SANTA CLARA — A new requirement that customers of Santa Clara’s electricity department who generate their own power must tap only renewable energy sources would effectively block the use of fuel cell technology, according to some experts and a leading company that manufactures fuel cells.
In a move intended to reduce greenhouse gas emissions, the Santa Clara City Council voted Tuesday to require power generators who rely on the city’s electric grid for back-up to use solar, wind, biogas or other renewable energy sources within the state. The city’s electric utility, called Silicon Valley Power, has pledged to make all new energy sources renewable and free of greenhouse gases by 2045.
But Bloom Energy, a San Jose company that manufactures fuel cells, is pushing back, arguing that renewable fuels such as biogas are both expensive and in very limited supply in California.
“The technology can run on biogas, as that becomes more available, but it’s three to five times more expensive than natural gas,” said Josh Richman, Bloom’s vice president of policy. “We do have companies like Apple and IKEA that run all their systems on biogas, but for many the economics aren’t attractive today.”
Bloom’s fuel cells combine fuel and hot air to produce a chemical reaction that creates electricity without any burning. Most of the company’s customers, including Intel and Equinix in Santa Clara, use natural gas, although that process can be powered by renewable fuels too.
Companies that currently use fuel cells will be grandfathered in after the regulation goes into effect June 1, but new fuel cell users and companies that want to expand their capacity will need to shift to renewable fuels. The regulation does not ban the use of diesel generators as emergency back-up.
In a statement Thursday, the city said Bloom’s customers can continue to install fuel cells in Santa Clara as long as they use renewable energy or the technology only for emergency back-up. Otherwise, they can disconnect from the city’s grid altogether.
“Bloom has previously told the City it does not prefer these alternatives as it will affect their profit margin,” the statement said.
Bloom says its fuel cells are cleaner than the city’s own natural gas plants, and the other alternative for back-up power — diesel generators — are even dirtier.
“This resolution has the exact opposite outcome to its stated goal. This will increase (carbon dioxide emissions), and it will increase combustion-related pollutants,” Richman said. “More importantly, this effective ban on fuel cells is anticompetitive monopolization by the City.”
Richman pointed to statements made by the power utility’s interim director and assistant city manager, Manuel Pineda, at a March 26 meeting, Then, Pineda noted fuel cells have contributed to a decline in sales, which fell for the first time in 10 years.
Pineda replied that the city’s public utility is not a for-profit business and the regulation is entirely motivated by a goal of reducing greenhouse gas emissions. Although sales fell this year, he said they have increased over the past decade.
Silicon Valley Power has also increased the percentage of its portfolio that relies on renewable energy and is free of greenhouse gases, Pineda said, making it a cleaner option than fuel cells for companies.
“In 2017, we were 72 percent carbon-free,” Pineda said, referring to Silicon Valley Power. “When you have a natural gas fuel cell that emits carbon, the whole time it’s operational.”
Many of Bloom’s customers run fuel cells 24/7 as their primary source of electricity, and connect to the city grid as back-up in case of failure. Equinix, which also sent a letter opposing the regulation, uses Bloom’s fuel cells to power its data centers.
Richman said fuel cells are a more reliable source of energy.
Pineda disputed that, noting the city reviewed power reliability for two of Bloom’s customers that also use the city grid — Intel and Equinix — and found Intel hasn’t had a power outage since 1994 and Equinix has had about an hour’s worth of outages over a five-year period.
“Which is incredible reliability. You can’t get much better than that,” Pineda said.
In addition to opposition letters from Bloom and Equinex, the city has received letters from two local professors who criticized the regulation and said it lacked proper analysis.
James Sweeney, a science and engineering professor at Stanford University, wrote that most of the market for renewable natural gas in California is used up by the transportation sector because of state and federal subsidies.
“The requirement to use only in-state biomass is tantamount to banning all behind-the-meter fuel cells,” Sweeney wrote.
Catherine Sandoval, a law professor at Santa Clara University and former member of the California Public Utilities Commission, agreed.
“The issue with the market isn’t that it’s simply too expensive, it’s plain unavailable,” Sandoval said.
“If their motive was to reduce greenhouse gases, they need to share with the public and voting members some analysis of the market and how this is calibrated to reduce greenhouse gases,” she added.
Pineda said companies will have to assess the costs of renewable fuel sources the same way the city has to.
“There’s a cost associated with (renewable fuel) — we have to look at how you balance that with financial implications, and they have to do that on their own,” Pineda said. “We fully support self-generation that’s renewable.”
Richman said Bloom is exploring its legal options, including challenging whether the regulation should have required additional environmental analysis.
Sandoval also questioned the city’s motives.
“What it looks like is they are trying to protect their own customer load,” Sandoval said.
Contact Thy Vo at 408-200-1055 or tvo@bayareanewsgroup.com.
