BILL ANALYSIS Ó
AB 796
Page 1
Date of Hearing: September 11, 2013
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Steven Bradford, Chair
AB 796 (Muratsuchi) - As Amended: August 26, 213
SUBJECT : Advanced electrical distributed generation technology
SUMMARY : Extends eligibility for cogeneration natural gas
rates to fuel cells that are operational before January 1, 2016.
Specifically, this bill :
This bill would make certain existing limitations upon gas rates
and surcharges charged to cogenerators applicable to a customer
using advanced electrical distributed generation, as defined.
EXISTING LAW :
1)Defines an advanced electrical distribution technology with
the characteristics of a specific fuel cell technology.
Extends eligibility for a specified natural gas rate to these
fuel cells technologies that are operational before January 1,
2014. (Public Utilities Code 379.8)
2)Provides that the surcharge assessed for natural gas used to
generate electricity by a nonutility facility must be the same
as the surcharge assessed for gas used to generate electricity
by the electric utility for that quantity of gas used to
generate electricity. Prohibits surcharges for electricity for
the sale of electricity from a cogeneration or nonutility
facility to an entity for resale to a retail customer. (Public
Utilities Code 6352)
3)Requires the California Public Utilities Commission (PUC) to
establish rates for gas utilized in cogeneration technology
projects not higher than the rates established for gas
utilized as a fuel by an electric plant in the generation of
electricity, except that this rate shall apply only to that
quantity of gas which an electrical corporation serving the
area where a cogeneration technology project is located, or an
equivalent area, would require in the generation of an
equivalent amount of electricity based on the corporation's
average annual incremental heat rate and reasonable
transmission losses or that quantity of gas actually consumed
by the cogeneration technology project in the sequential
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production of electricity and steam, heat, or useful work,
whichever is the lower quantity. (Public Utilities Code 454.)
FISCAL EFFECT : Unknown
COMMENTS :
1)Author's Statement. "AB 796 will extend a sunset date, by two
years, to allow advanced electrical distributed generation
technologies to receive the same gas rate as every other
customer that produces electricity from natural gas.
Extending the sunset date will allow these clean technologies
to continue to provide electricity that doesn't produce NOx
and SOx or particulate matter and has greenhouse gas emission
reduction benefits. AB 796 ensures that all technologies are
treated equally and that customers who chose to generate
electricity onsite continue to have a choice of what
technologies they chose to use."
2)Background . Current law requires that gas corporations provide
a rate for natural gas purchases for customers who operate a
fuel cell for on-site electricity generation if that fuel cell
meets certain criteria related to greenhouse gas and pollution
emissions. The rate is the same rate that merchant natural gas
generators and cogeneration facilities receive.
The author opines that customers that use natural gas to
generate on-site electricity are eligible for a particular gas
rate and that this rate should be available for all
technologies that generate on-site electricity and that meet
the intent of the law and allows for customer choice and fair
markets.
3)Should Fuel Cells receive this rate? 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. Utility customers that
purchase CHP fuel cell models receive the benefit of this gas
rate, but these same rates were not offered to customers with
non-CHP fuel cells. The original argument to allow fuel cells
to qualify for this gas rate was based on the reasoning that
fuel cells are an efficient method of electrical production.
Certain fuel cells are not configured to be used as
cogeneration technologies, also known as
combined-heat-and-power (CHP). Some fuel cells operate in a
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manner that only produces electricity.
4)Fuel Cell Emissions . This bill primarily impacts stationary
fuel cell technologies that generate power for large
institutions or facilities and use natural gas for fuel. In
comparison to natural gas plants, fuel cells generate lower
amounts of criteria pollutants including NOx, SOx, and
particulate matter. The benefits from an emissions standpoint
of non-CHP fuel cells are the de minimis NOx, SOx, and
particulate matter emissions.
Fuel cell technologies that use natural gas generate CO2
emissions. Depending on the efficiency of the fuel cell
technology, there can be emission reductions due to direct
displacement of grid based electricity, displacement of
natural gas burned in boilers, or by using recovered waste
heat to run chillers for cooling (thereby reducing electricity
that would otherwise have been provided from the electricity
grid). Some fuel cells are electric only and do not capture
waste heat for other uses.
The California Public Utilities Commission (PUC) published an
analysis of SGIP and found that electric-only fuel cells were
the only non-renewable technology that had a net-reducing
effect on GHG emissions for the SGIP in 2011, shown by a
negative value in the chart below (excerpted from the PUC's
analysis). Note that this analysis is based on the SGIP
program before it was amended to focus on GHG reduction
characteristics (SB 412, Stats. 2009, Ch. 182).
-------------------------------------------------------------
| Type | SGIP | Baseline Emissions (Metric Tons | GHG |
| |Emission| of CO2 per Year) |Emissio|
| | s | | ns |
| |(Metric | |Impact |
| |Tons of | |(Metric|
| |CO2 per | | Tons |
| | Year) | |of CO2 |
| | A | | per |
| | | | Year) |
| | | | F=A-E |
| | | | |
-------------------------------------------------------------
|----------+--------+--------+-------+-------+--------+-------|
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| | |Electric|Heating|Cooling| Total | |
| | | Power | | |Baseline| |
| | | Plant |Service|Service| | |
| | | B | s | s |E=B+C+D | |
| | | | C | D | | |
|----------+--------+--------+-------+-------+--------+-------|
|FC - CHP | 23,522 | 20,126 | 2,487 | 32 | 22,645 | 877 |
|----------+--------+--------+-------+-------+--------+-------|
|FC - | 7,561 | 7,811 | 0 | 0 | 7,811 | -250 |
|Elec. | | | | | | |
|----------+--------+--------+-------+-------+--------+-------|
|FC - PEM | 656 | 529 | 67 | 0 | 596 | 61 |
|----------+--------+--------+-------+-------+--------+-------|
|GT |111,071 | 78,780 |12,218 | 2,002 | 93,000 |18,071 |
|----------+--------+--------+-------+-------+--------+-------|
|ICE |157,237 |109,878 |33,038 | 2,861 |145,778 |11,459 |
|----------+--------+--------+-------+-------+--------+-------|
|MT | 58,447 | 29,949 | 9,430 | 529 | 39,908 |18,539 |
|----------+--------+--------+-------+-------+--------+-------|
|Total |358,495 |247,073 |57,240 | 5,425 |309,738 |48,756 |
-------------------------------------------------------------
(Type Abbreviations: Fuel Cell - Combined Heat and Power, Fuel
Cell - Electric, Fuel Cell - Proton Exchange Membrane, Gas
Turbine, Internal Combustion Engine, Microturbines)
The current SGIP program requires that a product or a
technology must produce fewer GHG emissions than it avoids
from the grid. As California's electricity resource mix adds
more renewable generation it is likely that the baseline
emissions shown above will be lower, which may make it more
difficult for fuel cell technologies to achieve net GHG
reductions.
Fuel cells customers are eligible for a ratepayer funded
incentive called the Self Generation Incentive Program (SGIP).
The incentive is a maximum of $2.25 per watt of capacity. One
fuel cell manufacturer has benefitted from approximately
$250,000,000 in incentives through this program since 2009.
5)Is there a cost-shift? PG&E estimates that approximately $4
million per year is shifted to other ratepayers as a result of
providing this rate to fuel cell facilities.
In addition to this discount on natural gas purchases, fuel
cell facilities are eligible for net metering credits as a
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result of their electricity generation. A report on the costs
and benefits of net energy metering is due by October 1, 2013
from the Public Utilities Commission.
6)Additional Support for Fuel Cells . In addition to the natural
gas rate and the net metering credits, fuel cells customers
are also exempted from responsibility to contribute to
'nonbypassable charges.' Nonbypassable charges include
contributions to support discounts for low income customers
and incentives for customers who make certain energy
efficiency expenditures or acquire fuel cells or renewable
energy facilities.
7)Future extension of this statute should review total
incentives for this technology . If this statute is later
proposed to be extended, the Legislature should review the
total incentives made available and whether the statute has
achieved its desired results with respect to cost reductions
and competitiveness in the market for this technology.
8)Support for AB 796 .
a) The Fuel Cell and Hydrogen Energy Association states
that, "Historically, energy policies have been focused on
one or two technologies. As technological innovation
continues, our existing policies need to become 'technology
neutral' to allow new technologies enter the market. For
instance, because the cogeneration definition is used to
determine eligibility for special gas tariffs and other
state incentive programs, it can act as a disincentive for
customers to install the latest and most efficient
technologies that best fit their needs."
b) TechNet states that this exemption from surcharges
"promotes the development of the most effective, innovative
clean energy technologies by making available favorable
natural gas rates - on a technology-neutral basis -- for a
broader range of clean, distributed generation
technologies."
c) The National Fuel Cell Research Center states that "
continuation of this policy is critical in ensuing that
fuel cells have a fair opportunity to participate in the CA
energy market."
AB 796
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REGISTERED SUPPORT / OPPOSITION :
Support
Fuel Cell and Hydrogen Energy Association (FCHEA)
National Fuel Cell Research Center (NFCRC)
The Technology Network (TechNet)
Opposition
None on file.
Analysis Prepared by : Susan Kateley / U. & C. / (916)
319-2083