly green hydrogen, which is produced using only renewable feedstocks, including renewable electricity, solar energy, and biomass. Per SB 1075, the California Air Resources Board (“CARB”) and the California Energy Commission (“CEC”) will be required to analyze options for using hydrogen as part of the state’s decarbonization strategies in the coming years.

SB 1075 directs CARB, in consultation with CEC and California Public Utilities Commission (“CPUC”), to provide an evaluation to the public (to be posted on CARB’s website) by June 1, 2024 including policy recommendations pertaining to the development, deployment, and use of hydrogen. In this evaluation, CARB must address, among other topics:

        • How the use of green hydrogen can help California achieve its climate and clean energy goals.
        • Strategies for supporting hydrogen infrastructure, including infrastructure needed for production, processing, delivery, storage, and end uses in difficult-to-decarbonize sectors of the economy, in preparation for the deployment of green hydrogen.
        • Policies that promote the reduction of economywide GHG emissions and short-lived climate pollutants through the deployment of hydrogen, including green hydrogen, while ensuring that hydrogen infrastructure will support the employment of a skilled and trained workforce in California. CARB must consult with the California Workforce Development Board and labor organizations on this.
        • An analysis of how curtailed electrical generation could be better utilized to help meet decarbonization goals, including whether curtailed electrical generation could be used to produce green hydrogen. CARB must consult with the California Independent System Operator on this.
        • Estimate the amount of reduced GHG emissions and air quality benefits California could achieve by utilizing green hydrogen in a variety of scenarios, the costs associated with green hydrogen, and the associated health and environmental impacts of prioritizing the development of various forms of hydrogen.
        • Policy recommendations for regulatory and permitting processes associated with transmission and distribution of hydrogen, including green hydrogen.
        • A life-cycle analysis of GHG emissions from the production various forms of hydrogen, including green hydrogen.
        • An analysis of air pollution and other environmental impacts from hydrogen distribution and end uses (including that of green hydrogen)

The bill directs the CEC to study and model potential growth for hydrogen in decarbonizing the electrical and transportation sectors of the economy in the 2023 and 2025 editions of its Integrated Energy Policy Report. It directs the CPUC, CEC, and CARB to consider green electrolytic hydrogen an eligible form of energy storage, and to consider other potential uses of green electrolytic hydrogen.

SB 1075 also directs all three agencies to consider how other forms of hydrogen, outside of green hydrogen, can contribute to achieving the state’s emission reduction, climate, and clean energy goals. As further indications of the Legislature’s confidence in supporting the development of hydrogen in California, two recently signed budget bills allocated funding for hydrogen-related projects. Assembly Bill ("AB") 209 establishes the Hydrogen Program at the CEC to provide financial incentives to eligible in-state hydrogen projects including the demonstration or scale-up of production, processing, delivery, storage or end use. That bill prioritizes projects that benefit geographically diverse areas of the state. AB 179 provides $90 million to support the CEC’s Hydrogen Program, and $5 million to the Governor’s Office of Business and Economic Development to support the establishment of a federally-funded hydrogen hub in California.

At the CPUC, Phase 4B of the reopened Pipeline Biomethane proceeding (R.13-02-008) is considering expanding renewable hydrogen in California by establishing standards and interconnection protocols for injecting renewable hydrogen into natural gas pipelines. Parties were recently invited to comment on a UC Riverside Study assessing the operational and safety concerns associated with injecting hydrogen into the existing natural gas pipeline system at various percentages. The Administrative Law Judge explicitly instructed parties to comment only on steps necessary to establish a safe level of hydrogen injection, not on hydrogen procurement. A decision on this issue should be forthcoming from the CPUC within the next several months.

Also, Several of the state’s major gas utilities, Southern California Gas Company, San Diego Gas & Electric Company, And Southwest Gas Corporation (the “Joint Utilities”) recently filed an Application at the CPUC seeking approval to establish hydrogen blending demonstration projects “to help inform establishing a future systemwide hydrogen injection standard that allows for significantly higher percentages.” The submission of this Application will open a ratesetting proceeding at the CPUC, which will need to be resolved within 18 months.

For more information, contact Brian S. Biering.