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Leading an Energy Revolution
Though proftability for now remains a distant dream, state's fuel cell companies are hotbeds of creative energy and innovation
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Business New Haven
1/5/2004
By: Richard Rangoon
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In the field of fuel cell research and production, Connecticut companies employ about one-third of the workers in the industry in all of North America. This commitment is translating into innovation.
But general commercialization and profits remain well into the distance, so for now public subsidies are picking up the slack.
"We are becoming the fuel-cell capital of the world," says Subhash Chandra, managing director of the Connecticut Clean Energy Fund (CCEF). "There really is a convergence of public and private partnership here."
CCEF distributes money for the development of promising commercial fuel-cell projects and is itself funded by a charge - typically ten cents to $1 - on the electric bills of state residents. (The charge is listed under the heading "Renewable Energy Investment Fund.")
CCEF projects include a fuel-cell installation, unveiled earlier this month, that will provide 250 kilowatts to help control temperature and humidity at Yale's Environmental Science Center near the Peabody Museum of Natural History. CCEF-funded fuel cells also provide backup power to St. Francis hospital in Hartford and to South Windsor High School in its role as an emergency center.
CCEF's first fuel-cell installation, at New Haven's East Shore wastewater treatment plant, was supported earlier this year by a $1.34 million grant from the fund.
FuelCell Energy, of Danbury, manufactured the fuel cell purchased by CCEF for the Yale installation. The company has a five-year agreement with Yale to service the plant, according to Steven Eschbach, director of investor relations at FuelCell Energy.
Fuel cells do not produce toxic gases such as nitrogen oxides and sulfur dioxides because they do not burn fuel in a traditional sense. Instead, they typically produce electricity by combining hydrogen with oxygen in an electrochemical reaction. However, fuel-cell technology has not advanced to the point where it is economically competitive with traditional energy sources. Therefore CCEF must support promising projects to facilitate the technology's development, Chandra says.
Another source of capital for FuelCell Energy is its shareholders. UTC Fuel Cells in South Windsor and Distributed Energy Systems (until recently known as Proton Energy Systems) also are publicly traded. Privately held companies include HydrogenSource in South Windsor and GenCell Corp., of Southbury.
A number of the companies have attracted venture funding, but the technology is not competitive on a cost-per- kilowatt-hour, according to the Connecticut Technology Council, a statewide organization representing technology companies. Therefore, although a few fuel-cell applications are funded by government contracts, most applications are subsidized.
An example of government contracts includes the U.S. Department of Defense's 2003 budget. UTC Fuel Cell and FuelCell Energy participated in a $7 million program to develop and commercialize domestic stationary fuel-cell systems, and FuelCell Energy participated in a $3 million program for the U.S. Navy Ship Service.
Distributed Energy Systems makes "reverse" fuel cells. Instead of producing water and electricity as a standard fuel cell does, the company's product takes water and electricity and creates hydrogen for industrial purposes, according to John Glidden, DES' vice president of finance. The company recently changed its name after adding a division in Vermont called Northern Power Systems.
"Connecticut is a good source for scientists and engineers," Glidden says. He believes that within ten years the momentum from current development will transform the state into a major fuel-cell manufacturing center.
To get there, "It's going to need that funding from the government; it's going to need that push," Glidden asserts. Connecticut is not the only region to take an interest in fuel cells: Companies in the Midwest, on the West Coast and in Europe have entered the fuel-cell market.
The price of fuel cells will not decline any time soon unless their manufacturers sell many more of them, Glidden notes. But in a textbook catch-22, the current prices of fuel cells are so high that there are few buyers.
A century ago, the internal combustion engine was a new concept. Now, after many years of refinement, automobile engines are manufactured in the millions. Fuel cells must go through the same process of exposure and refinement before they are mass-produced and become commonplace, Glidden says.
Currently, fuel cells are useful as backup generators. "For the foreseeable future, you won't get electricity cheaper than you can get it from the grid," he adds. "But the grid is not always available."
Meanwhile, CCEF has committed about $30 million to fuel cell development projects in Connecticut, Chandra explains.
The organization will continue to seek out worthwhile projects by issuing RFPs from companies seeking funding. The money will be for commercial projects - such as the organization's purchase of FuelCell Energy's Yale unit - as well as demonstration projects for companies to test new systems.
CCEF is working with Northeast Utilities and United Illuminating on new ways to generate electricity as well as integrating new technology into the existing electrical grid system.
"Fuel cell technology has the potential to change the way electricity is generated and how it is distributed to the end user," explains Chandra. "It's a major shift in the way we have been doing things."
Compared to fuel-cell energy, current methods of producing electricity for the grid - gas firing, burning coal, or using nuclear power - are detrimental to the environment and relatively inefficient, Glidden says. Furthermore, one day our supply of those energy resources will expire. Therefore, public investment in fuel cells is a forward-thinking approach, he adds.
For every 100 units of fuel going into Yale's newly installed fuel-cell power plant, 70 units are released as either electricity or thermal energy. This compares to a rate of about 33 percent for a typical fossil fuel power plant, Eschbach says.
Yale's new fuel cell plant will provide its Environmental Science Center with 250 kilowatts of electricity - about one quarter of its overall requirements.
CCEF bought the power plant for $1.25 million, while Yale will pay for its operation and maintenance.
"I know the government is very supportive of getting this type of technology into the commercial marketplace. Our goal, or course, is to further reduce our product cost so government subsidies will be less of a requirement," Eschbach says.
James Bolch, vice president for United Technologies Corp.'s fuel cell division, explains the working of the company's typical fuel cell plant.
The power plants, he says, create electricity by extracting hydrogen from natural gas, then using the hydrogen in an electrochemical reaction by combining the hydrogen from the fuel stock with oxygen in the air to generate electricity.
In the absence of combustion, says Bolch, the only by-products are a small amount of water. UTC says that the current cells are 40-percent efficient in their use of the natural gas feedstock, compared to approximately 18 percent for burning gas in a conventional power plant.
Bolch acknowledges that conventional power plants are still more efficient in terms of overall costs. Fuel-cell plants produce electricity at a cost of approximately 15 cents per kilowatt, compared to less than half that from most conventional sources. UTC sees market potential in places and countries where the additional costs of power transmission lines or the concern for clean energy outweigh those costs.
Bolch cites New York's Central Park police sub-station as an example: The city did not want to add power lines through the park but had a natural gas line that could power a fuel-cell power station. In Connecticut, too, the Mohegan Sun casino installed two PC25 plants for back-up power.
Distributed Energy Systems' "reverse" fuel cells can use wind or solar energy to generate the electricity to make hydrogen, which can be used in everything from weather balloons to projects run by NASA. Also, companies manufacturing conventional fuel cells can use the hydrogen produced by reverse fuel cells to help power their units, Glidden says.
CCEF has awarded Distributed Energy Systems funding for developing their technology and doing studies to match their products with the right markets. Next, the company hopes to receive CCEF funding for a hydrogen fuel cell installation somewhere in Connecticut, he adds.
A description of CCEF-funded projects includes:
o One UTC PC25 fuel cell at Hartford's St. Francis Hospital providing additional power security to operating room loads
o One UTC PC25 fuel cell at South Windsor High School to provide baseload electricity and serve as an emergency shelter
o One FuelCell Energy DFC300 unit at a Yale University building that houses rare and historic artifacts and fossil records requiring very sensitive temperature and humidity control
o Two FuelCell Energy DFC300 units at a Pepperidge Farm bakery providing power to mission-critical circuits
o One UTC PC25 unit at New Haven's Water Pollution Control Facility where the heat is used with a unique fat, oils and grease disposal system.
Two other commercial projects are expected from CCEF's 2002 RFP, including a UTC PC25 at a municipal wastewater treatment facility and a FuelCell Energy DFC300 unit at an urban hotel complex. Both units are in severely grid-congested areas of Connecticut.
Connecticut recently enacted legislation requiring electric utilities to secure long-term power purchase agreements intended to make fuel cell projects commercially viable. Such projects are designed to increase demand for fuel cells, allowing manufacturers to reduce costs, Chandra says.
CCEF also is involved in developing multi-megawatt utility-grade power plants using fuel cells. The projects will supply excess power to the grid.
These initiatives will serve as models for using fuel cell-powered utility grade plants as an alternative to large central power plants, he adds.
The Connecticut Clean Energy Fund invests in commercial enterprises whose products and services will accelerate the development and deployment of fuel-cell technology or make fuel cells more available, affordable and practical.
CCEF employs a variety of financial structures for investments, including equity, convertible debt, debt and debt-like constructs. Some of CCEF's commercial investments include:
o Proton Energy Systems of Rocky Hill, a company that builds Hogen PEM (proton exchange membrane) hydrogen generators and Unigen regenerative PEM fuel cell systems
o Acumentrics Corp. of Windsor, a manufacturer of direct natural gas and propane fueled solid oxide fuel cells (SOFCs) that electrochemically generate electricity and heat for small to medium-scale distributed generation and power quality applications
o Ztek Corp., a Woburn, Mass. company engaged in developing, manufacturing, selling and servicing of solid oxide fuel cell (SOFC)-based energy systems, including high temperature steam reforming (HTSR) technology inherent within the fuel cell system
o GenCell Corp., a manufacturer of fuel cells and integrated fuel cell power generators
o SurePower, a company that provides high reliability back up power systems using fuel cells.
"There need to be more cost-effective methods for manufacturing the fuel cells and they need to increase the volume of sales to get the cost down," says CCEF's Karen Mendes. "But commercial products are out there to purchase today."
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