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State, Industry Consider Incentives for Fuel Cells in Texas

Submitted by: Good Company Associates

Categories: Environment

Posted: Jan 17, 2002 – 11:00 PM EST


Fuel Cell Texas Incentive Policy Papers Intended to Energize Discussion

Jan. 17 /CSRwire/ - Fuel Cells Texas, a non-profit trade association of fuel cell companies focused on Texas, today released three reports prepared by its consultants, Good Company Associates, documenting clean energy incentive programs for Texas. (For the full press release and complete copies of the working papers, see www.goodcompanyassociates.com/subj/fuelcell.php.) A fuel cell is a zero-emission power generation technology that creates electricity through electrochemical means and is able to run more efficiently than internal combustion engines or turbines, even when operating at very small scales. They can be used in portable, mobile or stationary applications.

Given the importance of cleaner air to our urban areas and the economic potential for the growth of the fuel cell industry, early introduction of commercial fuel cells into Texas would bring important public benefits. It is for that reason that the state legislature asked the State Energy Conservation Office (SECO) to develop a plan to accelerate the commercial development of clean fuel cells in Texas (HB2845 by Danburg, 2001 session). The law specifically directs SECO to investigate the potential value of various incentive programs toward this end. SECO in turn has asked industry leaders to participate in a statewide Fuel Cell Initiative Advisory Committee (FCIAC) in order to learn what the industry thinks it will take to obtain early commercial success of this new technology and to attract industry leaders to locate in Texas.

The papers released today evaluate three major areas of possible incentive programs for fuel cells and are intended to encourage discussion at the FCIAC meeting on Tuesday, January 22, 2002. Additional policy analysis papers are planned for completion in coming months on infrastructure barriers, education and training needs, industrial development, and the status of the various fuel cell technologies.

Most people recognize the attractiveness of an efficient power source that emits little if any pollutants, but today most fuel cells are made one at a time so prices remain too high for most consumers. Federal programs are largely focused on further developing next generation technologies that look promising by investing hundreds of millions of dollars in R&D. Most state programs are, by contrast, designed to stimulate mass markets for fuel cells in order to speed the transition to mass production of these new products in hopes of helping to bring the costs down to consumers. "Fuel cells are where computers were 20 years ago, or where wind power was ten years ago. Everybody wants one, but not everyone can afford one yet," said Bob King, President of Good Company Associates. "We are exploring what possible public-private partnerships may potentially accelerate the industry development process."

Press availability of the members of Fuel Cells Texas will be provided from 1:00 pm to 2:00 pm on January 21st at the Austin Club, 110 East 9th Street in Austin, Texas. The January 22nd meeting of SECO/FCIAC will be held at the J.J. Pickle Research Center in Austin, Texas from 9:00 am to 3:00 pm and is open to the public.

Excerpts from the reports follow:

Net Metering

The first paper discusses net metering, or the ability of customers to use a single, bi-directional electric meter to offset their electric consumption. That is, when you consume energy the meter spins normally, but when you are producing energy via distributed generation, the meter spins more slowly or runs in reverse, racking up credits with the utility. Currently, 34 states have some type of net metering program, largely implemented over the past two decades to encourage renewable energy system applications. Because it is a new technology, only Connecticut, Georgia, Idaho, Massachusetts, Ohio, Oregon, Vermont and Wisconsin have net metering provisions that apply to fuel cells. Arkansas is currently developing a net metering provision mandated by the state's legislature. While these programs vary from state to state, they typically allow customers to run the meter in both directions, with the consumer receiving the net difference between what they consume and generate.

Including fuel cells in net metering provisions in Texas would save customers money, help stimulate the market for environmentally friendly fuel cell technology, and thereby reduce transmission and distribution line congestion. Texas has already taken a step toward facilitating the installation of fuel cells and renewable distributed generation by passing streamlined interconnection standards. The state has also adopted a net metering rule for renewable energy installations, such as photovoltaic cells, but that rule is in limbo now because of the transition to a restructured utility market and fuel cells were not included in the original provision. Austin has a net metering provision for renewable projects that excludes fuel cells as well.

Stationary Applications for Fuel Cells

The second incentive issue deals with stationary fuel cell applications in homes and businesses. Fuel cell technology is commercially available for stationary applications from a few manufacturers at present, although many more companies have products nearing final development. Tax credits or deductions are a common means through which states provide indirect incentives to individuals or businesses for adopting new technologies with perceived public benefits. For example, 34 of the 50 states offer one or more tax incentives for installation of renewable energy devices. Other states offer incentives for energy efficiency investments. Currently, 19 of the 22 states that have formally adopted utility restructuring programs, including Texas, offer constituents incentives to encourage investment in energy efficiency or renewable energy technologies. In addition, nine states including Texas have adopted renewable energy portfolio standards for retail electric providers, essentially mandating some investments in new renewable technologies. Similar incentives would be a likely means for supporting the early commercial deployment of fuel cells as well. In fact, seven of the state portfolio standards (not including Texas) allow fuel cell installations to count toward achieving renewable energy portfolio requirements in some form. Texas allows businesses investing in renewable energy devices a franchise tax exemption and did provide a sales tax exemption for renewable energy technologies, but is has since lapsed.

The fact that the current Texas renewable energy and energy efficiency programs exclude fuel cells is not a reflection on the perceived potential of fuel cells to contribute to energy reliability, efficiency, or clean air. Rather, when Texas' mandate and incentive programs were passed in 1999, little was known about the potential of fuel cells. In the subsequent session in 2001, the Texas legislature passed two measures relating to fuel cells directly: funds were given to the Texas Council on Environmental Technologies to support the development of fuel cells and SECO was charged with development of a statewide plan to accelerate the introduction of fuel cells into the Texas market. The paper discusses many direct and indirect incentives, which Texas might consider implementing.

Mobile Applications for Fuel Cells

The third policy paper discusses incentives for mobile applications of fuel cells. Cars and trucks are the leading cause of pollution in most US cities listed as in non-attainment status under the Federal Clean Air Act. Fuel cells will be a viable alternative to the internal combustion engine for use in vehicles of all sizes since they have extremely low emissions levels. Several states have developed a range of voluntary incentive programs to encourage individuals, businesses, and institutions to adopt lower emissions vehicles, but most of those programs were designed over the last decade for alternative fuel vehicles (AFVs) powered by natural gas or propane, ethanol or methanol or for specifically designed low or ultra-low emission vehicles (LEVs and ULEVs) powered by conventional fuels. Very few such programs have included fuel cells as eligible alternatives but it is not too early to consider how state incentive programs can accelerate the rate of adoption of fuel cells for vehicles and hasten the attainment of clean air in the State of Texas.

Some of the suggestions in the mobile applications policy paper include expanding emissions reduction related incentive programs, extending franchise and sales tax credits to individuals and businesses for the purchase of fuel cell vehicles and allowing AFVs and fuel cell vehicles to use the HOV lanes in Texas' major cities to further encourage the purchase of these vehicles.

Press availability of the members of Fuel Cells Texas will be provided from 1:00 pm to 2:00 pm on January 21st at the Austin Club, 110 East 9th Street, Austin, Texas. The January 22nd meeting of SECO/FCIAC will be held at the J.J. Pickle Research Center from 9:00 am to 3:00 pm and is open to the public.

About Fuel Cells Texas

Incorporated in September of 2001, Fuel Cells Texas is a non-profit trade association representing the fuel cell industry in Texas. Fuel Cells Texas seeks to accelerate the broad commercialization and deployment of fuel cells in the state of Texas through public education, policy alignment, and development of state-sponsored initiatives. The founding members of Fuel Cells Texas include Reliant Energy Power Systems, Inc., Fuel Cell Energy, DCH Technology, Hunt Power, Methanex Corp., Texaco Energy Systems, Inc., and have now been joined by Siemens Westinghouse Power Corporation and DuPont Fluoroproducts.

For more information, please contact:

Robert J. King Good Company Associates
Phone: (512) 480-2220

For more from this organization:

Good Company Associates


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