Bloom Energy proposes to replace fuel cells at QFCP facilities

This week’s entry covers the latest chapter in a long and complicated story about the provision of financial incentives for Bloom Energy to locate a fuel cell production facility in Delaware (at the University of Delaware Star Campus). SAFE members and like-minded allies have done their best to limit the damage, so far without much success.

Now, in a curious twist, Bloom Energy has offered a new proposal that may actually have been prompted by a suggestion from our side. Here’s what’s up.

A. Back story - On 9/20/18, civic activist John Nichols filed a petition with the Delaware Public Service Commission (PSC) for a review of the long-term contract between Bloom Energy (BE) and Delmarva Power (DP) pursuant to which (1) high cost electric power (30 Megawatts at two fuel cell power facilities, hereinafter FCFs) is being generated, and (2) DP ratepayers are being charged – based on a Qualified Fuel Cell Provider (QFCP) tariff approved by the PSC in 2011 – for the “excess cost” involved. Cumulative charges to the ratepayers exceed $200 million to date, the total is growing by some $3 million per month, and, based on the legal paperwork executed in 2011 (which could only be altered by the joint agreement of BE and DP), this arrangement will be in effect until 2033.

9/20/18 petition is posted on SAFE’s website with an upbeat summary: “This petition asks the PSC to review how the QFCP tariff came to be approved in 2011, what effects for Delmarva Power ratepayers it has had to date, and what the future penalty will be through the 21-year term of this contract. It would be unconscionable to conclude that no options for mitigating the burden on ratepayers are available without undertaking such a review.”

One of the potential “options” mentioned in the petition was for BE to replace the fuel cells at the FCF with improved fuel cells that might be able to produce electric power less expensively and thereby reduce the QFCP tariff being borne by ratepayers.

Upgrade the equipment in use at the FCF or adjust other operating procedures with a goal of reducing the cost of electric power being produced. As the saying goes, “if you always do what you always did, you will always get what you’ve always got.”

Sadly, a motion to dismiss this petition – jointly filed by the PSC staff and the public advocate – was granted on October 9. The PSC’s decision wasn’t based on the merits, indeed participants at the hearing agreed that the arrangement to generate 30 MW of electric power with BE fuel cells had saddled DP ratepayers with an unjustifiable cost burden, but simply reflected the understanding that having approved the QFCP tariff the PSC had no power to alter its terms. Problem solving 101, Section B,

B. The twist – On October 23, BE submitted two “maintenance upgrade” applications to the Air Quality Division of DNREC seeking permits for the removal of all fuel cells (and replacement of most of them) at the Red Lion and Brookside sites.

It was represented that relevant air emissions at both sites would be reduced as follows (emissions per megawatt hour): nitrogen oxide 19.0%, carbon monoxide 66.0%, volatile organic compounds 20.5%, and carbon dioxide 9.4%.

There was no discussion in these applications of the generation or disposal of hazardous solid waste. Likewise, there was no discussion of BE’s reasons for replacing the fuel cells, the cost involved, or the economic effects, if any, on DP ratepayers.

DNREC was initially inclined to process the applications without a public meeting, but such a meeting was scheduled at the request of the Caesar Rodney Institute. It took place at 6:00 p.m. on January 10, 2019, in a DNREC building (391 Lukens Drive, New Castle).

C. The meeting - There were about 50 people in the meeting room, including a dozen or so employees from BE (most of them wearing green shirts) who were seated near the front.

Hearing officer Lisa Vest and Karen Mattio of the Division of Air Quality kicked things off by stating the ground rules. No questions could be directed to other speakers, e.g., the Bloom Energy presenter – comments of attendees would be welcome, but should be limited to three minutes (which was to be strictly monitored) and relate to air quality (as that was what the hearing was about) versus other matters – DNREC had not taken a position on the application, and the scheduling of this meeting should not be construed as indicating otherwise - written comments could be submitted until January 25th. In due course, a ruling on the applications would be issued; this report would address points that had been raised for and against Bloom’s proposal so everyone would know their points had been considered.

BE Vice President Arne Ballantine gave a brief presentation, which basically summarized the information in BE’s permit applications. Air quality would be improved, power generation would be more reliable than ever, and there were no meaningful drawbacks.

Comments followed from four critics who raised substantial points about BE’s applications and two BE employees who lauded the company and its fuel cell venture.

#Caesar Rodney Institute - David Stevenson (Director, Center for Energy Competitiveness) presented part of CRI’s comments (a 1-1/2 page letter), and Clint Laird (Advisory Council member) covered the balance of them. The basic CRI position was that the applications were incomplete, in that;

1. There was no discussion of hazardous materials accumulating due to the operation of pollution control equipment in the BE servers – sulfur, benzene, lead, chromium, arsenic, and hydrogen sulfide – which materials are temporarily stored in stainless steel canisters. The canisters are periodically shipped to regulated incinerators in other states. Full details of the hazardous waste being produced, and applicable procedures for its handling and disposal, should be provided.

2. There was no discussion of how the fuel cell decoking process, which is used 3% to 4% of the time, impacts emissions.

3. There was no discussion of what would happen to the old BE servers, which weigh over 6 million pounds – much of that weight in electronic waste that is difficult to recycle. There may also be questions about disposal of the proprietary catalyst (scandium?) in the BE servers. Would the old servers be sent to landfills for disposal, sent somewhere else for recycling, or resold?

4. The application for the original Delaware Coastal Zone permit for the Red Lion facility represented that no Hazardous Materials would be generated, and the Red Lion permit in effect limits the disposal of electronic waste to 10,000 pounds per year. Accordingly, not only should the DNREC application cover the generation and disposal of solid hazardous wastes but a new Coastal Zone permit is needed for the proposed BE project.

5. The current BE servers are apparently still functional. The new servers may cost “hundreds of millions of dollars, with only about an 8% better natural gas fuel economy worth about $5-6 million in Net Present Value.” How can that justify replacement, unless BE or some related entity would be claiming the federal Investment Tax Credit, which, at the applicable 30% rate, could cost taxpayers as much as $100 million dollars. Would BE or any related entity be claiming the ITC?

#Lindsay Leveen, an award winning chemical engineer and journalist, lives in California and was unable to attend the meeting. However, his comments were summarized by environmentalist Amy Roe and a full copy was provided for the hearing record.

Mr. Leveen challenged the accuracy of the data reported in BE’s applications, which were underestimating emissions of greenhouse gases (should use the EPA calculation procedures for natural gas), volatile organic compounds (reliance on statistically insignificant data points from three tests with widely varying emission limits), and sulfur dioxide (by failing to discuss handling of the solid waste generated by desulfurization tanks).

Also, BE was using a capacity factor of 100% for all the megawatts installed to calculate natural gas consumption. Such performance is not possible in the real world, and reports to the PSC indicate that BE’s capacity factor has been low due to their need to “decoke” the units 3 to 4% of the time. The process of “decoking” creates air emissions, which emissions aren’t quantified in the air permit applications.

To cure these deficiencies, DNREC should require BE to do the following: (1) Provide accurate and statistically meaningful data on air emissions; (2) Provide a detailed demolition plan with full disclosure of the mass of solid waste and the method of disposing of the solid waste; (3) Provide public assurance that they will not claim investment tax credits for this maintenance project; (4) Provide details of their agreement with Credit Suisse on how funds will be disbursed; and (5) Justify why it is proposed to install fewer megawatts of nameplate capacity for this upgrade than were installed in 2012.

#John Nichols, civic activist (and a SAFE director) – Various terms had been used to describe the proposed project, e.g., repair – replace – upgrade – Natural Minor construction permit. What, in fact was the basic intent, or was it BE’s plan to represent that this was a repair project for some purposes (e.g., continuing to collect the QFCP tariff approved in 2011 and operate under the Red Lion permit in the Coastal Zone) and a replacement project for others (e.g., claiming Investment Tax Credit).

Given the hazardous solid waste produced by Bloom fuel cells, a Coastal Zone permit should never have been granted for the Red Lion facility. DNREC subsequently acknowledged, after prodding from the regional office of the EPA, that hazardous waste is indeed being produced. And Shawn Garvin, the current DNREC secretary, has stated publicly that manifests for the transportation of hazardous waste are being filed as required.

Despite diligent submission of “freedom of information” requests, however, Nichols has only been able to obtain copies of two manifests – neither of them of recent vintage. Accordingly, it simply isn’t clear what has been happening to the hazardous waste.

Also noteworthy, regarding the construction of the Red Lion site, is that construction of a utility scale power generating facility in the Coastal Zone is flatly prohibited by the Uniform Development Code of New Castle County. It’s unclear how this prohibition was ignored or circumvented, but clearly it should not be ignored in ruling on the current applications.

#BE employee one – A young woman expressed satisfaction with her job and with the way in which she has been mentored and encouraged by the company. Great managers – awesome technology – we all need clean air.

#BE employee two – A US Army retiree is pleased with his job at BE. He sees the company as making a contribution, both to the nation and to the local community, and said it was discouraging to be “attacked like this” by people with “a political axe to grind.”

D. Now what – Coverage of this story by Delaware’s largest newspaper focused primarily on the back story and impressions of a media tour of the BE production facility that had taken place earlier in the day . There was very little information about the public meeting per se, particularly in the print edition (the online version was enhanced by a picture of BE Vice President Arne Ballantine and a video clip of John Nichols at the podium). Bloom Energy defends deal as Delaware considers new permit application, Karl Baker, News Journal, 1/12/19.

As for what happened at the hearing, this story reports the following: “At the DNREC public meeting, Bloom Energy’s critics insisted that the company’s deal has been bad for Delaware. Company employees countered that the state subsidies, which brought Bloom to Delaware, have enabled them to achieve middle-class livelihoods.”

Additionally, David Stevenson was interviewed on the radio – much better, but how many people heard this? Money and politics in Delaware, WILM 1450, podcast (10 minutes),

Comments for the public record can be submitted to DNREC until January 25th. Hearing officer Lisa Vest,

Your faithful scribe has submitted comments re the permit applications on SAFE’s behalf. Letter to Lisa Vest, DNREC hearing examiner, with copies to several government officials,
1/21/19. Feedback would be appreciated, whether pro or con. Here’s the text for ready reference:

SECURE AMERICA’S FUTURE ECONOMY, advocating smaller, more focused, less costly government since 1996

January 21, 2019

Ms. Lisa Vest, Hearing officer
Department of Natural Resources & Environmental Control

Re: Regulation No. 1102 Natural Minor construction permit applications submitted by Bloom Energy to replace all fuel cells at the Red Lion and Brookside sites

The Bloom Energy applications were filed with DNREC’s Division of Air Quality on October 23, 2018, and a public hearing thereon was conducted on January 10, 2019. A summary of the information presented and relevant background information has been posted on our website. Bloom Energy proposes to replace fuel cells at QFCP power facilities, 1/21/19. [Access path: Secure America’s Future Economy – Blog – 1/21/19.]

Based on the foregoing, we would like to offer the following comments and request that they be appropriately reflected in the disposition of this matter:

1. Operation of the fuel cells results in sulfur and other contaminants in natural gas being trapped in desulfurization units, which must be periodically removed and disposed of. Bloom needs to disclose the volume of such waste that will be generated by the new fuel cells and the disposal procedures to be followed (and monitored by DNREC) Air emissions during the periodic “decoking” of fuel cells should be included in the air quality data that are shown, and also sulfur and other contaminants that will eventually be returned to the atmosphere via incineration of hazardous solid waste taken from the desulfurization units.

2. The applications should disclose what will be done with the old fuel cells (total weight is understood to be about 6 million pounds) that are to be removed from the two sites. Unless the old fuel cells are to be sold or recycled, a large volume of electronic waste would need to be disposed of.

3. From the standpoint of Delmarva Power ratepayers, the Qualified Fuel Cell Provider tariff that was approved by the Delaware Public Service Commission in 2011 has represented an extraordinary burden (the “excess cost” borne by ratepayers is over $200 million to date, the total is growing by about $3 million per month, and by its terms the tariff will remain in effect until 2033). Given this background, it seems imperative that the proposed replacement of fuel cells be reviewed in depth by the PSC to ensure that an equitable portion of the economic savings from installing new and technologically improved fuel cells would be applied to reduce the amount of the QFCP tariff that will otherwise be payable by the ratepayers between now and 2033.

Please advise if you have any questions or we can help further.


Copies to: Governor John Carney; Shawn M. Garvin, DNREC;
Matt Hartigan, PSC; Andrew C. Slater, Public advocate

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