BILL ANALYSIS � 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
AB 796 - Muratsuchi Hearing
Date: August 30, 2013 A
As Amended: August 26, 2013 FISCAL/Urgency
B
7
9
6
DESCRIPTION
Current law mandates that every electrical corporation provide
for net energy metering for eligible fuel cell customers. The
tariff is available to customers until the cumulative rated
capacity of those receiving the tariff reaches its proportionate
share of 500 megawatts capacity based on the ratio of the
corporation's peak demand compared to the total statewide peak
demand. The California Public Utilities Commission (CPUC) may
raise the limitation in order to promote the growth of the fuel
cell market. (PUC �2827.10)
Current law defines "advanced electrical distributed generation
technology" (fuel cells) and establishes eligibility for the
same natural gas fuel rates as cogeneration technology. Only
facilities that are first operational at a site before January
1, 2014 qualify for the specified rates. (PUC �379.8)
This bill extends eligibility for cogeneration natural gas rates
to fuel cells that become operational before January 1, 2016.
BACKGROUND
What is a Fuel Cell? - Fuel cells use an electrochemical
reaction to produce electricity from fuels such as hydrogen,
natural gas, or biogas. The majority of stationary fuel cells
that are currently deployed use natural gas. Unlike a typical
natural gas power plant, the fuel cell does not burn or combust
the gas in the process of producing electricity. This process
significantly reduces some the emissions of fuel cells compared
to combustion generation. The primary reductions occur for
nitrogen oxide (NOx) and sulfur oxide (SOx) compounds, which
contribute to acid rain, that are produced during the generation
of electricity. However, a fuel cell using natural gas continues
to produce carbon dioxide (CO2) as a waste product, which is a
greenhouse gas (GHG).
Fuel Cells in PG&E Territory - The Legislature mandated (AB
1110, Fuentes, 2009) that certain fuel cell models be eligible
for natural gas at rates available to cogeneration and
electrical generation facilities. At that time the special rate
was offered by other gas utilities but not by Pacific Gas &
Electric (PG&E) which refers to this rate as the "G-EG" rate.
The original argument to allow fuel cells to qualify for the
G-EG rate was based on the reasoning that fuel cells are an
efficient method of electrical production, but certain models do
not qualify as cogeneration technologies, also known as
combined-heat-and-power (CHP). While CHP technologies recycle
the waste heat from the primary cycle in a secondary process to
provide heating for the facility, some fuel cells do not. These
non-CHP models of fuel cells recycle excess heat internally to
increase the efficiency of electricity production, but this does
not qualify as cogeneration since the excess heat is not used
for a separate heating purpose.
According to PG&E there are 69 individual customer fuel cell
units providing 35 megawatts (MW) of capacity within their
territory that benefit from the G-EG rate for natural gas. Most
of these customers use non-CHP fuel cell models produced by
Bloom Energy, who reports that the CO2 emission rates from their
fuel cells are 738-886 pounds (lbs) of CO2 per megawatt-hour
(MWh) of electricity produced. This is comparable to some of the
more modern and efficient natural gas plants. The Bloom Energy
models recycle excess heat internally, so do not qualify as
cogeneration. PG&E reports that these customers have received a
total annual natural gas subsidy of $4.7 million. Bloom Energy
has additional fuel cells outside of PG&E territory.
Greenhouse Gas Emissions - An analysis from the National Fuel
Cell Research Center (NFCRC) at University of California, Irvine
found that fuel cells produce 980-1080 lbs CO2/MWh.<1> The fuel
cell emission rate can be compared to that of the average
natural gas-fired generator in California, which produces
960-980 lbs CO2/MWh, according to the NFCRC analysis.
Directed Biogas - The Legislature took steps to develop the
biogas market last year (AB 2196, Chesbro, 2012) and expand its
eligibility as a fuel source under the Renewables Portfolio
Standard. The bill clarified that biogas procured under
contracts for electrical generation on-site, off-site via a
dedicated pipeline, or off-site via a common carrier pipeline
that flows within the state or toward the generation site would
be eligible for RPS credit. Assembly Bill 1900 (Gatto, 2012)
further directed the CPUC to develop standards for biogas that
is injected into common carrier pipelines in order to ensure the
health and safety of the public and the pipelines. The CPUC was
also directed to adopt programs that promote the use of biogas
within the state.
COMMENTS
1. Author's Purpose . Non-CHP fuel cell models that are
installed after the end of this year will no longer qualify
for the G-EG rate. The author argues the program has been
successful for customers using non-CHP fuel cells to
provide on-site electricity by reducing their fuel costs.
Therefore, the author argues that the program should be
extended to a January 1, 2016 sunset.
The original intention for the statute was to balance the
market for all models and manufacturers of fuel cells by
granting them all the same rates for natural gas, even
though some models do not operate in a CHP mode.
Specifically, utility customers that purchase CHP fuel cell
models receive the benefit of the G-EG rate, but these same
rates were not offered to customers with non-CHP fuel
cells. By qualifying the non-CHP fuel cells for the G-EG
rate, the playing field was leveled.
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<1>Build-Up of Distributed Fuel Cell Value in California: 2011
Update, NFCRC, UC Irvine
http://www.nfcrc.uci.edu/2/FUEL_CELL_INFORMATION/MonetaryValueOfF
uelCells/
2. Are Fuel Cells Clean ? This bill primarily impacts
stationary fuel cell technologies that generate power for
large institutions or facilities and use natural gas for
fuel. (Fuel cells utilizing biogas are eligible under the
RPS program and not affected by this bill.) In comparison
to natural gas plants, fuel cells generate lower amounts of
criteria pollutants including NOx, SOx, and particulate
matter. However, all fuel cells that run on natural gas
continue to produce CO2 emissions at levels similar to a
natural gas plant. The benefits from an emissions
standpoint of non-CHP fuel cells are the de minimis NOx,
SOx, and particulate matter emissions, not the CO2
emissions.
Many programs have been established to incent clean
generation and transportation technologies in an effort to
reach California's aggressive GHG reduction goals. The
special gas rate required under current law and extended by
this bill does not further those goals. These fuel cells
have fewer criteria pollutants than natural gas combustion
generators, but do little to reduce the state's GHG
emissions. Additionally the Legislature has directed the
CPUC to take the steps necessary to develop a market for
biogas. The incentive to utilize natural gas to power fuel
cells extended by this bill is not consistent with those
goals. Moreover, the cost shift to other ratepayers for the
incentive is reported by PG&E to be $4.7 million annually
for existing fuel cells. That number would grow under the
provisions of this bill.
ASSEMBLY VOTES
Previous votes are irrelevant, because this is a new bill.
POSITIONS
Sponsor:
Author
Support:
National Fuel Cell Research Center
TechNet
Oppose:
None on file
Kyle Hiner
AB 796 Analysis
Hearing Date: August 30, 2013