Despite Bloom Energy deal, utilities see little fuel cell impact

While Bloom Energy scored a preliminary massive deal to sell fuel cells to Delaware utility Delmarva Power (subject to terms and regulatory approval), utilities in general are not all that interested in fuel cell technology, according to the latest report from consultants with Black & Veatch. A Black & Veatch report released on Monday found that utilities think that fuel cell technology will have one of the least impacts on their businesses in comparison to other types of green technology.

On a scale of 1 to 5 (with 1 being “no impact” and 5 being “significant impact”), utilities found that fuel cell tech like Bloom Energy’s ranked a 2.65, having a smaller impact than biofuels, modular nuclear power, electric vehicles as battery storage, carbon sequestration technologies and overall energy storage on a utilities’ business. Fuel cells are “making slow progress,” in the minds of utilities, found the report.

Black & Veatch analyst Mark Gabriel explained to me via email some of the reasoning behind utilities’ skepticism, including that fuel cells have been around for over forty years, have always been five years away from commercialization and have always seemed to struggle with scale and cost.

A fuel cell is a device that chemically converts fuel — including natural gas, biogas, biofuel and hydrogen — into electricity. Oftentimes fuel cells use metal catalysts like platinum and nickel. The process is often more efficient than combustion, and when a carbon-free fuel is used, the electricity generation can be cleaner than natural gas and coal power plants. Fuel cells are also commonly distributed technology (not located at a central power plant but located at the user’s site), and taking out the distribution process of the electricity can also be more efficient.

But beyond the unusually large 30 MW potential deal between Bloom Energy and Delmarva, not many utilities have embraced fuel cells via commercial scale installations. Out of the utilities that have implemented the technology, most have installed small, and often pilot-sized, fuel cell devices.

PG&E has a plan to install 3 MW’s worth of fuel cells, including a 1.4 MW fuel cell from FuelCell Energy that will be installed at California State University, East Bay, and two fuel cells — one 200 kW fuel cell from Bloom Energy and a 1.4 MW fuel cell from FuelCell Energy — that will be installed at San Francisco State University (SFSU). Southern California Edison will also install three fuel cells that will provide 3 MW on California campuses, including two FuelCell Energy systems at CSU, San Bernardino, and CSU, Long Beach, and one Bloom Energy fuel cell at the University of California, Santa Barbara.

These California campus projects are pilot projects and will help PG&E and SCE utilities learn about how fuel cells work. It should be noted that PG&E and SCE are also two of the more aggressive and progressive utilities when it comes to green technology and meeting the state mandates for renewable energy.

The total PG&E fuel cell project will cost $20.3 million, plus operational costs of $9 million; the SCE project will cost $19.1 million to install and $9 million in operation and maintenance costs. The costs of these California fuel cell projects is so high that at one point last year, an administrative law judge in California made a preliminary decision to recommend against fuel cell projects for California utilities, because they were deemed too costly at “three times the price paid to renewable generation.” California regulators ended up not listening to that advice and approved the utilities’ fuel cell contracts last year.

The Bloom Energy deal with Delmarva has some important conditions. For instance, the state regulatory body needs to approve the deal. Also, legislation needs to pass to include the use of fuel cells in Delaware’s renewable energy mandates, which say that 25 percent of utility-produced electricity needs to come from clean power by 2025. Oftentimes (as is the case in California), fuel cells are only included in a state mandate if they use biogas for fuel and not natural gas.

As Black & Veatch analyst Gabriel put it: “Fuel cells still require fuel, usually natural gas that is reformed as part of the process of making electricity. There is no free lunch . . . it still takes a fossil fuel, either in a thermal reaction or chemical, to make electricity.”