U.S. Deployment Programs
In the United States, the federal government provides an uncapped Investment Tax Credit (ITC) that allows a taxpayer to claim a credit of 30% of qualified expenditures (up to a tax credit limit of $3,000/kW) for eligible power generation technologies, including fuel cell power plants, that are placed in service on or before December 31, 2016. In December 2015, the United States Congress extended the ITC for 5 years, beginning on January 1, 2017, and phased down to 26% in 2020 and 22% in 2021. The intention, as publicly stated by Congressional leaders, was to extend the ITC to all eligible technologies; however, the actual approved language only extended the ITC for solar energy technologies. Senior Congressional leadership, as stated in the Congressional Record on December 18, 2015 and in the media, acknowledged a drafting issue with the legislation and their commitment to correct this oversight in 2016. The expectation is that a bill will be introduced for vote to include all eligible technologies in the ITC extension, including fuel cells. The federal government also provides accelerated depreciation for eligible fuel cell projects.
State Programs to Support Clean Power Generation Deployment and Renewable Portfolio Standards1
Renewable portfolio standards (RPS) establish requirements or guidelines for electric utilities to serve a specified minimum percentage of their customer requirements with eligible sources of renewable power generation. 33 states and the District of Columbia have renewable portfolio standards. A number of states include fuel cells operating on natural gas as eligible under their RPS due to the high efficiency of the fuel cell power generation process. These states recognize that high efficiency results in greater power production from a given unit of fuel while limiting carbon emissions, both important aspects of fuel cell power generation that is important to support.
Below is a list of select states with leading programs to promote the adoption of clean and renewable power
Beginning in 2017, the State of California Self-Generation Incentive Program (SGIP) will provide partial reimbursement of the capital costs for DFC power plants with 50 percent up-front and 50 percent over time based on $0.60/watt ($600/kW) for CHP configured plants operating on natural gas and up to $1.20/watt ($1,200/kW) for CHP configured plants operating on renewable biogas.
U.S. Department of Energy summary of fuel cell SGIP financial incentives for California
On-site CHP capabilities of DFC® plants make them eligible for the CHP Feed-in Tariff (AB 1613). Under this program, excess electricity not used on-site can be sold to the electric grid as long as the heat is used on site. The price is set by the California Public Utility Commission (CPUC) via the Market Price Referent (MPR). DFC plants are potentially eligible for a 10 percent adder depending on the location of the power plant installation. The MPR is determined by the year the plant becomes operational and the term of the underlying power plant contract with payments ranging from approximately seven to eight cents for plants that become operational by the end of 2013, rising modestly thereafter.
The carbon cap-and-trade program is a central element of greenhouse gas (GHG) reductions under Assembly Bill 32 (AB32). AB32 targets large emitters and is mandatory for facilities with CO2 emissions greater than 25,000 metric tons per year. Fuel cells operating on clean natural gas are exempt from a covered entity’s cap-and-trade compliance obligation. Facilities having onsite power generation and/or gas fired heating/cooling can reduce or eliminate their GHG cap-and-trade compliance cost by deploying fuel cells or sell their cap-and-trade credits. Natural gas users below the emissions threshold will experience an upstream carbon adder to the cost of gas to compensate for GHG emissions. These users can voluntarily opt-in to the program and avoid the adder by deploying fuel cells. Cap-and-trade credits traded for $12.73 per allowance (1 metric ton CO2) as of the February 2016 auction with a varied list of participants including industrial companies, utilities, independent power producers and municipalities: Auction report – August 2016
Beginning in 2017 and through December 31, 2021, fuel cell power plants are eligible for Fuel Cell Net Energy Metering (FC-NEM), an optional rate schedule for investor-owned utility customers who install a fuel cell generator to supply some or all of their own energy needs. FC-NEM was expanded and extended by Assembly Bill 1637 approved by the Governor in September 2016, for fuel cell projects up to 5 megawatts per electric meter. The program supports 500 megawatts of fuel cell customer generation in total.
In addition to billing credits for generation exported to the electric grid, participating FC-NEM customers are exempt from standby charges, departing load charges, and some costs associated with interconnection application fees, studies and distribution upgrades. Participation in FC-NEM does not limit a customer-generator’s eligibility for any other rebate, incentive, or credit provided by an electric utility, or as part of a governmental program.
The State of Connecticut has a performance-based renewable energy program divided into two categories including low emission renewable energy credits (LREC’s) that DFC plants are eligible for and zero emission renewable energy credits (ZREC’s) for solar and wind. Under the program, the two major electric utilities in the State enter into 15 year contracts to purchase renewable energy certificates from renewable power generation installations. The total LREC program is $300 million structured as 15 year contracts with $4 million to be awarded each year beginning in 2012 through 2017 (i.e. $4 million x 5 years for award submissions x 15 year contracts = $300 million). Power generation projects are submitted under an annual bidding process for the value of the REC’s with the lowest bids winning the awards. Maximum bid under either program is $0.20/kWh.
U.S. Department of Energy summary of fuel cell LREC financial incentives for Connecticut
New York’s Clean Energy Standard is structured to fight climate change, reduce air pollution, and ensure a diverse and reliable energy supply. The Clean Energy Standard requires 50 percent of New York’s electricity to come from renewable energy sources by 2030. In its initial phase, utilities and other energy suppliers will be required to procure and phase in new renewable power resources starting with 26.31 percent of the state’s total electricity load in 2017 and grow to 30.54 percent of the statewide total in 2021. Fuel cells operating on natural gas or renewable biogas are eligible. Order Adopting a Clean Energy Standard / Eligible technologies: Appendix A, page 3 for fuel cells – Appendices to Order Adopting a Clean Energy Standard
The Renewable Portfolio Standard Program Purchase of Renewable Energy Attributes utilizes renewable energy credits (REC’s) under a structure where the State purchases the environmental attributes of a power generation project at a fixed price over a 15 year term.
U.S. Department of Energy summary of fuel cell financial incentives for New York
NY Prize is a part of a statewide endeavor to modernize New York State’s electric grid, spurring innovation and community partnerships with utilities, local governments, and private sector to enable the technological, operational, and business models that will help communities reduce costs, promote clean energy, and build reliability and resiliency into the grid.
1An RPS is a mechanism designed to promote the adoption of renewable power generation. The RPS may be voluntary or mandated through legislation and generally places the obligation on the suppliers of electricity to generate a specified percentage of their electricity from renewable power sources. The purpose of an RPS is to provide a program that provides a competitive marketplace for providing renewable energy at the lowest possible cost while allowing clean renewable power to compete with cheaper but ‘dirtier’ fossil fuel power generation. An RPS may even be structured to promote economic growth through adoption of renewable power generation.
Fuel cells can play a role in meeting RPS clean power mandates by generating highly efficient, clean electricity continuously. Fuel cells operating on renewable biogas meet the requirements of typical RPS programs and many RPS programs include fuel cells operating on natural gas due to the near zero emissions and highly efficient power generation process of fuel cells.