[Editor's note: Article updated 6:00 p.m. PT, Bloom response added, emissions figures revised]

There's an active docket at the California PUC that potentially amends a renewable incentive that drives revenue at fuel-cell vendor Bloom Energy and a host of other firms.

California's Self-Generation Incentive Program (SGIP) was re-authorized by Governor Jerry Brown last year and will continue to provide $83 million per year (through 2019) in upfront and performance-based incentives for eligible behind-the-meter generation technologies. These include wind, waste-to-heat power, gas turbines, combined heat and power, advanced energy storage, biogas and fuel cells -- all vying for the $83 million per year.

The SGIP is the original California renewables incentive, predating the California Solar Initiative.

Bloom Energy's natural-gas-powered fuel cells have drawn or reserved more than $400 million of the program's 14-year $1.4 billion total, according to the CPUC's SGIP worksheet. If the SGIP's aim was to provide several hundred million dollars to a single VC-funded fuel-cell company, then it has succeeded -- by classifying fuel cells as an "emerging technology." 

Source: Base SGIP Incentive Levels for Eligible Technologies (from 2015 SGIP Handbook)

However, the SGIP was actually intended "to provide incentives for any distributed generation resources that the commission determines will support the state's goals for reductions of emission of greenhouse gases."

Are fuel cells or energy storage cleaner than a 20% RPS grid?

According to SB 861, "Eligibility for incentives under the self-generation incentive program shall be limited to distributed energy resources that the commission, in consultation with the State Air Resources Board, determines will achieve reductions in emissions of greenhouse gases pursuant to the California Global Warming Solutions Act of 2006." (Here's the full text of the budget rider bill.) The legislation now requires that eligible technologies improve air quality by reducing criteria air pollutants.

Using pounds of CO2 per megawatt-hour as a metric means Bloom's technology has to be cleaner than a 20 percent or 33 percent RPS grid. Consider the following:

  • Bloom's spec sheet lists CO2 emissions of 735 to 849 pounds per megawatt-hour.
  • A typical new combined-cycle gas turbine plant emits about 800 913 pounds of CO2 per megawatt-hour. 
  • Coal-fired generators emit 2,200 pounds of CO2 per megawatt-hour.
  • PG&E's "most recent independently verified CO2 emissions rate of 445 pounds of CO2 per megawatt-hour is about one-third of the national average among utilities."

A Bloom spokesperson said, "Bloom fully supports a GHG standard in the SGIP, wants the standard to be updated and will continue to reduce emissions even with renewables on the grid. Per the latest SGIP Impact report, Bloom is actually the largest GHG reducer in the SGIP program." Bloom emphasized, "Distributed generation does not displace all of the generators on the grid, but rather generation from the marginal gas plants that the utility curtails in response to changes in demand, as well as transmission and distribution line losses. [...] This is why the present requirement for the SGIP program is 379 kg of CO2/MWh (835 lbs CO2/MWh), which is well in excess of the PG&E average of 445 lbs./MWh." 

Bloom Energy's comments on the issue are here. Pertinent highlights include:

  • "SGIP technologies should not be assumed to avoid the deployment of new renewable capacity, and therefore this 20% reduction, although intending to encourage clean technologies, was not required. If the SGIP GHG emissions factor is adjusted based on the RPS, it will have the perverse effect of 1) inhibiting the deployment of technologies that in actuality are reducing GHGs in real time, and 2) actually increasing emissions from centralized combustion plants because these cleaner technologies, which displace generation from those plants, will not be deployed."
  • "The CPUC would also need to consider the fact that procuring more intermittent renewables may result in changes to the heat rate of the operating margin, as existing gas plants will be required to operate differently. Although the CPUC has the expertise to execute such an analysis, it is unwarranted. Utilities are not deferring or downsizing procurement of renewables based on SGIP. Again, SGIP is proportionally small to the overall load and planning process."
  • "As our responses above explained, SGIP, and distributed energy resources in general, do not displace deployment of new renewable generation capacity. Rather, these advanced clean technologies on the customer’s side of the meter actually displace large gas generation, and we hope that the Commission will adjust the emissions factor methodology accordingly."

Bloom is certainly not the only company to take advantage of the SGIP. Bloomberg reported yesterday, "Tesla is on track to reap as much as $65 million" in SGIP incentives for it energy storage systems.

A decision should be forthcoming in the near future: "On or before July 1, 2015, the commission shall update the factor for avoided greenhouse gas emissions based on the most recent data available to the State Air Resources Board for greenhouse gas emissions from electricity sales in the self-generation incentive program administrators’ service areas."

That CPUC decision will help determine the grid-edge technology mix funded by $300 million of California ratepayer cash over the next few years.