Tacoma Power proposes rate to support renewable electrofuel producers

by Peter Maloney
APPA News
November 10, 2020

Tacoma Power has filed a pilot rate to support the production of carbon neutral fuels known as electrofuels that could be substitutes for traditional fossil fuels.

Electrofuels are typically made from electricity, water and air. The resulting synthetic fuel can have a variety of forms and uses including the transportation sector. Renewable energy produced by wind, solar and hydropower resources that might otherwise be wasted can be stored as a renewable or “green” fuel.

In a filing with Tacoma’s Public Utility Board (U-11206), the public power utility noted that electrofuel producers could operate differently than most industrial customers because the production process can be interrupted on very short notice and be shut down for extended periods. The production of renewable electrofuels is flexible because the resulting fuel can be stored. That flexibility would allow Tacoma Power to request curtailment of the production process at times when electricity demand and prices are high.

Tacoma Power had conversations with several hydrogen producers, Clay Norris, the utility’s Power Management manager, said. “We realized their business model is driven by electricity costs. We also realized the flexibility of their production. We were looking to take advantage of that flexibility to get to a win-win outcome,” he said.

The proposed renewable electrofuel rate could call upon the customer to curtail their electric service for a minimum of 15% of the hours during a year. Participants in the pilot program would also have to be willing to curtail production within 10 minutes of notification for a minimum of one hour and up to three days. The pilot program is currently capped at 65 megawatts (MW).

In return, the utility would offer renewable electrofuel producers rates lower than standard industrial rates. The utility added that renewable electrofuel producers would not likely site facilities in its territory without this pilot rate.

The Renewable Electrofuel Service Pilot was approved by Tacoma’s Public Utility Board on Oct. 28 and is now awaiting approval before the city council. The city council has scheduled hearings on the proposal for November and December. If approved, the rates would take effect April 15, 2021, and the pilot program would end in 2030.

The electrofuel rates are designed to provide a benefit to the utility through increased retail sales, Tacoma Power said in the filing, adding that it does not anticipate a cost associated with the new rate.

Tacoma Power also noted that the new rates could benefit existing utility customers by providing several million dollars a year in revenues from electricity sales to electrofuel producers that the utility would otherwise sell into the wholesale market. In addition, an electrofuel customer represents a long-term energy sale that could generate positive margins, lowering rates for existing customers. And, finally, the community as a whole would benefit from the creation of jobs and additional tax revenue for the city, the utility said.

Tacoma Power would not have to procure firm capacity to serve electrofuel production load. If a regional resource adequacy program were established, the new rate could be characterized as a demand response program – the utility’s first – and would qualify as capacity and, therefore, would not burden existing customers with incremental costs.

Other utilities may adopt similar programs, which would lead to wide-spread beneficial use of surplus renewable power, Tacoma Power said in the filing.

The new interruptible load from hydrogen producers on Tacoma Power’s system would be a useful tool. “For the West Coast in particular, it is a power manager’s dream,” Norris said.

“Meeting climate change policy targets will be impossible without substantial electrification of infrastructure traditionally dependent on fossil fuels,” the utility said in the filing.

Other public power utilities in the Pacific Northwest have been exploring alternatives to fossil-based transportation fuels. The Eugene Water and Electric Board in Oregon last month signed a memorandum of understanding to explore the development of a production facility for renewable hydrogen that could be used in the region’s heating and transportation sectors.

And the Douglas County Public Utility District in Washington and its partners have received a $1.9 million grant from the Centralia Coal Transition Board to fund a demonstration project for the first hydrogen fueling station for fuel cell electric vehicles in Washington state.