The City of Santa Clara has refused to process pending applications for alternative power sources, demanding that a San Jose fuel cell company seek the same permits as required for ‘power plants, a lawsuit filed late last month claims.

The lawsuit filed June 29 in Santa Clara County Superior Court against the city by Bloom Energy is the latest salvo in a two-year legal battle..

Bloom Energy is a public company headquartered in San Jose that manufactures and markets solid oxide fuel cells that produce electricity on-site, meaning Silicon Valley companies can avoid using power from the city-owned utility in Santa Clara, a significant revenue stream for the city.

Bloom Energy was founded in 2001 and came out of stealth mode in 2010. It raised more than $1 billion in venture capital funding before going public in 2018.

Last year, in response to an earlier Bloom Energy suit, a Superior Court judge at the court said the city violated state law when it passed a resolution banning nonrenewable fuels for distributed generation, including fuel cells.

Bloom has five fuel cell installations in Santa Clara totaling 14.9 megawatts that were approved by the city via building permits, according to the suit. At the time, Santa Clara didn’t require use permits or an environmental review, according to Microgrid Knowledge, an alternative energy website.

Two years ago, Bloom Energy filed applications to install 13 MW of additional fuel cell capacity for technology companies Intel and Equinix. Two of Intel’s existing fuel cell installations are part of microgrids.

After the court ruling, the city reinterpreted its zoning code by deeming fuel cells to be power plants, according to Bloom Energy. In addition, the city decided the fuel cells would have to go through a state environmental review process. The city asked Bloom to pay $121,230 for the environmental review.

Bloom said its fuel cells are “accessory uses” installed to provide on-site power. They are about the same size and shape as other accessory uses such as heating, ventilation and air conditioning units, according to the company.

Unlike a power plant, the fuel cells are safe, quiet and have such low emissions they can be set up feet from occupied areas, Bloom Energy said in a statement.

“The city is, in effect, banning Bloom Energy servers from operating in the city through an unsupported and illegal reinterpretation of its own zoning code,” Bloom Energy said. “By preventing and delaying the construction of new fuel cell projects, the city is illegally forcing businesses to use [Silicon Valley Power] to further its own economic interests.”

The latest lawsuit cites emails between employees of Silicon Valley Power, the city’s utility, that discuss how fuel cells were reducing the utility’s sales and the need to limit fuel cells in the city.

Silicon Valley Power has a peak demand of about 590 megawatts and sales to industrial customers make up about 90% of all its sales, according to the utility.

Bloom Energy said it has deployed fuel cells worldwide totaling more than 500 megawatts. Bloom Energy contends its fuel cells produce less carbon emissions than the most efficient natural gas-fired turbines and almost no nitrogen oxide or sulfur dioxide emissions.