San Diego Project Taps New England Fuel Cell Company to Generate Energy From Waste Methane Gas

A complicated financing deal led by New Energy Capital of Hanover, NH, has provided $23.5 million for a renewable energy project in San Diego that uses methane gas from a sewage treatment plant to generate electricity from advanced technology fuel cells.

Construction is scheduled to begin next month on a “biogas” purification system developed by BioFuels Energy, an Encintas, CA, startup founded in 2007 to process gas generated at landfills, sewage treatment plants, and at large livestock facilities into usable methane. The plan calls for installing the gas processing at the Point Loma Wastewater Treatment Plant and the South Bay Water Reclamation Plant, which are both operated by the City of San Diego. The city currently flares methane gas generated during the sewage treatment process.

Molten carbonate fuel cells made by Danbury, CT-based FuelCell Energy (NASDAQ: FCEL) will be installed at the two treatment plants and on the campus of UC San Diego, according to Byron Washom, UCSD’s director of Strategic Energy Initiatives.

FuelCell Energy logo 2010The fuel cell power plants at the three locations will be configured to provide heat and electricity, and excess methane gas will be injected into the natural gas pipeline delivery system operated under an energy credit initiative approved by the California Public Utilities Commission.

Methane needed to operate the largest fuel cell, a 2.8 megawatt plant at UCSD, will be supplied by San Diego Gas & Electric under the arrangement. Washom said the energy credit scheme, which is a first in California and probably nationwide, is comparable to withdrawing cash from an ATM in San Diego after making a deposit elsewhere. In this case, methane gas from the sewage plant is being processed to meet utility standards and injected into a gas pipeline near the sewage treatment facility in Point Loma. Meanwhile UCSD is withdrawing a similar amount of gas elsewhere for its power plant in La Jolla. The City of San Diego also plans to withdraw gas to power a sewage pumping station in Otay Mesa.

“We’re taking a waste product that is currently being flared and using it to generate renewable energy,” Washom says. “The key is this CPUC ruling. It was visionary on their part. By providing this ATM accounting, you can put a supplier with a buyer anywhere in the Western U.S.”

The additional power generating capacity means that the San Diego UC campus, which has about 28,000 students and another 28,000 faculty and staff, will be generating about 92 percent of its own power needs, Washom says.

The arrangement apparently is promising enough that San Diego Gas & Electric and its sister utility, the Southern California Gas Co. have asked the CPUC for authorization to develop, own, operate and maintain bioenergy production and gas conditioning facilities. The utilities, which are both owned and operated by San Diego-based Sempra Energy (NYSE: SRE) are seeking regulatory permission to process gas from organic waste at water treatment plants, farms, and other operations into gas suitable for power production or injection into utility pipelines.

The Point Loma treatment plant is the city’s largest, and treats roughly 175 million gallons of wastewater per day generated in a 450-square mile area by more than 2.2 million residents. By stopping the gas flaring and instead generating electricity from the waste, city officials estimate the project will eliminate more than 68,000 pounds of nitrogen oxides, sulfur oxides, and other pollutants annually.

The project, which is scheduled for completion by next summer, is expected to be the largest combination of fuel cells in a single project in the U.S., according to FuelCell Energy. In addition to UCSD’s 2.8 megawatt facility, which will generate 8 percent of the university’s energy needs, the company will install a 300 kilowatt fuel cell at the Point Loma treatment plant and a 1.4 megawatt plant at the South Bay plant.

“It’s a very exciting project,” according to Jacques Chirazi, cleantech program manager for the City of San Diego. The municipality estimates the project will generate $2.6 million in new revenue over the next decade, and the city expects to save an additional $780,000 in reduced electricity cost. “It looks like it has a better economic payback period than most renewable projects,” Chirazi says.

The project financing includes bonds issued by the California Pollution Control Authority, equity investments and debt from New Energy Capital and North Sky Capital CleanTech Alliance, grants from the California Self-Generation Incentive Program, and U.S. Treasury investment tax credits. U.S. Bancorp provided tax credit financing.

Bruce V. Bigelow was the editor of Xconomy San Diego from 2008 to 2018. Read more about his life and work here. Follow @bvbigelow

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4 responses to “San Diego Project Taps New England Fuel Cell Company to Generate Energy From Waste Methane Gas”

  1. Dr. No says:

    So, there are $23.5 million capex in order to generate 2.8 MW in a fuel cell from existing (free) biogas (sewage plant) that merely needs to be upgraded to grid quality and then converted to electricity. The CapEx is $8.5/W installed. This is more expensive by a healthy margin than unsubsidized solar panels. Further, SEMPRA could have merely gotten two 1.5 MW biogas engines from GE/Jenbacher or MWM for $0.5 to $3 per MW or 15-30% of the cost. Considering the revenues or even worse net income one is looking at a 10-30 year payback time. This is 3 to 10 times more what it should be.
    In sum this is one of the great examples how bad selection of expensive “green” technology will backfire when it comes to simple economics giving cleantech a bad reputation.

    • Peter Thomas says:

      This project will SAVE money… and its clean! “Grid Quality”? Our grid is anything but quality…. Where have you been man??? Grid quality??? This is DISTRIBUTED POWER at the point of use… whatever… read the above posted links… get educated on THE GRID!