The Federal Energy Regulatory Commission (FERC) issued a Notice of Proposed Rulemaking (NOPR) that would allow certain Solid Oxide Fuel Cell (SOFC) systems to be certified as Qualifying Facilities under the Public Utility Regulatory Policies Act of 1978 (PURPA) and thus receive regulatory benefits meant, in part, to encourage the innovation and development of cogeneration facilities.  The proposal applies to SOFC systems that use heat and steam to convert natural gas to hydrogen, which then reacts with oxygen in the fuel cell to produce electricity, and then uses some of the heat and steam produced to continue converting methane into hydrogen to produce additional electricity.

FERC’s proposal would reduce regulatory barriers for the covered SOFC systems and thus may spur increased fuel cell entry.

Background

Under PURPA, FERC may certify as Qualifying Facilities (“QFs”) small power production facilities and cogeneration facilities that meet certain criteria.  QFs receive regulatory relief, such as exemptions from the Public Utility Holding Company Act of 2005 and from certain provisions of the Federal Power Act; in many instances, utilities are obligated to purchase their power.

FERC’s QF certification rules, established in 1980, define a cogeneration QF as a facility that “produces electric energy as well as steam or forms of useful energy (such as heat) which are used for industrial, commercial, heating or cooling purposes.”  The rules limit a cogeneration QF’s “useful thermal energy output” to thermal energy that is (1)“made available to an industrial or commercial process;” (2) “used in a heating application;” or (3) “used in a space cooling application.”

Bloom Energy Corporation petitioned FERC to clarify the definition of “useful thermal energy output” so that it may apply to that used by SOFCs to produce additional electricity.  Bloom stated that without a clarification, most SOFC facilities “would not be able clearly to avail themselves of key benefits of PURPA aimed at reducing barriers to entry for new efficient energy technology.”  This is because a 1981 FERC order required that a cogeneration QF’s use of thermal energy must be completely independent of the power production process.[1]  In the SOFC process, however, some of the thermal energy output is used in the fuel cell conversion process to produce more electricity.

FERC NOPR

In the NOPR, FERC recognizes that SOFC systems with integrated natural gas reformation equipment are now a viable option for efficient electric energy cogeneration and that, with the growing industrial applications of hydrogen, the distributed production of hydrogen is increasingly important.

Accordingly, FERC proposes to add to its rules, as an additional acceptable use of thermal energy produced by a cogeneration QF, the thermal  energy “used by a solid oxide fuel cell system with an integrated steam hydrocarbon reformation process for production of fuel for electricity generation.”  With the addition of this acceptable use of thermal energy, SOFC systems with integrated natural gas reformation equipment meet the definition of a cogeneration QF.  FERC describes this type of system as follows:

Solid Oxide Fuel Cell systems with integrated natural gas reformation equipment convert the chemical energy within natural gas into electricity using a steam-methane reformation process, which converts the natural gas input to hydrogen, which then reacts with oxygen in the fuel cell to produce electricity. The by-product of the fuel cell’s production of electricity is heat and steam, some of which is used in the steam-methane reformation process to convert more methane into hydrogen, which the fuel cells use, in combination with oxygen from the air, to produce electricity.[2]

FERC recognizes this additional acceptable use of a cogeneration QF’s thermal energy is a departure from the 1981 EG&G order by noting that the order did not involve fuel cells and was issued under the then effective regulations, which are now proposed to be revised.

Comments on the NOPR are due 30 days after date of publication in the Federal Register.

[1] EG&G, Inc., 16 FERC ¶ 61,060 (1981),

[2] NOPR at P. 16, footnote omitted.

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Photo of Bud Earley Bud Earley

Bud Earley, a non-lawyer senior advisor, provides analysis and advice on a wide range of federal and state energy regulatory issues, including transaction and rate issues, regional transmission organization (RTO) tariffs and rules, interconnection, retail choice and demand response for electricity customers…

Bud Earley, a non-lawyer senior advisor, provides analysis and advice on a wide range of federal and state energy regulatory issues, including transaction and rate issues, regional transmission organization (RTO) tariffs and rules, interconnection, retail choice and demand response for electricity customers, a natural gas pipelines and hydroelectric facility licenses, and LNG export authorizations.

Working with Covington teams, Mr. Earley has provided expert advice and analysis to investment firms, utilities, independent power producers, project developers, customers, marketers and U.S. and international energy companies,

Prior to joining Covington, Mr. Earley served for over 30 years in various staff positions at the Federal Energy Regulatory Commission (FERC). While at the FERC, Mr. Earley was instrumental in developing and applying policies regarding the transition of the electric utility industry to competition, including policies regarding independent power producers, transmission access, standard generator interconnection procedures, organized electricity markets, mergers and market-based rates.