Fuel Cells: Technical and Economic Assessment

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Fuel Cells: Technical and Economic Assessment Andrew Skok Executive Director, Strategic Marketing FuelCell Energy Danbury CT, USA Introduction FuelCell Energy (FCE), headquartered in Danbury, CT, USA develops and markets high temperature stationary fuel cell power plants to meet worldwide growing need for ultraclean, reliable, efficient, distributed power. The FCE power plants are founded on the company s patented Direct FuelCell (DFC ) technology. The design allows the hydrocarbon fuel to be fed directly to the fuel cell resulting in a lower cost, higher efficiency, simple fuel cell based system. The DFC manufacturing process utilizes readily available materials. Also, the manufacturing exploits well-known processes such as metal forming, tape casting, and mid-temperature heat-treating. The by-product exhaust heat can be harnessed for combined heat and power (CHP) applications using hot water, steam or chilled water to heat or cool buildings. Stationary Fuel Cell Products FCE is commercializing DFC power plants for commercial, industrial and government customers and continuing to develop the next generation of large size carbonate fuel cell products. FCE s current products, the DFC300MA, DFC1500MA and DFC3000 (described in Figure 1), are rated in capacity at 300 kw, 1.2 MW and 2.4 MW, respectively, and are scalable for distributed applications up to 10 MW or larger. These products are designed to meet the base load power requirements of a wide range of commercial and industrial customers including wastewater treatment plants, telecommunications/data centers, manufacturing facilities, office buildings, hospitals, and universities. These customers demand ultra-clean, efficient and reliable distributed power generation and the DFC products are responding to these demands. DFC 300MA DFC 1500MA DFC 3000 Output: 250 kw Output: 1000 kw Output: 2000 kw Footprint 22 w x 30 l Footprint 50 w x 70 l Footprint 49.4 w x 59.6 l MO3139 Figure 1. FCE Stationary Fuel Cell Power Plants: DFC300MA, DFC1500MA, DFC3000 rated at 250kW, 1MW, and 2MW, respectively FCE has installed over 65 sub-mw and megawatt power plants around the globe and have generated over 160 million kwh of green power. The DFC power plants achieve an electrical efficiency of 45 to 49 percent, the highest of any distributed generation technology in a comparable size range. Using the high value heat byproduct of the DFC products for cogeneration applications, an overall energy efficiency of 70 to 80 percent can be achieved depending on location, application and load-size.

The DFC power plants have lower emissions of carbon dioxide, and significantly lower emissions of other harmful pollutants such as nitrogen oxides, sulfur dioxide and particulate matter than conventional combustion-based power plants. Both the sub megawatt DFC300MA and megawatt DFC1500 plants have been designated as ultraclean by the California Air Resources Board (CARB), and have been certified to CARB s emission standards for 2007. Being an ultra-clean distributed generation product, reduces the time and cost for permitting and installing DFC power plants at customer locations while helping the environment. The carbonate power plants can utilize many fuel sources, such as natural gas, industrial and municipal wastewater treatment gas, propane, and coal gas (escaping gas from active and abandoned coal mines as well as synthesis gas processed from coal). FuelCell Energy has operated DFC stacks of varying sizes on all of these fuels. Multi-fuel capability can present specific customers with attractive, value-added self-generation options. Biogas offers a unique opportunity for carbonate fuel cell products. Particularly, industrial wastewater treatment facilities represent a promising market for carbonate fuel cells. The methane produced from the anaerobic digester process is the fuel to generate electricity to power the wastewater treatment plant. The fuel cell heat can be used to heat the sludge to facilitate the anaerobic digestion. Moreover, wastewater treatment gas is a renewable fuel eligible for incentive funding for project installations throughout the world. FCE has fielded thirteen units to operate on biogas of which 70% are wastewater treatment applications including a 1 MW DFC1500 at King County, WA. The King County plant put in operation in 2004 is a dual fuel plant that automatically switches to natural gas in the event digester gas supply is interrupted. In many places digester gas production volume is variable. In such applications, the plant could be designed to operate with automatic blending with natural gas. Two of the sub-megawatt plants at the Sierra Nevada Brewery (Chico, CA) are currently operating with blended (natural gas and digester gas) fuel. Cost Reduction FCE has been pursuing a two-pronged approach to drive to profitability, reducing product design costs by aggressive cost reduction efforts and increasing volume by penetrating multiple vertical markets, with strong, repeatable business opportunities. As part of the cost reduction efforts FCE developed the cost-reduced modular sub-mw, DFC300MA and megawatt DFC1500MA designs. The first DFC300MA unit, a modular three-piece design (consisting of mechanical balance of plant (MBOP) fuel cell module and electrical balance of plant (EBOP) was tested at the company test site and delivered to a customer in April 2006. Equipment packaging is optimized to improve manufacturability and serviceability. A photograph of two 250 kw DFC300MA plants operating at San Diego Sheraton West Tower is shown in Figure 2. $/kw $20,000 $16,000 $12,000 $8,000 $4,000 $- ~$20K ~$10K ~$8K 1996-1997 2003 2004 Sub-MW 1 MW 2 MW 2006 design target for DFC3000: $3,200-$3,500/kW ~$6.2K ~4.6K ~4.3K 2005 2006 2007 Increasing annual production volume to 50 MW/yr. can yield an additional cost reduction of 25-50 percent ~$2.5-$3.5K; Commercial in Japan, ADG in U.S. w/o subsidy ~$2-$3K; Commercial in Calif. w/o subsidy Figure 2. Two DFC300MA Units: Operating Side by Side at San Diego Sheraton West Tower Figure 3. FCE Value Engineering Cost Reduction Progress: The DFC1500MA and DFC300MA Design

To achieve profitability, the cost of the DFC products needs to be in a range of $2,000 to $4,000 per kilowatt, depending on local electricity rates and fuel prices. As shown in Figure 3, FCE has made significant progress towards that target. With the help of available incentives, the product costs are starting to be competitive in many areas of the US, Asia, and Europe. Availability Availability of the products is a key metric for meeting customers expectations. FCE s cumulative fleet availability has improved to nearly 95 percent (Figure 4), an industry benchmark for distributed generation. This improvement can be attributed to the establishment of a 24/7-call center and regional service teams to provide around the clock support. The DFC units can be monitored remotely and, in many cases, problems are solved without dispatching a technician to the field. Since about 40 percent of service interruptions are due to external influences such as grid disturbances and loss of fuel or water supply, the current focus includes reducing the effect of grid disturbances and improving the water treatment system to accept broader ranges of water quality. One of the key product development efforts is to extend stack life from the current three years (24,000 hours) to five years (40,000 hours) and longer, which is expected to further contribute to improving availability and reducing operating costs. Market In 2005, FCE focused on moving its sales to larger-sized units, given their lower cost due to economies of scale. FCE received eleven new orders totaling 6 MW, with 2 orders of at least 1 MW and another 5 orders of at least 500 kw each. That trend has continued with the announcement of a 1-MW DFC power plant for California State University Northridge. FCE is beginning to see repeatable markets develop as evidenced by order flow to date. Cumulative through April 2006, 8.25 MW of orders were received from Japan and Korea, and 8 MW were received from California, FCE s leading geographic markets. From an application standpoint, leaders are wastewater treatment plants (4.25 MW), manufacturing (3.5 MW) and hotels (2.75 MW). States seeking to secure cleaner energy sources are defining Renewable Portfolio Standards 95% 90% 85% 80% 75% 70% 80% -Actual 85% 87% 90% 93% 2002 2003 2004 2005 2006 2007 Field Trial Program -Projected Field Follow Commercial Units Stages of Product Development 95% Mature Product (RPS) to mandate that utilities provide a certain amount of their electricity from renewable sources such as solar or wind. Currently, 20 states have RPS laws on their books. In six states California, Connecticut, Hawaii, Maine, New York and Pennsylvania ultraclean fuel cells operating on natural gas qualify as renewable. Fuel cells provide firm, 24/7 predictable power, differentiating them from peaking wind and solar sources. FCE moved forward on two state programs with multi-mw bids. Figure 4. FCE Fleet Availability Factor: The enactment of the Energy Policy Act Availability Improvement Fleet approaches 95% of 2005 provides substantial financial incentives for fuel cell power plants. Specifically, it grants an investment tax credit of 30 percent up to $1,000 per kilowatt of total project costs, as well as five-year

accelerated depreciation. This is reflected in increased interest from developers, distributors and third party financers in the DFC products. California continues to remain a strong market. The state s Self Generation Incentive Program (SGIP) includes a $100 million annual allocation for renewable and ultra-clean distributed generation technologies, and has been extended through 2007. DFC meets these emission requirements and qualifies for the SGIP (Self Generation Incentive Program). In Japan, FCE received the government s endorsement for the DFC products operating on anaerobic digester gas. This was due to a favorable technical report on the performance and availability of the DFC power plant at a municipal wastewater treatment facility in the City of Fukuoka. Japan is a significant market as evidenced by enactment of a national RPS program in 2004 with a target of 3,500 megawatts by 2010 and their dedicated approach to complying with the Kyoto Protocol. Projects on Natural Gas and Biogas Applications FCE s over 65 projects are to many to describe in detail, however some of the specific projects demonstrate the DFC products application benefits, unique attributes, and proven customer acceptance. Some of these projects are highlighted below. Kirin Brewery, Toride Japan First SubMW Biogas Project with Backup Fuel FCE s first sub-mw ADG project also had unique site fuel supply issues which led to design improvements and a more robust biogas product. After the company s early pre commercial projects, its first commercial installation was at the Kirin Brewery in Toride, Japan. The project was arranged through FCE s Asian distributor, Marubeni Corporation. In this application, the fuel cell is operated on a relatively concentrated digester gas (~80% methane) produced from effluent from the brewery process. The power plant installation is shown in Figure 5. Figure 5 DFC300 at Kirin Brewery

The Kirin operation once again demonstrated that the fuel cell operates as well on digester gas as it does on natural gas. One problem that was encountered in this application was that the digester plant proved to be more efficient than expected, so the wastes from the brewing process were consumed entirely during the workweek, with none left over on the weekend. As a result, on the weekends the fuel supply would stop completely. After evaluating a variety of options, it was decided to install a propane backup system. In the event of a loss of digester gas the power plant switches to using the propane fuel. The Kirin project continues to operate well, and the digester operations have been modified so that the fuel loss events are less frequent than in the past. Sierra Nevada Brewing Company First Application of Digester Gas / Natural Gas Fuel Blending This project, at Sierra Nevada s brewery in Chico, California (through FCE s Alliance Power distributor), is the first application of an additional power plant biogas feature -- fuel blending. The Sierra Nevada installation consists of four DFC300A power plants, as shown in Figure 6. The size of the installation was determined on the facility s base load power needs, not gas availability. The amount of digester gas currently available from the existing wastewater digester at the site can support approximately 25% of the 1 MW total power generation capacity. While initial operation of the system has been entirely on natural gas, FCE is currently installing a digester gas clean-up system and provisions to mix digester gas with pipeline natural gas to operation of the system with digester gas. This fuel blending application is another example of a new product feature that enhances the ability of the product in biogas applications with limited or varying fuel supply rates. Figure 6 Four DFC300 Power plants at Sierra Nevada Brewing Company

Kyoto Eco-Energy Project (KEEP), Kyoto, Japan Food Waste Project in Environmentally Focused Mini-Grid Application This Marubeni project is FCE s first project fuelled by biogas from recycled food waste. Heat energy produced by the plant is provided to the food waste digestion process, thus increasing its efficiency. The Eco-Energy project was launched in 2003 in Japan's Kyoto Prefecture to demonstrate how renewable energy systems can be employed to provide stable base load power supplies in community settings. It combines the intermittent power from solar and wind sources with firm, 24/7 biogas energy from a DFC power plant. This 250 kw unit is part of an 850 kw mini-grid consisting of the fuel cell, a wind turbine, photovoltaics and gas engines all connected in parallel to the local electrical grid. The installation is shown in Figure 7, below. Japan's New Energy and Industrial Technology Development Organization (NEDO) is supporting the capital and installation cost. The plant started operation in March 2006. Figure 7 DFC300A Installed at KEEP Project, Kyoto, Japan Starwoods Hotels and Resorts Repeatable Application of DFC the DFC Products Starwood Hotels and Resorts has installed many of FuelCell Energy s Direct FuelCell (DFC ) power plants at properties in CA, NY, and New Jersey. Starwood considers all of these installations a success. The power plant at the Sheraton New York, shown in Figure

8 below, provides about 10% of the power and domestic hot water needs for the hotel, which is a flagship hotel in New York for Starwood. The New York Sheraton is the first property in New York City to adopt fuel cell technology. The unit, located on a forth floor roof landing, is clearly visible from the street. Installation at that location required the roof be structurally reinforced and new electric, gas, and heating lines be routed to the unit. The project is part of a joint cooperation between Starwood Hotels and Resorts, PPL Energy Plus, a subsidiary of PPL Corp, and FuelCell Energy. Due to the fact that Starwood Hotels and Resorts Worldwide has been a proponent of fuel cell technology, the company was named as Energy Star Partner of the year for two years running. Figure 8 DFC 300 at the Sheraton NY and Towers near Times Square in NYC Starwood entered into a Master Energy Services Agreement (MESA) to install DFC power plants at additional Starwood properties. The MESA provides a framework for fuel cell power plant projects at Starwood s hotels and will streamline (and reduce the project costs) for additional power plant installations. This is an example of Starwood s innovation and environmental stewardship benefiting the fuel cell industry. The first project under the MESA provided one MW of power to the Sheraton San Diego & Marina. Four DFC 300 power plants provide base load electricity for the 1,044 room hotel. The heat byproduct is used for the hotel s Lagoon Pool. Installation of the units was so successful, that two additional units were added to the facility, bringing the total to six units and 1.5MW of installed fuel cell capacity.

Figure 9 4 DFC 300 Units Installed on a Tennis Court at the San Diego Sheraton and Marina Fuel Cell Outlook Government and customer initiatives are driving the need for clean, efficient and reliable power generation. The DFC field units are meeting these customer needs. Building on the field experience, FCE has improved the product reliability (cumulative fleet wide availability improved nearly 95%) and reduced the design cost of the sub-mw and MWclass product by 25 and 30 percent, respectively. The future focus is built on performance and cost reduction successes to date and increased sales focusing on larger megawatt and multi-mw products.