Fuel cells for microgrids

The long, slow maturation of the fuel cell industry has created many skeptics out there who have wondered whether the technology will ever find an application where the benefits of fuel cells balance out the price premium that must be paid for the novel technology. But as retail electricity prices creep up and many renewable sources of power decline in cost, fuel cells are inching closer to being a realistic power option, particularly at the microgrid level.

The hope has always been that hydrogen powered fuel cells could be utility plays. Their core advantage has been the elimination of distribution and transmission costs because fuel cell parks can be built anywhere they’re needed. They’re also quiet and don’t take up too much space. Leading utility fuel cell player Fuel Cell Energy estimates it needs just one acre for 10 megawatts of fuel cell capacity. Those parameters make it good for densely populated urban areas where capacity must be dropped in or areas where solar radiation or wind aren’t great.

Costs, though, have always been challenging, partially because the catalyst required in many fuel cells is a precious metal like platinum, sending up capital costs. Fuel Cell Energy has gone with nickel as a catalyst as the company targets megawatt scale installations with major stacks at the 1.4 megawatt and 2.8 megawatt size, as compared with other companies that are looking at the kilowatt scale market. The company has built out fuel cell parks on the scale of 15 megawatts. In many of the large fuel cell installations, the excess heat from the fuel cells can be recaptured to do district heating or even to drive a turbine to produce additional electricity.

The company targets a levelized cost of power, assuming $6-8 natural gas, of 12-13 cents per kilowatt. Those figures have improved significantly over the past ten years and when one looks at regions like the northeast where industrial customers are paying between 10 and 12 cents per kilowatt hour and commercial customers are paying between 12 and 15 cents, fuel cells look more attractive than what one might assume.

It’s this pricing that has me thinking that microgrids could be an increasingly promising market for fuel cells. While selling to utilities is always challenging because of how well versed utilities are at producing their own coal or natural gas based power at low rates, commercial customers like hospitals, universities and manufacturers can do simple cost comparisons and weigh the benefits of building their own microgrids.

One benefit of a microgrid that is receiving more and more attention is the ability to use the grid as a backup power source rather than primary. We’re seeing this in data centers where uptime is mission critical. Some data center operators believe the natural gas grid is more resilient and lower risk than the electrical grid, and are thus experimenting with fuel cells.

Fuel Cell Energy is targeting the microgrid market and has done installations for Hartford Hospital, UCSD, and Pepperidge Farm Bakery (Pepperidge Farm actually uses the excess heat from its fuel cells in its bakery). The UCSD campus is a large 42 megawatt microgrid that utilizes fuel cells for about 8 percent of its power alongside solar PV and other power sources. One of the benefits of putting fuel cells into a microgrid is being able to balance out the evenings when solar isn’t available. UCSD gets biogas offsets from nearby Point Loma wastewater treatment facility. Most wastewater treatment plants end up flaring their excess biogas as there are few arrangements for its reuse.

As the costs of all renewable sources of energy decline, the attractiveness of microgrids will grow, particularly in areas where retail electricity rates are high. And if fuel cell pricing can continue to push south as economies of scale in manufacturing improve, the possibility of megawatt scale microgrids for commercial and industrial applications will continue to look more promising.