State of New Mexico Renewable Energy Conference

1. State of New MexicoRenewable Energy Conference Santa Fe, New Mexico July 22-23, 2008 Biomethane Program Rod Boschee Pacific Gas & Electric Company

2. About PG&E and Our Business What we do: • Deliver safe, reliable, and environmentally responsible gas and electricity to approximately 15 million Californians

3. PG&E’s Stance on Climate Change • The link between greenhouse gas emissions and the Earth’s warming climate is clear • The potential consequences of global climate change are serious • The electric and natural gas sectors are large contributors to U.S. greenhouse gas emissions • Industry participants should find responsible and effective solutions to the threats posed by global climate change and take immediate action

4. PG&E’s Climate Change Commitment “PG&E is committed to leading by example when it comes to climate change. That means more than just minimizing the greenhouse gas emissions from our operations. It also means maximizing the opportunity we have to lead efforts to establish responsible policies and programs to address global climate change.” — Adopted by PG&E Corporation, May 2006

5. PG&E’s Leadership Strategies • PG&E will continue to be a leader in energy efficiency programs • Increasing supplies of renewable energy • Facilitating clean distributed generation sources • Pursuing wind and solar initiatives • Leveling the playing field for low-emissions sources • Using innovative technology • Proposing new incentives and tax rebates for customers

6. Biogas Option • Biogas can be manufactured from: • Any organic material • Agricultural waste • Field waste • Nut shells • Animal waste • Food waste • Wastewater facilities • Landfills • Forest waste

7. What is Biomethane? Biomethane is pipeline-quality natural gas generated from biomass resources. Biomethane (Renewable Natural Gas) Bio-SNG (Bio-Synthetic Natural Gas) or Upgraded Biogas Technology: Status: Implementation: Feedstock: Project Scale: Statewide Potential: Anaerobic Digestion/Fermentation (Biochemical process) Commercially available Today Wet biomass - animal waste, food waste, wastewater, landfills Small (200-400 decatherms/day/ 6000 cows) Limited (20,000-40,000 Dth/day) Gasification & Methanation (Thermochemical process) In development 2010 Dry biomass – ag waste, forest waste, municipal solid waste Large (15,000 decatherms/day/ 1,500 tons per day plant) Large (200,000 Dth/day) Both processes can deliver a product that is interchangeable with conventional natural gas

8. PG&E’s Interest in Biogas Opportunities • “We just announced that we’re seeking partners for a major biomethane demonstration project to evaluate technologies for creating large quantities of pipeline-quality natural gas.” • “We think this has the real potential to contribute to the state's renewable goals while also providing benefits like reducing greenhouse gas emissions, helping with fire prevention, improving local air quality, and decreasing landfill disposal.” Peter A. Darbee, Chairman, CEO and President, PG&E Corporation, at the United Nations CERES Investors Forum, February 14, 2008

9. Potential Types of Biomethanation Projects • Technologies to increase conversion efficiency, expand the range of usable feedstock, and improve the quality of the biomethane • Bio-SNG • Potentially 70% energy converted to biomethane • Unlike anaerobic, can access all ligno-cellulosic matter • Demonstration projects in Austria, the Netherlands, and Sweden • Similar to other demonstrated technologies (coal to SNG, IGCC, xTL) • Advanced anaerobic digestion • Efficient integration with liquid biofuel • Hybrid projects (biomass with petcoke/coal gasification with CO2 sequestration).

10. Flexibility in feedstock supply • Gas storage maximizes value of production • Multiple end-use markets • Reduced energy loss (pipe vs. electric transmission) • Higher electric efficiency • Dispatchable and shaping resource • Best available emissions control Generating biomethane instead of power at conversion facility Generating biopower in a conventional system gas-fired plant Why is Biomethanation Important? Biomethanation is an Effective Way to Generate Biopower Separating fuel production from power generation improves economics for utility and bioenergy developer

11. Renewable Portfolio Standard Biomethane (Renewable Natural Gas) • RPS compliant • Meets potential biomass set-aside • Procurement Portfolio Needs • New gas supply source • Fits with gas pipeline network • Avoids electric transmission and ancillary services investments • More flexible than biomass combustion for electricity • Environmental Benefits • Meets multiple local and system environmental needs • Responds to customer demand for more green products GHG Reduction • GHG neutral or better • Provides option for reducing natural gas’s GHG profile Why is Biomethanation Important?

12. 1,200 1030 MDth/day 1,000 800 Bio-SNG 600 400 200 Upgraded Biogas Manure+GreenWaste Wastewater Landfill upgrade Shells, Prunings Forest MSW Biomass EnergyPotential in California, 2006 Source: Team analysis, California Biomass Collaborative http://biomass.ucdavis.edu/pages/reports/Roadmap.doc and http://biomass.ucdavis.edu/materials/reports%20and%20publications/2006/2006_Biomass_Resource_Assessment.pdf *Assumes all “technically available” bioenergy converted to biomethane; thermo-chemical biomass converts to Bio-SNG at 10 dth/ton

13. Renewable Gas or Power Purchase Agreement Commercially established technologies and on-site power RPS Phase 1 RFI Refined RFI Information on needs and market potential Phase 2 RFI Development Support + GPA or PPA for Demonstration Project Emerging biomethane technology demonstration proposals (Complete teams) Bioenergy Participants and Stakeholders Gas upgrading Forum Site hosts Financiers Consultants Biomethanation Contact List Conversion Technology Feedstock supplier Overview of Process For Biomethanation Projects

14. Cow Power • PG&E is partnering with industry participants to develop a new, creative renewable energy source • Biomethane from dairy manure will be received into PG&E’s natural gas pipelines • Provides renewable energy and prevents methane from escaping to the atmosphere

15. Options for Methane Capture Registry Certified GHG Emission Reduction (eliminates the release of methane to the atmosphere) Flare on-site Renewable energy credit (displaces the use of fossil-based fuels) Generate electricity on-site Manure Digester Put in pipeline for use ina natural gas plant

16. Current Practice and Desired Goals • Dairy cows across California produce waste that releases greenhouse gases into the atmosphere (biogas) • Biogas is mostly made up of methane and CO2, which can be processed by existing technology resulting in pipeline quality gas • Anaerobic digestion is a proven available technology commonly used in Europe

17. Transportation of Biogas to Markets • PG&E will provide open access to markets under existing lowest-cost tariffs similar to California gas producers • Gas Supplier (dairy of its digester provider) will execute Interconnect and Operating Agreement • Gas Supplier will also execute standard California Production Balancing Agreement

18. Interconnect and Operating Agreement • PG&E will provide all engineering and planning • Gas Supplier will provide digesters, scrubbing equipment, pipeline to deliver gas to PG&E, compression, meter lot and meter equipment, and reimburse PG&E for pipeline tap • Supply over 500 Mcf/d • PG&E will provide tap to the transmission pipeline • PG&E will provide and install the meter equipment

19. Pipeline Delivery Requirements • Gas must be compressed into PG&E’s transmission pipeline • Gas must meet PG&E’s Gas Rule 21.C. Quality of Gas • Rule21.C.13 states “…Biogas must be free from bacteria, pathogens and any other substances injurious to utility facilities or that would cause the gas to be unmarketable and it shall conform to all gas quality specifications identified in this Rule.” • Specifications include 1% CO2 and 4 ppm H2S

20. Advantages of Pipeline Biogas • Provides reliable renewable gas supply • Most efficient use of biogas for generating electric energy • Significant reduction of greenhouse gas emissions at dairy • Utilizes existing transmission pipeline infrastructure • Provides dairy with new revenue source

21. Overcoming Challenges • Monitor quality of biogas delivered from dairy digesters • Review and evaluate CO2 removal technologies • Assist with identifying funding to cover initial investments • Work with Western United Dairymen to develop grants • Modify existing tax rebates to include delivery of pipeline biogas • Assist the efforts to make co-digestion in dairy digesters a feasible alternative