"How would the Sheraton like a guaranteed discount off its electricity from now on?" asked Steve Gabrielle, business development manager for PPL Inc. PPL is a subsidiary of Pennsylvania Power and Light, based in Allentown, PA, and controls or owns 11,500 MW of electric generation, which it sells in the US and abroad.

To earn this savings, the 276-room Sheraton Edison Hotel Raritan Center in Edison, NJ, must make way for a 250-kW hydrogen fuel cell (designated model 300A) to reside somewhere on the property.

John Lembo, director of energy for Starwood Hotels and Resorts (owners of the Sheraton chain), was intrigued. At the time, in 2002, his department had just earned top credentials for progressive energy management, having been designated an Energy Star Partner of the Year by the DOE.

"How much are we going to have to put up?" asked Lembo.

"Nothing," replied Gabrielle.

Lembo observes, "When someone offers you a deal that won't cost anything," you want to find out a bit more. So he and his staff began investigating molten carbonate, high-temperature direct fuel cell (DFC) technology, and its developers, FuelCell Energy (FCE) of Danbury, CT. Comparatively speaking, rival H2 technologies, like solid-oxide and proton-exchange membrane types, were "not really ready for prime time," he found. However, at the time of PPL's proposal, this plant would have been already their fourth application, its previous projects being two at a credit-card processor in Montana and one at an Air Station on Cape Cod, MA. Other DFCs in various parts of the world were yielding steady results as well. For example, FCE had installed the first-ever megawatt-scale DFC—the largest of any kind in the US—in Santa Clara, CA, back in the mid-1990s, where its electrical efficiency—at about 44%—surpassed that of any other DG resource in the 1-MW range. All told, nearly a dozen applications were proving out the DFC concept, Lembo found, e.g., at the University of Bielefeld in Germany; at a Mercedes-Benz plant in Alabama; for the Los Angeles Department of Water and Power; at a wastewater treatment plant in Washington State; and powering a coal gasification site (being powered by that fuel) in Indiana. FCE's list of energy partners include firms like Alliance Power, Chevron Energy Solutions, LOGANEnergy, and Caterpillar—the latter deciding to develop their own branded version. Says Lembo, "We decided, 'You know what? This is a solid organization. This is a solid product.' "

A fuel cell for the Edison Sheraton would also hold the distinction of being the first wholly commercial application of this technology, i.e, in which the primary goal would be to make—or save—money, as opposed to merely demonstrating performance. True, as a business proposition the proffered benefit amounted to just a few percent savings for the Sheraton's electricity (on a base-loaded system, supplying an estimated 25% of load). But a success here would also open the door to other Starwood properties, and potential installations at Sheratons and other sites worldwide, among Starwood's 750 properties in 80 countries. Lembo's electric bill cumulatively came to about $50 million a year. If one DFC could save him money at one site, then multiple ones could probably do so almost anywhere and, just as important, the beneficial impact for the fledgling fuel cell technology might be historic.

What was the downside?

Only that if the cell didn't work, PPL and Gabrielle would take it back, and the Sheraton would revert to paying its usual rates—hardly a back-breaker, and worth the risk.

However, a few other factors also needed to be weighed, which Lembo enumerates.

"It's big," Lembo says. The footprint measures a not-inconsiderable 10 feet by 28 feet. Skid-mounted, the unit fits inside a nifty General Electric—made modular enclosure standing 10 feet tall. Inside are the electricity-making stack and hardware for converting natural gas or methane (or even other fuels, as the case may be) into hydrogen. Space-wise, Lembo noted, the same dimensions could probably hold a 1.2-MW reciprocating engine at considerably lower cost per kilowatt; but the DFC has its own unique appeal to overcome this—primarily, its almost immaculate emissions profile.

At 87,000 lbs., it's quite heavy. "You can't put it everywhere," Lembo notes. The box must sit on a concrete slab, or—as was being done at a later Sheraton installation occurring in 2005 in New York—on a heavily reinforced elevated surface. "And moving it isn't easy" either, he adds.

Apart from their heft, molten carbonate fuel cells are a novelty and unknown quantity to building engineers and mechanics, "so there are a lot of new things to learn about them, and a lot of decisions that have to be made," he says.

All in all, though, PPL's virtually no-risk offer and guarantee of electricity savings—and free heat in the bargain—says Lembo, "was just too good to pass up."

As for the thermal element, under normal conditions a 300A DFC operates at about 1,200†F , yielding 650†F "exhaust" of almost-emission-free very hot air, capturable with an air-to-water heat exchanger. The usable heat amounts to about 300,000 Btu's per hour, which can warm up a water or glycol loop (for example), feeding into a storage tank. Of the value of this benefit, Lembo recalls, "We knew that we could preheat our domestic hot water and even our pools, using that." The heat-and-power cogeneration would raise efficiencies even higher than the extraordinarily good 45% to 50% the fuel cell achieves, up to about 70%. (Note: Testing of the DFC's heat for charging a Broad chiller will take place this year at the Fuel Cell Test & Evaluation Center in Johnstown, PA.)

"We felt good about that," he sums up. "And the emissions were close to zero. So it was a win-win." (Note: The current efficiency record for combined DFC is an astounding 96%, reportedly being achieved at Rhon-Klinikum in Bad Neustadt, Germany, by recycling all of the rejected heat to displace boiler fuel.)

Senior management at Starwood also had their say, naturally. They listened to a brief discourse on fuel cell technology and—to serve as a demonstration for them—PPL actually went out and purchased a little fuel cell car that used solar energy to extract the H2. The execs "got a kick out of this," reports Lembo, and they signed the contract for a single-stack, skid-mounted 300A direct-fuel-cell generator.

Starwood got a guarantee, but what (you may wonder) was in it for PPL?

As a major mid-Atlantic utility generator, they were interested in fostering DFCs as clean energy, particularly as air-quality regulators in the region have moved ever-closer into mandatory renewables portfolios and alternative clean generation. In short, PPL saw considerable long-range benefit. PPL even opted to become an equity stakeholder in DFC, seeing the technology's promise.

Moreover, as already mentioned, if one fuel cell for the Sheraton chain was good, two would be even better; thus, almost simultaneously with the Edison job agreement in 2002, PPL proposed installing a 300A for a Sheraton in Parsippany, NJ. Again, PPL would sell power for less than whatever Lembo was already paying, and provide heat for free.

Monetarily, each 250-kW DFC plant would cost PPL about $1.5 million—a very big outlay. Anticipated billings couldn't justify this in straight-out ROI. But what juiced it for PPL was the availability incentive money from the New Jersey Clean Energy Program, to the tune of $860,000 per site. "Essentially," explains Gabrielle—who helped negotiate the master agreement with Starwood—"the State of New Jersey paid for over half the cost" of each DFC 300A. At that time, the Garden State was one of several in the East (along with NY, CT, MA) supporting clean energy production with grant money. Rules allowed one rebate per site and, hence, each Sheraton was sized for one fuel cell. Under differing funding circumstances, perhaps two or three might have been desirable, on simple load-carrying terms; on this point it should be noted that FCE also makes 1- and 2-MW DFCs in addition to the 250-kW model.

In the wake of these first two, a third Sheraton DFC 300A installation followed, in New York City in 2005; it qualified for a 50% subsidy under the New York State Energy Research and Development Authority (NYSERDA), which underwrites as much as $1 million per project.

PPL's bottom line here, then: even though billings on the three Sheratons did not promise to be enormous—and would be dented by fuel costs—the grants will enable payback on these projects to come, Gabrielle estimates, "in the high 10-year range"

As for the installations themselves, these went fairly smoothly, Lembo says, but they necessitated careful planning to minimize disruptions. Commissioning came in autumn 2003. One major glitch at Edison soon thereafter was a stack failure, due apparently to a manufacturing defect; the element was replaced, and full operation was quickly restored.

After nearly two years on the job now, how have the DFCs been performing?

"Extremely well," reports Joe Foy, who oversees their operation as FCE's customer service manager. Each unit connects to the grid power in parallel, he notes, so that however the grid goes, "the fuel cell inverter follows." An outage or disturbance causes automatic disconnection. The cell goes into "hot standby" waiting for the grid to come back up, then reconnects, "and begins wrapping itself back up in power," he says. (When starting cold, fuel cells require several days to warm up slowly to attain full power. Once they do, output remains consistent.) Also, DFC fuel cells "aren't load followers," he points out, their ideal applications being those in which the cell supplies a relatively small percentage of total load, offsetting rather than replacing grid power. "It's designed to sit there and generate power at a constant load," he says. "That's when they're happiest."

Most of Foy's work in keeping his fleet running (as of mid-2005 numbering 37 applications) involves simply "monitoring (often by remote) and doing routine maintenance." Onsite safety precautious—i.e., lockout/tagout and flammable gas procedures—are typical of those needed around any high-voltage equipment.

At this stage in the deployment game, notes Foy, discoveries and insights are fairly flying at him and his crew with every iteration. A few examples: one important finding was the inconsistency of pipeline natural gas quality from place to place and over time; degraded quality was occasionally impacting cell performance. As a corrective, he's now doing advance testing for contaminants, adding filtration to the gas intake, and spot monitoring. Performance has greatly improved. Similarly, local inlet water—which is used in the cell's fuel conversion—is now being filtered and treated to raise it to semiconductor industry standards. A third insight impacting design: cell controls are now relocated and fans repositioned within the high-temperature casing, as it was found that summer heat can effect instrumentation. Another gain from experience: FCE is getting better at troubleshooting technical problems via remote. Still another: spare parts are now being kept onsite for quicker replacement and briefer downtime, and so on. All of these improvements and others, notes Foy, "are subtle issues that you would never find in testing one or two units in a lab," but they emerge under rigorous field conditions, and they're proving invaluable in refining product design, improving site preparation, shortening and easing the installation job, fine-tuning the cell's operation, and reducing maintenance. Lastly, he notes, working within a purely service-oriented setting with the Sheraton management—rather than at quasi-experimental sites—has provided Foy's shop with the experience of radically different customer priorities. "It has been an awakening," he says, "and it has allowed us to become more commercially mature."

In terms (and therms) of energy output, after a year and a half on the job the fuel cells' heat contribution (i.e., cogeneration displacement) has turned out to be, respectively, about 10% in Edison and 20% in Parsippany. Lembo notes that this is roughly equivalent to a small commercial boiler, and thus, "It's enough to supplement, and it increases the value proposition for us." At $10 a decatherm—the current price in New Jersey—"300,000 Btu's is nice to have," he says.

It will be even nicer in New York City, where gas costs are double. Electric rates are also higher there. Between the two, then, the economics of the DFC should prove easier to justify in Manhattan or other expensive locales. In fact, as Gabrielle notes, the cogenerated heat output in the latter (scheduled to be commissioned in mid-2005) will actually be more valuable than the electricity. A 300A DFC expends about 2 decatherms (2 MMBtu) per hour, he finds. This hardly classifies the DFC as an energy hog, but in order to soften the fuel price volatilities for Starwood a bit, PPL assumed some of the risk on a current natural gas contract for the Edison site. Any such clause for leveling fuel cost should be a useful bargaining chip in future deals.

All told, three Sheraton Hotel DFCs have now come on stream. Unfortunately, not long after the first two, New Jersey's Clean Energy funds were curtailed; thus, the projects cannot be replicated elsewhere in that state.

However, out on the West Coast, California is turning into a different story. Fuel cells there can readily qualify for generous grants awarded for much-needed low-emission self-generation. California needs both cleaner power and more of it—preferably sitting at customer sites. Moreover, air quality standards have rapidly become so strict there that reciprocating gas engines ("usually the engine of choice," Lembo notes) effectively no longer qualify as suitable DE. So, as far as Lembo and Starwood Hotels are concerned, he says, "Fuel cells are now the only onsite power system for doing combined heating and power applications."

Emission restrictions are so tight now, in fact, that even older boilers at some of Starwood's California properties "are going to be in trouble for excessive NOx and SOx" under California Air Resources Board (CARB) standards, Lembo adds. Upgrades will be needed. Meanwhile, the 300A DFC's ultra-clean, 1,000†F heat output begins looking even more attractive.

Thus, early in 2005 Starwood announced a deal to move forward with four additional 250-kW DCF power plants, all to be installed later this year for base-loading at the 1,044-room Sheraton San Diego Hotel & Marina.

Partnering with FCE this time will be a West Coast power-plant developer, Alliance Power Joint Venture (APJV). As in the East Coast deals with PPL, APJV will own the DFCs and sell electricity to the Sheraton, under a Master Energy Services Agreement (MESA). Starwood gets a guaranteed 5% discount on power, "and all of the heat is thrown in free," notes Lembo. "Free" heat is not uncommon in cogen deals where thermal metering is difficult to do anyway. It's easier to lump the heat in as a bonus. At the San Diego Sheraton, says Lembo, heat will make a nice contribution to warming up the waterfront hotel's "lagoon pool."

To make the deal profitable for APJV, the California Public Utilities Commission's (CPUC) Self-Generation Incentive Program offers incentive funding of up to $2.5 million of eligible project costs (i.e., about 40% of the total installed cost per unit). The 300A is already pre-certified in California as "ultra-clean" under CARB 2007 rules (as is the 1-MW DFC 1500). This seal-of-approval confers an exemption from needing any further AQMD permitting, as well as granting preferential treatment under CPUC tariffs, i.e., no expensive exit fees or standby charges.

All in all, the DFC's foray into California looks to be another win-win, says Lembo, because it makes sense financially for Starwood's bottom line, as well as for APJV and the hotels. The state will be advancing its goal of acquiring ultra-clean power generation where it is needed most. Sacrificed in this deal will be one of the hotel's tennis courts, Lembo notes, but the agreement will provide tremendous impetus to a critical new onsite power technology. The eventual impact of this high-profile installation coming later this year in California, he says, represents "an awesome opportunity for the direct fuel cell industry."

DAVID ENGLE, a writer based in La Mesa, CA, specializes in construction-related topics.

DE - September/October 2005