In a newly revised proposed decision, the California Public Utilities Commission (CPUC) lowered the emissions threshold to be eligible for its Self-Generation Incentive Program subsidy to 334 kilograms of CO2 per megawatt-hour in 2016.

California's SGIP is a generous subsidy ($83 million per year) intended to spur development of low-emissions distributed generation with upfront and performance-based incentives for eligible behind-the-meter generation technologies. These include wind, gas turbines, combined heat and power, advanced energy storage, biogas and fuel cells. But the CPUC has to decide what "low emissions" actually means now that the state has a 50 percent renewable portfolio standard by 2030.

The calculation could exclude fuel cells and small gas engines from participating -- and regulatory folk from the solar, fuel-cell and natural-gas industries have weighed in with their own formulas in letters to the CPUC.

One of many vendors vying for the subsidy is fuel cell company Bloom Energy. According to Bloom's data sheet, its first-year average emissions number is 333.4 kilograms of CO2 per megawatt-hour.

Bloom can achieve 333.4. The proposed threshold is 334.

If one were conspiratorially minded, one might believe that the threshold was set specifically to allow Bloom to participate in the program. Bloom'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 a CPUC worksheet.

And according to reports, it wouldn't be the first time that the CPUC was open to Bloom's suggestion on policy.

In 2011, PG&E filed a petition asking that the CPUC suspend SGIP payments pending a rule change to better disperse the money across different technologies. According to a 2011 article in the Sacramento Bee, Bloom board member John Doerr of VC firm Kleiner Perkins intervened and called the then head of the CPUC, Michael Peevey. (Peevey stepped down from his post amidst an ethics scandal last year.)

Matthew Vespa, senior attorney at the Sierra Club, had this to say in a public comment: Revisions released yesterday to the [proposed decision] only nominally reduce the qualifying emission factor and would perpetuate flaws in SGIP implementation that have resulted in the funneling of hundreds of millions of dollars in public subsidy to carbon-intensive distributed resources. Sierra Club urges the Commission to reject the [proposed decision] and set a significantly lower greenhouse gas eligibility threshold to ensure only resources that meaningfully reduce greenhouse gas pollution benefit from this important incentive program.

Despite the urgent need for an SGIP course correction, the revised [proposed decision] issued yesterday, which purports to now account for the recently enacted 50 percent RPS requirement, would only reduce the emission factor to 350 kgCO2/MWh or, accounting for degradation, a first-year emission rate of 334 kgCO2/MWh. At its most efficient stated level, a Bloom natural gas fuel cell emits 333.39 kgCO2/MWh. One could reasonably conclude that the elaborate formula and discretionary inputs used to determine the emission factor were reverse-engineered to ensure Bloom’s carbon-intensive fuel cells continue to profit from significant public subsidy.

The time to end SGIP’s checkered history of providing handouts to polluting fossil-dependent technologies is long overdue. With the climate crisis growing more acute with each passing day, we simply do not have the luxury of squandering limited incentive funding on counterproductive subsidization of fossil-fueled resources at the expense of the much cleaner technologies critical to achievement of California’s climate goals. Sierra Club urges the Commission to revise the PD to significantly lower the emission factor. If the Commission is unwilling to do so, the Commission should explicitly exclude electric only natural gas fuel cells from SGIP as part of its consideration of program modifications in the next phase of this proceeding.

In August, the California legislature weighed in with a pointed letter directed to CPUC Commissioner Michael Picker that emphasized the intent of SB 861. The letter states, "We are deeply disappointed with your proposed decision, which meets neither the letter nor the spirit of the statute." The letter notes that "the decision appears to be skewed to maintain eligibility for existing technologies operating on 100 percent conventional natural gas," adding, "If your decision is adopted, SGIP will continue the increasingly absurd practice of subsidizing natural gas consumption, supporting existing technologies that have already taken hundreds of millions of dollars from SGIP...without producing substantial efficiency improvements, cost reductions, or general benefits for taxpayers, squandering the $415 million ratepayer investment authorized by SB 861 and undermining our collective efforts to clean the grid and transition away from fossil fuels."

A vote on the SGIP proposed decision scheduled for Thursday was not held for undisclosed reasons. 

This decision will determine the grid-edge technology mix funded by $300 million of California ratepayer cash over the next few years. It could also serve as a reflection of the will of the current CPUC leadership.