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Santa Clara Refusal to Reconsider Fuel Cell Approval Spawns Second Lawsuit

Late last month fuel cell company Bloom Energy hit Santa Clara with a lawsuit alleging the City enacted new policies to obstruct the connection of Bloom backup systems to the Silicon Valley Power grid. This follows a 2020 lawsuit where a judge struck down a 2019 ordinance concerning fuel cell backup electrical generators.

The ordinance required electrical generation systems — micro-grids — connecting with the City’s electrical grid to use only a renewable energy source (biogas). Bloom’s fuel cell technology — Bloom Box energy servers — uses natural gas in a chemical reaction to produce electricity.

The issue of that lawsuit wasn’t the City’s requirements for microgrids. Instead, the issue was whether or not the ordinance required an Environmental Impact Report (EIR) before it passed in 2019. The judge dismissed the City’s claim that the ordinance wouldn’t have a significant environmental impact, saying the ordinance could have a significant impact by indirectly increasing use of diesel backup generators.

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Since that decision, Bloom has asked Santa Clara to reconsider use permit applications for several new fuel cell projects that had been denied.

Bloom already had five installations in Santa Clara before the City Council passed the ordinance, all of which were approved as ministerial acts — according to legal authority and not subject to discretion or other review. No CEQA reviews or use permits were required for these projects, according to Bloom’s complaint.

Subsequent to losing the lawsuit, Bloom says that City Hall decided that the mini-grids were “electric power plants” — apparently previous approvals hadn’t considered them as such — and thus required discretionary use permits and CEQA reviews. The City wanted $121,000 for a CEQA review and permit applications.

Bloom asked the City Council to hear an appeal. At its June 8 meeting, the Council voted to “note and file” the request on the advice of City Attorney Brian Doyle.

“There is no administrative appeal at this point for the Council,” Doyle said, “and the use of this procedure is meant to be some kind of shortcut directly to the Council which we don’t believe is a proper administrative procedure. Bloom is free to pursue other remedies if they would like… [but] we are not recommending the Council agenda this.”

 

Allegation That City Action Driven By Revenue, Not Public Interest

Bloom alleges that Santa Clara “decided to abuse its land use authority as an alternate method of banning Bloom Energy Servers” in the interest of protecting the revenue of City-owned electric utility Silicon Valley Power (SVP), citing an exchange between SVP Assistant Director Ann Hatcher, SVP CEO Manuel Pineda, SVP COO Kevin Kolnowski.

“‘I’m told that Bloom Fuel Cells wants to come in to talk with our Key Customer Rep/Engineers about even more potential customers of natural gas fired fuel cells in Santa Clara,'” Hatcher emailed Pineda and Kolnowski in February 2019, according to the complaint.

“‘This sounds like more locations beyond the 4.35 MW that were part of our answer to Finance on the reduced forecast/reduced contribution in lieu. If real, it would mean another reduction in our growth forecast.’”

Pineda replied, according to the complaint, that “‘Deanna would like to fast track regulations on future fuel cells (get something in the books now). Let’s talk tomorrow. …what the options are.'”

Bloom alleges the ordinance banning power cells not using biogas for their chemical reactions aimed at making it impossible for Bloom to do business in Santa Clara.

“‘The strategy of prohibiting all fuel cells except those that rely on California-sourced biogas, which the City knows is relatively scarce and heavily incentivized for use as a transportation fuel, making it cost — prohibitive for other uses in California,” says the complaint.

“In the place of the outright ban, the City would now use its discretionary land use authority to prohibit further installations of Bloom Energy Servers in the City,” the complaint alleges, citing an email from Planning Manager Reena Brilliot to Plan Review Manager David Tran.

“‘We’ve received guidance from the City Attorney’s Office that Section 18.60.050 of the Zoning Code prescribes the requirement of a Use Permit for the installation of an Electric Power Plan [sic], such as fuel cells.

“‘As such, we need to make sure that any fuel cell proposals file a Use Permit and conduct environmental analysis (an initial study will be required),'” the email continues.

“‘We learned that the City was previously issuing these as Building Permits only, without need of a Use Permit, and this is incorrect per our Zoning Code.’”

Bloom is asking for an injunction mandating that the City “perform its ministerial duties to process and approve the building permits and other non-discretionary approvals” as well as costs and legal fees.

You can read Bloom’s complaint here: [Bloom Complaint 2021]

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1 Comment
  1. Ammy Woodbury 5 months ago
    Reply

    In a city with deep roots in generating environmentally sustainable energy, Bloom isn’t that. It’s natural gas. Technically it’s a fuel cell, but it’s not like it’s hydrogen. And a use permit makes sense! You don’t just build the cell and it sits there doing nothing for 30-50 years. Bloom’s model should require a use permit and an environmental impact study. I’m sorry their business model still relies on greenwashing, but I’m heartened that Santa Clara seems to be seeing through the mist.

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