Discussion

In D.02-09-051, we addressed the eligibility of renewable-fuel combustion turbines (e.g., micro-turbines) for self-generation program incentives. This decision was issued in response to a Petition filed by Capstone Turbine Corporation approximately one month earlier than Mafi-Trench's Petition. Our discussion in that decision is relevant to the consideration of Mafi-Trench's Petition. Specifically, we discuss at some length the basis for the incentive structure adopted in D.01-03-073:

"...the incentives were structured to subsidize a certain percentage of total project costs (i.e, 50%, 40%, 30% for Level 1, 2 and 3, respectively) subject to per-watt dollar limits on total subsidy costs. These limits were based on the average capital costs of the technologies within each category. For example, the per-watt limit for Level 1 was designed with projects that have average capital costs of $9.00/watt in mind (i.e., $4.50/watt divided by 50%).... Similarly, Level 2 incentives were designed for projects with costs of approximately $6.25/watt (i.e., $2.50 divided by 40%), and level 3 incentives were designed for projects that cost about $3.33/watt (i.e., $1.00 divided by 30%. "⁴

Mafi-Trench has provided no information concerning the average project capital costs of the turbo-expander technology it proposes to include under the self-generation program. Therefore, its assertion that the technology should qualify for Level 1 incentives cannot be substantiated by the record due to the lack of cost data.

More importantly, we not persuaded that turbo-expanders should be considered in isolation when evaluating the eligibility of this technology for distributed generation incentives. In practice, turbo-expanders allow for the recovery of excess pressure in natural gas transmission to produce electrical power much in the same way (although by different processes) as co-generation units allow for the recovery of waste or process heat to produce electrical power. Both increase the efficiency with which fossil fuel inputs are utilized. However, neither technology can generate electricity in isolation, i.e., without fossil fuel inputs somewhere down the line. Natural gas pipelines require fossil-fueled compressors approximately every 50 to 100 miles to boost and maintain the high-pressure transmission that creates the pressure differential used to produce electrical power via turbo-expanders. Were we to consider this technology eligible for self-generation incentives, we believe it is necessary to consider additional data on efficiency based on a broader definition of the energy inputs involved.

Because turbo-expander generation relies on fossil fuel inputs, we do not find this technology to be either super clean or renewable. The record lacks any data on the relative emissions of fuel cells (the only Level 1 technology with operational emissions) and turbo-expander generation when taking the fuel input requirements of compression stations into consideration. Therefore, nothing in the record compels us to equate turbo-expander generation in terms of air emissions with Level 1, Level 2 or Level 3 renewable technologies. However, this technology could be considered eligible for Level 3 non-renewable incentives depending on the efficiency characteristics of turbo-expander generation and the project costs. As discussed above, we require additional information on these issues.

Mafi-Trench's request raises other unanswered questions and concerns. One of the primary objectives of the self-generation program is peak load reduction. Mafi-Trench provides no evidence that this application of turbo-expanders can provide peak load relief to its customers. We also have very limited information on the range of benefits for turbo-expander generation. Since only large industrial customers that receive high pressure natural gas can utilize this technology, the potential appears to be relatively small. In addition, we have concerns about how to monitor the use of turbo-expanders to ensure that they are used for electrical production and not a different industrial process once they are installed.

For these reasons, we deny the Petition at this time. We afford Mafi-Trench the opportunity to respond to our concerns by answering the following questions:

1. What are the installed system costs (on a dollar per kilowatt basis), both average costs and with project examples included?

2. What is the market potential for the application of this technology to recovery waste heat for the production of electrical power, both in terms of customer classes and total potential in California?

3. How would this application aid in peak load reduction and what is an average expected generation profile?

4. What efficiency does electrical power production from turbo-expanders achieve considering total inputs, including those required to produce the pressure differential in the first place? What is the total energy use for compression stations in California?

5. How would this application meet the waste heat recovery and reliability requirements for Level 3 incentives, assuming it was eligible for incentives under that category?

6. How could this application be monitored to ensure that the turbo-expanders are used for electrical production and not a different industrial process once they are installed?

In its December 12, 2002 comments on the draft decision, Mafi-Trench filed and served responses to these questions. Interested parties may provide comments on Mafi-Trench's responses within 15 days from the effective date of this decision, and Mafi-Trench may reply within 10 days thereafter. After reviewing this information, Energy Division should develop recommendations for our consideration concerning the appropriateness of including turbo-expanders within the self-generation program. Energy Division may request additional data from Mafi-Trench and other sources, as appropriate, and consult with members of the Self-Generation Working Group in developing its recommendations.⁵ Energy Division should forward its recommendations to the Assigned Commissioner and Administrative Law Judge no later than 90 days from the effective date of this decision.

Since initiating the self-generation program in D.01-03-073, we have received several petitions for modification that request an evaluation of additional technologies to include in the program.⁶ As suggested by SCE, it would be more effective to establish a process by which the Commission could give careful consideration to proposed new technologies that does not rely on procedures related to petitions for modification.⁷ We agree. In particular, we believe that Energy Division, in consultation with the Working Group, should assist us in this process by (1) reviewing proposals for new technologies, (2) requesting and obtaining additional data from the proponent or other sources that would, among other things, address the types of concerns raised in this decision and D.02-09-051 and (3) develop specific recommendations for our consideration. We envision that the Energy Division/Working Group recommendations on whether to include the proposed technology in the program (and if so, under what incentive level) would be issued for comment via an Assigned Commissioner's Ruling. Energy Division's recommendations and parties' comments would subsequently be addressed by Commission decision in this proceeding.

We direct Energy Division, in consultation with the Working Group, to develop the details of such a process, including a timeline for the various steps involved, within 30 days from the effective date of this decision. Comments on the proposed process are due 15 days thereafter. We delegate to the Assigned Commissioner the task of establishing a process for our consideration of proposals to add technologies to the program, via Assigned Commissioner's ruling.