Fuel Cells


De1907 16

Stationary fuel cells, long viewed as a “fuel of tomorrow,” increasingly are becoming a fuel for today for a growing number of large businesses and electric utilities in the US. The surge in interest is driven by the shifting needs of commercial and industrial (C&I) customers of electric utilities as well as the structural changes roiling the electricity business, according to fuel cell company executives interviewed by Distributed Energy.

The forces driving increased interest in and deployments of stationary fuel cells include:

• C&I customers’ increased demands for higher-reliability electricity as well as backup generation and microgrids

• Deployment of fuel cells at landfills, where the fuel— naturally occurring methane—is free and abundant

• NIMBY-ism that has made it more difficult for electric utilities to site high-voltage transmission lines

• Increased concern by regulators and customers over the environmental impacts of power generation

• Utilities’ gradual embrace of fuels cells, battery storage and other non-traditional, decentralized resources

• Widespread availability of inexpensive natural gas, which powers most stationary fuel cells

Make no mistake: Stationary fuel cells will not put baseload power plants fueled by coal, natural gas, or uranium out of business anytime soon. But stationary fuel cells are making inroads, particularly in states such as California, Connecticut, New York, New Jersey, and Massachusetts, where the real estate, and electricity, are expensive.

“Fuel cells have long been pigeonholed as the ‘solution of tomorrow,’ like some far-off day in the future when people would use flying cars to get around,” commented Tom Gelston, vice president of finance and investor relations for FuelCell Energy. “In fact, a growing number of C&I customers and electric utilities have chosen to install fuel cells for very practical reasons.”

“Fuel cells are proving themselves in the market to be a very robust and reliable technology that can be flexibly deployed to create value for a wide range of customers,” said Preeti Pande, vice president of products for Bloom Energy Corporation.

Even fuel cells’ strongest advocates don’t claim they are the silver bullet that can solve all the world’s energy, environmental, and economic challenges. But manufacturers interviewed by Distributed Energy were encouraged by the trends that are driving demand for their products.

That said, investors’ ardor for fuel cells has cooled in recent years. While many are private, some, like FuelCell Energy, Bloom Energy, and Ballard Power, are pure plays that trade on public markets. Others, like Doosan Fuel Cell, are part of larger firms, where investors have less ability to directly vote their views on the future of fuel cells.

At one time, investors adored FuelCell Energy, bidding its stock above $2,500 in 2002. By 2009, the share price had fallen to $600. Today, its shares sell for about $1.25 each, giving the company a total market capitalization of about $19 million. Bloom Energy went public in the summer of 2018 at $19 a share; as it neared its one-year anniversary as a public company, the company’s shares have lost about one-third of their value and were recently trading at about $13 each, valuing Bloom at around $1.4 billion For the last decade, Ballard Power Systems stock has traded between $2 and $5 per share, giving the company a market capitalization of $900 million.

Investors are notorious for their focus on short-term results. Fuel cells, however, are the ultimate long game, so it’s no surprise that fuel cell companies and investors have, in many cases, gone their separate ways.

De1907 18 1

Stationary Fuel Cells: Markets, Units, and Applications
Measured on a megawatt basis around the world, companies in Asia and North America have accounted for nearly all of the electric generating capacity of fuel cells deployed in recent years, according to data compiled by consultants E4tech (see Fig. 1).

De1907 18 Fig1

In Asia, electric utilities are the predominant buyer of fuel cells, but in the US, C&I customers have adopted fuel cells more rapidly than electric utilities.

Based on the number of units, most fuel cells have been used in stationary deployments (both C&I customers and electric utilities), E4tech said in its Fuel Cell Industry in Review 2018 report. On a megawatt basis, deployments in the transportation market have soared in recent years, E4tech noted.

Despite the surge in demand in the transportation sector, those engaged in stationary fuel cell manufacturing seem content to play the tortoise to transportation’s hare, mindful that the tortoise won that race in Aesop’s fairy tale.

De1907 18 2

What’s Driving C&I Customers?
Fuel cells have been deployed by a broad cross-section of Fortune 500 companies, including Home Depot, Alphabet (parent of Google), Coca-Cola, Intel, Verizon Communications, Morgan Stanley, Apple, and others. Sometimes that’s part of an effort to burnish their sustainability credentials, but as often it is to ensure that power-sensitive equipment is not disrupted by surges or sags in utility-supplied power.

“One of our customers, JSR Micro, is a precision manufacturing company with operations in Silicon Valley,” said Bloom Energy’s Pande. “Every time there was a surge or sag in their power quality, it cost them serious money. They have installed a microgrid with our fuel cells to reduce the amount of wasted product that is caused by power quality issues.”

Nationwide, utility customer power outages have doubled in duration between 2016 and 2017, she continued, citing US Energy Information Administration (EIA) data. “Power outages and power quality events are becoming more prevalent as electric utilities’ infrastructure gets stretched, and the costs to customers can be significant.”

She cited another customer, II-VI Inc., a photo-electronics manufacturer in New Jersey, whose expansion of manufacturing facilities would have been delayed by one to two years because the local electric utility faced constraints in its infrastructure. Bloom Energy built II-VI a microgrid with fuel cells. While the company stayed on the utility grid, it used its microgrid to ensure it was able to expand production and to protect critical operations during outages.

Pande said about 80 of Bloom Energy’s deployments are configured as microgrids, and that 65 percent of those microgrid deployments have taken place in the last three years. Microgrids using fuel cells can create a self-powered “island,” separate from the grid, so that disturbances on the grid do not affect the reliability and quality of their electricity.

Verizon Communications has installed fuel cells made by Doosan Fuel Cells. The company’s chief sustainability officer, James Gowen, explained his company’s interest in fuel cells this way: “This is a natural evolution of our sustainability efforts and of our use of alternative energy to power a variety of our facilities. These projects will reduce our carbon footprint, relieve demand on the electrical grid, and enhance the resiliency of our proven service continuity.”

“There are a lot of innovative and cool advancements in the fuel cell space,” said Jennifer Gangi, director of communications and outreach for the Washington, D.C.-based Fuel Cell & Hydrogen Energy Association.

Admittedly not a neutral observer, Gangi, who has over 20 years of involvement with fuel cells, said in an interview: “C&I customers and electric utilities are exploring various deployments and approaches. We’re seeing greater receptivity to fuel cells in both segments.”

Noting rising interest and deployments among technology companies like Apple, Amazon, Verizon, IBM, Yahoo, eBay, Adobe, and Alphabet, she said, “We’re relying on those companies’ technologies to run our lives and businesses, and those companies increasingly are relying on fuel cells to keep their operations running. What does that tell you?”

FuelCell Energy’s Gelston points to the city of Woodbridge, Connecticut, which was hard hit by Superstorm Sandy in 2012. The prolonged power outage from that storm disrupted school schedules and nearly every other aspect of daily life in that community. So city officials decided they needed to become more self-reliant for their electric and heating needs.

Answering the call, FuelCell Energy installed a 2.2-MW fuel cell next to Amity High School. The unit could generate enough electricity to power the city’s infrastructure, such as police, fire, first responders, and traffic lights, during a power outage, while also producing heat, which could keep students warm.

Other municipal deployments of fuel cells, such as at wastewater treatment plants or landfills, are becoming less and less of a novelty. In Riverside, California, a FuelCell Energy unit is powered by methane created by decaying organic material at the local landfill. The electricity is sold to the city-owned electric utility.

Bloom Energy is piloting a biogas-fueled fuel cell with the Southern Company at a landfill in the Southeastern US.

Wastewater treatment plants as well as dairies and agricultural-processing facilities are an ideal fit for biogas-fueled fuel cells. Generating electricity from the naturally occurring methane at a landfill keeps that potent greenhouse gas out of the atmosphere while also producing a useful good: electricity.

Sales and interest in fuel cells continue to rise in other power-critical C&I sectors like data centers, healthcare companies, telecommunications firms, and educational institutions.

Officials from Doosan Fuel Cells told Distributed Energy they have over 100 operating fuel cells in the US totaling 45 MW, and another 30 MW of product is on order. Their C&I customers include Verizon, Coca-Cola, the University of Connecticut, Whole Foods Market, Sheraton, and CBS.

Bloom Energy has more than 350 MW of fuel cells in operation, and about 300 MW of those units are deployed at C&I customer sites, including 25 for the Fortune 100 companies, Pande said. “We deploy power where it is needed. Data centers, healthcare facilities, manufacturers, and retailers are increasingly concerned about power reliability and power quality. Any deterioration in power quality has a negative impact on their operations.”

De1907 19

Costs Reductions, Tax Credits Boost Fuel Cells’ Attractiveness
As fuel cells’ costs have come down, customer interest has perked up, commented Michael Coskun, general manager for sales and business development at Doosan Fuel Cells. He estimates that his company’s all-in costs, before state and federal incentives, have fallen about 65 percent over the last 10 years. Further cost reductions are on the horizon, though he said they might not be as great as the earlier cost reductions.

Gelston of FuelCell Energy estimates that his units cost about $4,200 per installed kilowatt (kW). Those units can produce electricity for 9-11 cents per kilowatt-hour (kWh) before subsidies like tax credits and tax incentives. Five years ago, that power would have cost about 15 cents per kWh, he estimates.

Bloom Energy’s per-unit costs have declined by about 70 percent since 2010 or so, Pande said in an interview. She said that she expects the company’s next-generation fuel cell, due out in late 2020, to continue that cost reduction trend. The next generation of Bloom’s modular Energy Server will deliver 50 percent more capacity in the same footprint as today’s 500 kW systems.

Pande added that Bloom could save customers in some high-cost areas, like Northern California, between 10 and 25 percent on their electricity costs.

“Congress’ restoration of the Investment Tax Credit for fuel cells really helped us a lot,” Gelston said. Taxpaying entities that begin construction of a fuel cell between January 2017 and December 2019 are eligible for a 30 percent federal tax credit against their system equipment and installation costs. Units that begin construction in 2020 are eligible for a 26 percent federal tax credit. A 22 percent tax credit is available to projects that begin construction during 2021.

The tax credits apply to taxpaying entities that own a fuel cell or take power from it via a power purchase agreement (PPA).

The sliding scale of the tax credits was meant as incentive for developers to begin installing projects sooner rather than later. It has worked.

Doosan’s US and South Korean factories are running full tilt, with each site producing 140-150 units per year. 

Electric Utilities and Fuel Cell Companies: Competitors or Collaborators? Yes!

While fuel cells pose some direct competitive threats to electric utilities—both exist to meet the electric needs of customers—there also are opportunities for fuel cell companies and electric utilities to work collaboratively.

For example, the South Korean government set a renewable portfolio standard (RPS) of 30 percent by 2030. Meeting that goal looked to be an uphill slog, as there are not a lot of high-quality wind or solar resources in that country. But according to Doosan Fuel Cell’s David Giordano, the government defined “renewable” to include fuel cells and because of that, his company is selling a lot of fuel cells to electric utilities in South Korea.

California fuel cell maker Bloom Energy also has found success in Korea. The company has announced the deployment of 15 megawatts (MW) of solid oxide fuel cell projects in the country since January 2018 with utilities and with KT Corporation, South Korea’s largest telecommunications company.

The US utility market remains somewhat geographically limited, with interest mainly concentrated in those East and West Coast states where electricity prices are high and land is at a premium.

Giordano told us that fuel cells filling a 20’ by 40’ footprint could generate as much electricity as a five-acre field of solar panels. “It’s hard to find five acres of unused land in the markets we’re targeting,” he said.

Utilities facing tough RPS standards in states like California and Connecticut can’t possibly access enough land to site all the solar arrays or wind turbines it would take to meaningfully move their RPS numbers.

NIMBY-ism, or “not-in-my-back-yard” thinking, is another problem that fuel cells are solving for electric utilities. “A utility on Long Island was having a huge problem siting transmission lines to bring solar and wind power to customers there,” remarked FuelCell Energy’s Gelston. “Land prices were at a premium and customers weren’t interested in having transmission lines constructed in their neighborhoods. We are in the process of installing 40 MW of fuel cells at existing substations that help the local utility avoid millions of dollars of outlays.”

FuelCell Energy also has installed projects for Eversource Energy and Avangrid, two New England utilities.

Bloom Energy is working with Consolidated Edison, a large New York utility, operating fuel cells at five locations in Brooklyn and Queens, including two hospitals and the 600-unit Marcus Garvey affordable housing site. It also has delivered a 25-MW fuel cell facility for Delmarva Power & Light, a Delaware electric utility.

More in Home