July 29, 2014 garrygolden@gmail.com

Energy Revolution Ahead? Utilities may soon favor Fuel Cells over Solar

FC smallSolar power receives more media attention and seems to capture our imagination around the ‘future of energy’, but fuel cell energy appliances represent a more compelling distributed power strategy for utilities looking to develop solutions for commercial customers who demand more resiliency, always-on power and a reduced carbon footprint.

Today we sense high expectations for the future of solar, and either complete confusion, indifference or disdain to the future of fuel cells.  Fuel cells are often over-sold by evangelists or dismissed by skeptics but within a decade, energy pundits may speak of fuel cells as being a more radical (and practical) energy innovation platform than solar energy. With fuel cells you can imagine putting a power plant in every hand, home or community.

Solar power has a huge growth upside as a critical foundation energy technology. Solar is a fantastic distributed power solution but it is not the only option. Solar has limitations in solving real world energy customer problems and competing against fuel-based energy appliance alternatives.  Fuel cells offer a more utility-friendly (and energy startup-friendly) platform for transforming how we deliver fuels and electricity to the world.

It should be noted that fuel cells do not offer a quick fix to climate change nor do they represent a radical depature away from the major players in hydrocarbon energy.  Fuel cells do offer a cleaner way of using our existing supply of molecule fuels and bringing reliability and resiliency to end users. As a solid state ‘energy appliance’ fuel cells offer a quicker path to reducing energy access (energy poverty) issues around the world.  We can imagine billions of people leap-frogging into a distributed energy era rather than repeating the centralized grid model that appear in the 20th century.

In more practical terms there is a very compelling business case that fuel cells bring to electric utilities who must now confront a changing world of customers demanding distributed power and widespread pressure to reduce carbon footprints.

2014: Year of Committments & Momentum  
A recent forecast estimates global fuel cell capacity growing to 640MW by 2020.  Skeptics will call this a round-off error compared to total global electricity capacity.  The business case for fuel cells is based on the patience to see accelerated growth beyond 2020 as cost curves and learning curves mature.

Much of this growth will happen in engineering-centric nations of Japan, Germany and Korea who have doubled down on their investments and incentives to cultivate distributed power systems based on fuel cells.

Now large energy companies in the United States have hinted at more investment momentum around fuel cells.  In July 2014, General Electric announced a cost breakthrough on solid oxide fuel cells and plans for a pilot manufacturing projects in the US and Malta.

More recently Chicago-based Exelon, one of the world’s largest utilities, signed an agreement to finance 21 megawatts of fuel cell projects for commercial customers across the United States.  The partnership will deliver stationary (solid oxide) fuel cells to customers who need reliable electricity that offers a lower carbon footprint.

For Exelon the deal helps address their internal learning curve on new ways to scale up distributed power.  It is a hedge on an alternative way of delivering energy and power solutions to customers seeking always-on energy.

For Bloom Energy, the partnership is a critical validation for their business model innovation known as ‘Power as Service’ where customers pay for energy rather than the equipment itself.

How does this change the future of utilities?  
Nothing changes quickly in the energy industry.  Things change even more slowly in the world of utilities!  Yet these investments are significant and the scaling up strategy of appliances is fundamentally different to the world of scaling up megawatt centralized power plants.

A strategic question we need to explore refers to how utilities might weigh investment decisions for solar and/or fuel cell based capacity.

Scenario: Utilities Favor Distributed Power via Fuel cells over Solar
Solar energy sources can range from large megawatt grade scale ‘plants’ to rooftop solar.  Costs continue to drop but scaling solar remains a challenge due to intermittancy and large spatial footprint.  Solar takes up more physical space than a contained fuel cell unit!   It is hard for solar cells to compete with the energy potential locked up inside of chemical fuels like natural gas and oil.  [I would argue that solar to hydrogen is a smarter business path for the industry as it creates a more valuable product (compared to electrons).]

Fuel cells give utilities a solution that is aligned to customer needs and fits their internal legacy power plant culture.

Why are utilities more likely to embrace fuel cells?  

Fuel-based energy conversion devices are a stronger operational and culture fit.

Fuel cells are power plants.  They convert fuels (natural gas; hydrogen; propane) into heat and electricity.  Fuel cells stacked into megawatt sized moedules can be placed onsite where clients need the energy. They can also be stacked into MW sized ‘power parks’ within suburban or urban neighborhoods.  The physical footprint needed to deliver large amounts of energy to customers is a fraction of solar cells.  The reliability of fuel-based energy conversion helps utilities reduce risks of power supply disruption if the sun doesn’t shine or batteries do not have enough stored energy to meet peak demand.

Fuel cells are quiet and continue to improve their performace reliability meaning maintenance costs will continue to drop. Their ground-based installation is more technician-friendly than rooftop solar cells.

Is it now ‘fuel cells’ vs ‘solar’?

Take away the emotional appeal of solar cells as the holy grail and we find that molecule-fuel based conversion in fuel cells has more appealing qualities to utilities and their customers.

In this light, fuel cells might be seen as ‘frenemies’ of solar.  They will not deter the growth of solar but they might limit its long term upside.

Fuel cells are not the enemy.  The enemy is the limitation of photon to electron conversion.  Molecules are a market-ready solution.

So let’s look 2020-2030 and imagine a future where the surprise in the utility industry is not solar-layered rooftops but fuel cells used to create vast distributed networks of power parks and isolated commercial and residential energy appliances.


Read more 

Exelon’s partnership with Bloom Energy via Crains; MarketWatch; GigaOm

Learn more

Fuel Cell 101 (US Department of Energy)

Overview of 15MW Fuel Cell Park by Dominion Energy in Bridgeport, CT


Fuel Cell Energy feature 


Look at the Manufacturing Process of Solid Oxide Fuel Cells 

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