FuelCell Energy Finds Niche in Natural Gas Stations

The launch of Bloom Energy’s fuel cells has refocused the energy industry on just how to get this decades-old technology to compete on a cost basis with traditional forms of energy generation. For most fuel cell makers, that means finding niche markets — data centers, perhaps, or remote cellular base stations, or wastewater plants that generate their own biogas.

For FuelCell Energy (s FCEL), one such niche may be scavenging wasted energy within the guts of the natural gas distribution system itself. The Danbury, Conn.-based company is piloting a project with natural gas giant Enbridge (s ENB) that has a potential to grow to hundreds of megawatts-worth of fuel cells in the field — if it can get the electricity prices it needs to make the project pay off.

The $10 million Canadian ($9.7 million) “Direct Fuel Cell – Energy Recovery Generation” (DFC-ERG) project started up in November 2008 in Enbridge’s Toronto, Canada headquarters. It’s meant to capture energy otherwise wasted in natural gas pressure reducing stations — the facilities that take in gas that’s been highly pressurized for long-distance transport and reduce that pressure for local distribution. Reducing the pressure of a gas makes it cool down — cold enough that it has to be heated with gas-fired boilers before it’s piped on. Traditional systems also release pressure with a valve, wasting that pressure energy.

The 2.2 MW DFC-ERG system, on the other hand, puts the high-pressure gas through a turbo expander to turn some of that “scavenged” energy into electricity. Then there’s FuelCell Energy’s 1.2 MW fuel cell, fueled by the plentiful natural gas in the station, which generates a lot of heat as a byproduct. That heat replaces the gas-burning boiler, cutting emission from burning the gas, and generating electricity to boot.

This energy scavenging fuel cell combination can claim a 60 percent or more efficiency, Enbridge reports, which would make it among the most efficient forms of generation out there. IDC Energy Insights states that the Toronto plant’s efficiency has approached as high as 65 percent — a combination of 47 percent efficiency of FuelCell Energy’s molten carbonate fuel cells and another 15-percent from the turbo expander, built by French company Cryostar.

All in all, Enbridge sees 250 to 300 MW of opportunities for these systems in Ontario, California and the Northeast. In Europe, it has identified another 200 to 600 MW of potential, said Sam Jaffe, an analyst with IDC Energy Insights who’s studied the project. Because it cuts down on emissions from the gas boiler, the DFC-ERG system also leads to a net reduction in greenhouse gas emissions, even though the natural gas running through the fuel cell is still converted to CO2.

But making DFC-ERG pay off, Jaffe says, will depend on what price the system can command for the electricity it sells.  “Enbridge told us that if they could sell the electricity for 11.5 Canadian cents per kilowatt-hour, the system would be competitive,” he said. However, in Ontario province, where the pilot is located, grid power goes for about 3 Canadian cents per KwH, meaning that “they’re losing money on the system.”

The province of Ontario’s Green Energy Act doesn’t approve fuel cell power for its feed-in tariff program, which bars the Toronto project from getting subsidies to help close that gap, he said.  But throw in some incentives for clean or renewable power, or for power that’s generated in smaller distributed units close to electricity loads, and that equation might change, he said.

Take Connecticut, FuelCell Energy’s home state, which has qualified the DFC-ERG system as clean power under its mandate to get 27 percent of its power from clean source by 2020. The company is seeking financing for a 9 MW DFC-ERG system at a Milford, Conn. gas pressure station, and has three more such projects in the works, said Andy Skok, executive director of strategic marketing.

The company is also looking at California — where it already has some 9 MW of fuel cells running on state-incentivized biogas — for more DFC-ERG systems, Skok said. California does have a very limited feed-in tariff program that applies only to renewable power generated at water and wastewater treatment plants, but FuelCell Energy is hoping that program might expand to include the natural gas stations where its DFC-ERG systems can work, he said.

“The economics are different in each of those regions, but all in all, they fall into that range where 11, 12, 13 cents a kilowatt-hour makes this a viable economic operation,” he said. That makes them competitive with wind and solar power, he said, and “probably a little more expensive than ordinary brown power, but not a lot more.”