The Federal Energy Regulatory Commission (FERC) has opened the door for fuel cell systems with integrated hydrocarbon reformation equipment to be certified as Qualifying Facility cogenerators under the Public Utility Regulatory Policies Act of 1978 (PURPA).  The agency adopted a final rule that amends the definition of the useful thermal output of a QF cogenerator so that such fuel cell systems may qualify.

FERC’s rule is intended to reduce regulatory barriers for the covered fuel cell systems and thus may spur increased fuel cell entry.  The rule will be of interest to fuel cell providers, utilities and energy policymakers.

Background

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, and in some instances utilities are obligated to purchase their power.

Under PURPA, FERC may certify as QFs cogeneration facilities that meet certain criteria.  FERC’s rules 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 add a fourth use to the definition of “useful thermal energy output” to clarify that the thermal energy produced by solid oxide fuel cell (“SOFC”) systems with integrated natural gas reformation equipment that is used to produce additional electricity is useful thermal energy.  Bloom stated that without this addition, most SOFC facilities would not be able to qualify as a QF cogenerator because FERC precedent requires the use of thermal energy to be completely independent of the power production process.  However, the SOFC system uses the thermal energy output in the fuel cell conversion process to produce more electricity.

As reported in this blog, FERC issued a Notice of Proposed Rulemaking (NOPR) that proposed to add as a fourth acceptable use of thermal energy 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.”

The new rule

FERC’s new rule adds a fourth acceptable use for the thermal energy produced by a fuel cell with integrated hydrocarbon reformation equipment, but, in response to a comment, does not limit that use to solid oxide fuel cell systems.  FERC noted that “the focus should be on the integrated use of waste heat for reforming hydrocarbons to produce hydrogen to fuel a fuel cell, instead of the specific fuel cell technology utilized to accomplish that goal (i.e., solid oxide or carbonate).”  Accordingly, FERC’s new rule modifies the NOPR’s description of the type of fuel cell that would qualify for QF status.  Under the final rule,  the fourth acceptable useful thermal energy output of a topping-cycle cogenerator is that “used by a fuel cell system with an integrated steam hydrocarbon reformation process for production of fuel for electricity generation.”

FERC finds that a fuel cell with integrated hydrocarbon reformation equipment fits within the PURPA definition of a cogenerator because it  produces two forms of useful energy: electric energy and heat/steam (thermal energy) which can be used to produce hydrogen from which chemical energy can be used to produce electric energy.

In some instances, QFs can require utilities to purchase their output.  To qualify for this benefit,  PURPA requires that a cogenerator QFs output “is used fundamentally for industrial, commercial, residential or institutional purposes and is not intended fundamentally for sale to an electric utility.”  FERC’s order here states that these requirements apply to fuel cell systems subject to the new rule.

The new rule will become effective 60 days after publication in the Federal Register.

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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.