You asked for a discussion of state fuel cell initiatives adopted since the passage of the electric restructuring legislation (PA 98-28). You wanted to know how much electric ratepayer funding has been invested in these initiatives and, if available, the number of jobs this funding has generated. Much of the data in this report is taken from the fund's February 2009 report to the Energy and Technology Committee.

SUMMARY

The primary fuel cell initiatives have come from the Clean Energy Fund and Project 150, both of which are funded by electric company ratepayers. The fund, created by PA 98-28, supports a wide range of renewable and clean energy projects. To date, the fund has provided approximately $ 16 million in subsidies for fuel cell projects located on customers premises with a generating capacity of 3. 6 megawatts (a megawatt of capacity serves 750 to 1,000 homes). Project 150 was established pursuant to PA 03-135. It required the electric companies to enter into long term contracts to buy the power produced by eligible projects funded by the Clean Energy Fund. The Department of Public Utility Control (DPUC) has approved contracts for 42. 4 megawatts of capacity. DPUC estimates that these contracts will have a total ratepayer cost of $ 775 million over the 20-year life of the contracts. The net cost of these contracts, i. e. , the ratepayer subsidy, cannot be determined at this

point as it will depend on the future cost of power produced from conventional resources. These projects also received a total of $ 7. 7 million in funding from the Clean Energy Fund. Other state initiatives to support fuel cells include tax benefits and appropriations.

We have not found any data on how many jobs have been created by the ratepayer funds. However, in March 2009 the Clean Energy Fund published the first phase of an economic assessment of Connecticut's energy efficiency and renewable energy sector. The assessment identifies the number of companies and jobs in this sector and the revenue and employment income the sector generates. The assessment found that approximately 1,200 of 4,454 people directly employed in this sector work in Connecticut's fuel cell industry. Fuel cell jobs and employment income are concentrated in manufacturing and engineering (primarily in product development and process engineering).

The assessment does not identify the proportion of these jobs that are attributable to the state's expenditures on fuel cells. However, it estimates that every $ 1 million in subsidies for fuel cells creates 7 to 11. 7 job-years (one full time job for one year). In other words, each job costs approximately $ 85,470 to $ 142,860 per year in subsidies. The assessment is available at http: //www. ctcleanenergy. com/Portals/0/Phase%201%20Deliverable%20Final%20Full. pdf.

CLEAN ENERGY FUND

PA 98-28 created this fund, which is funded by a surcharge on electric company bills. The act authorizes the fund to invest in a wide range of clean and renewable energy technologies, including fuel cells.

Table 1 describes the customer-sited fuel cell projects that have received money from the fund. These projects account for 3,600 kilowatts of generating capacity. (A kilowatt is the amount of electricity used by 100 100-watt light bulbs; a megawatt is 1,000 kilowatts. ) Their total cost was nearly $ 23 million, of which the fund provided $ 15. 76 million. Table 2 provides information on utility scale fuel cell projects that received money from the fund and were subsequently chosen for Project 150 (described below). These projects account for 42. 4 megawatts and received $ 7. 7 million in direct subsidies from the fund. As the table indicates, the selected projects have energy technologies in addition to fuel cells.

Table 1: Fuel Cell Projects Supported by the Clean Energy Fund

Table 2: Projects Funded by the Clean Energy Fund and

Selected for Project 150

PA 07-249 provided additional support for the Middletown High School project. Specifically, it made those costs of installing the fuel cell and related equipment that were not covered by the Clean Energy Fund eligible for funding under the school construction grant program. It excluded the wall and area enclosing the fuel cell and the slab area for emergency generator from standard space limits that apply to the school construction grant program.

PROJECT 150

PA 03-135 required electric companies to enter into minimum 10-year contracts for at least 100 megawatts of class I renewable power (PA 07-242 increased the amount to 150 megawatts). Class I resources include solar and wind energy as well as power produced by fuel cells. The power must come from facilities with a capacity of at least one megawatt that have received funding from the Clean Energy Fund. The law entitles generators who enter into these contracts to choose from two pricing mechanisms that are tied to market prices for power plus a premium.

DPUC has approved contracts with fuel cell generators for a total of 43. 4 megawatts of capacity. DPUC estimates that these contracts will have a total ratepayer cost of $ 775 million over the 20-year life of the contracts. The net cost of the contracts (the total cost minus the amount the electric companies would have to pay for power on the market) cannot be determined at this point.

OTHER INITIATIVES

In addition to the project funding described above, in 2007 the Clean Energy Fund provided $ 176,000 to the University of Connecticut. The university, in collaboration with the United Technologies Company, used the funding to create advanced optical diagnostic tools to help develop proton exchange membrane fuel cell systems. Also in 2007, the fund provided a $ 600,000 grant, through its Operational Demonstration Program, to support a project to separate excess hydrogen generated by high-temperature fuel cells through a process that requires relatively low energy consumption and is less expensive than existing mechanical separation technologies. The project involved a system consisting of a stack of 25 fuel cells and electrochemical hydrogen separator equipment. In the power mode, the unit produced 2 kilowatts of power, and in the hydrogen mode, the unit separated enough hydrogen to fuel up to three fuel cell vehicles per day.

PA 00-93, among other things, eliminates the need for a Siting Council certificate for fuel cell generating facilities with a capacity of up to 10 kilowatts. It also requires the council to approve the construction or location of any fuel cell by an expedited process (a declaratory ruling), unless the council finds that the fuel cell will cause substantial environmental harm.

PA 01-6, June Special Session, eliminated the sales and use tax on material, tools, fuel, machinery, and equipment bought by fuel cell manufacturing facilities. Under the act, (1) a "fuel cell manufacturing facility" is a factory where fuel cell parts or components are manufactured, overhauled, or rebuilt; and (2) "machinery and equipment" is tangible personal property installed in a fuel-cell manufacturer's facility and used largely to produce fuel cells.

PA 02-4 exempted from the petroleum products gross earnings tax earnings from wholesale sales of petroleum products to be used as fuel for fuel cells that occur between July 1, 2002 and June 30, 2004. PA 04-231 extended this exemption for four years, until July 1, 2008.

PA 05-1, June Special Session, established incentives for new distributed generation (e. g. , small power plants using fuel cells or other technologies). The incentives include capital- and operating-cost subsidies and the provision of long-term financing. The act also provides awards to electric companies for their efforts in connection with the installation of these resources.

PA 06-186 appropriated $ 375,000 to the Department of Economic and Community Development (DECD) for fuel cell economic development planning.

PA 07-1, June Special Session, appropriated $ 800,000 to the Department of Education for fuel cell projects. It appropriated $ 250,000 to DECD for fuel cell/hydrogen economy projects.

PA 07-242 required DPUC to establish, by October 1, 2007, a grant program for distributed generation projects in business and state buildings that are powered by class I resources such as solar energy and fuel cells. It requires DPUC to award grants of up to $ 25 million each for fuel cell and other projects. Although the act authorized $ 50 million in bonding for this program, the bonding has not yet been allocated and the program has not been established.

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