Distributed Generation Program Background

This page reviewed April 22, 2010

Distributed Generation (DG) refers to replacing or supplementing electricity from the grid with electrical generation sources that are located near the place of use.  Some examples of electrical generation technologies are engines, turbines, fuel cells, and photovoltaic cells.  Some businesses choose to operate distributed generation technologies with heat recovery systems that capture the heat generation technologies with heat recovery systems that capture the heat produced from the electrical generation process.  This captured heat can then be used to heat water, provide steam or space heating, or power a chiller at the facility.  Distributed generation can be used at various types of businesses such as hospitals, schools, libraries, breweries, utilities, and laundries.

Senate Bill (SB) 1298 (chaptered in 2000) required the Air Resources Board (ARB or Board) to establish a distributed generation certification program for electrical generation technologies that are exempt from local air district permits.  SB 1298 mandated that the ARB establish at least two levels of emission standards for affected DG technologies.  The law required that the first set of standards be effective no later than January 1, 2003, and reflect the best performance achieved in practice by existing DG technologies that are exempt from district permits.  The law also required that, by the earliest practiable date, the standards be made equivalent to the level determined by the ARB to be the best available control technology (BACT) for permitted central station power plants in California.  The emission standards were to be expressed in pounds per megawatt hour (lb/MW-hr) to reflect the efficiencies of various electrical generation technologies.

Pursuant to SB 1298, the Board adopted a DG Certification regulation in 2001.  The ARB staff proposed interim standards for 2003 and recommended that 2007 be considered the earliest practicable date for DG applications to meet central power plant emission standards.  In addition to establishing emission standards, the DG Certification regulation included testing protocols, calculation procedures, and other specified requirements that manufacturers must satisfy to certify DG technologies.

Generally, microturbines up to 250 kilowatts (kW), engines less than 50 horsepower (hp), and fuel cells are exempt from district permits.  Although small engines are exempt from district permits, most engines used in distributed generation applications are larger and therefore require district permits.  Consequently, the regulation has so far only affected fuel cells and microturbines.

There are currently about 700 microturbines and fuel cells in California capable of producing more than 41 MW of electricity.   Of the 700 units, only 4% are fuel cells.  Roughly half of the 700 units are certified models using natural gas.  Of the remaining, there are more than 100 units operating on natural gas that were purchased before the DG Certification program became effective in local air districts.  Roughly 50 percent of the certified units using natural gas operate with a heat recovery system.  This is not surprising.  To be economically competitive with grid power, DG units using natural gas should have a significant demand for the waste heat generated for such processes as heating water or running an absorption chiller.

Microturbines and fuel cells were just entering the California market when the Board adopted the DG Certification regulation in 2001.  Because of uncertainties at the time regarding the development and deployment of these DG technologies, the ARB staff included in the regulation a requirement to conduct a program and determine if revisions were warranted.  Staff determined revisions would be required and on October 19, 2006 presented its revisions to the Board.  The Board adopted staffs revisions and they became effective on September 7, 2007.