First published in Cleantech Infocus: Distributed Generation, September 2008. Copyright Cleantech Investor 2008
by Dr. Kerry-Ann Adamson, Fuel Cell KTN
Distributed Generation (DG) is the production of energy close to its point of use. The traditional view of DG is micro renewables such as solar roofs in grid-tied locations or propane generators powering out-of-the-way homes. In reality both of these options have propagated due to financial signals such as government rebates, as in the German Solar Roofs programme, or the high cost of rural electrification. Now, with the changing of the political landscape seeing climate change, sustainability and energy security being built into everyday government speak and business plans, we are witnessing the opening of a window of opportunity for new DG technology such as fuel cells.
To date fuel cell technology has been promoted as a number of things, including the saving grace of the car industry and enabling technology for mass diffusion of 5G mobiles and PDAs. In reality both of these are still under development and, whilst they offer great potential, it is the less PR friendly application of stationary fuel cells in DG that is already starting to make an impact.
At its most basic a fuel cell is a black box which uses hydrogen rich fuel to produce electricity and, as by-products, heat and water. Depending on a number of influencing factors such as the type of fuel used (direct hydrogen or reformed hydrogen), whether the waste heat is reclaimed for heating or cooling and the type of stack, the overall system efficiency of fuel cells in DG applications varies from the low 30% upwards to the 80%+ mark.
Fuel cells are currently being used and offer huge growth potential in combined heat and power (CHP) and as electricity producers in both grid-tied and off-grid developments<1>. Over the last five years we have seen the adoption of over 3,000 individual units varying from 1kW CHP units in Japanese homes to the commissioned installation of 4.8MW of Phosphoric Acid Fuel Cells (PAFCs) for the Freedom Tower development in New York. Units have been installed in environmentally sensitive areas such as Argentina <2> and Antarctica as well as more mainstream locations like urban prisons, breweries and office blocks.
Contrary to popular misconception fuel cell technology is flexible, something that is needed for any global roll-out of DG, with at its core a box that can work from sub-zero to very high temperatures, requires minimal maintenance and will continue to produce power as long as it has access to fuel. It can get fuel from a wide variety of sources and, due to the efficiency gains, can help to reduce the carbon footprint of the installation. Units can be as small as 100 watts or, when linked in series, up to 5MW
Technology Landscape – Residential
The use of fuel cells in Micro CHP (mCHP) is somewhat rife with confusion due to the number of development strands under way. For individual home use, fuel cell products are being designed that produce electricity and heat in a private home to be used by that home. The two different development pathways within this can then be classed as thermal units or electrical load units, with the first being maximised to produce useful heat and the second for electricity, with minimal useful heat production.
For the first model, where the unit is thermal loaded, there are two further technological nuances. First, the unit being developed by the British AIM listed firm Ceres Power is a Solid Oxide Fuel Cell (SOFC, high temperature fuel cell). This unit is sized to provide all of a home's required space and hot water heating as well as producing flat rate electricity that is either used by the home or sold back to the grid. Only in times of power spikes will top-up electricity be drawn down from the grid. The unit being developed and which is scheduled for field trials during 2009 is promoted as being 1kWe and 28kWth power. Ceres Power is working with Centrica (British Gas), which is currently looking to sell the units in the UK within the next five years.
In Japan, which has had a proactive programme to fast track residential fuel cell development since 2003, the technology used to date has been low temperature Polymer Electrolyte Membrane (PEM) fuel cells which have much lower capacity to produce useful heat. In this market the units under production and customer leasing are 1kWe units, which supply the hot water heating requirements and baseload electrical power for eight hours of the day, traditionally the peak period. The rest of the day grid power is used. Japanese stack developers in this space include Ebara Ballard, Toshiba Fuel Cells, Matsushita and, very interestingly, Toyota, with the energy companies leasing the units to the customer<3>.
The converse to these systems is the unit being developed by companies such the Australian firm Ceramic Fuel Cells (CFCL), listed on both AIM and ASX, German firm Baxi Innotech (a part of the large British group Baxi) and Swiss firm Hexis. This can best be thought of as a traditional boiler that also produces electricity. The unit is a condensing boiler with an integrated fuel cell<4>. The purported benefit of this design is that as houses are becoming better insulated they require less heating, and therefore the value added to the consumer of the technology lies in the provision of electricity.
The units under development in this sector are bigger in terms of kW electricity out - for example the Gennex unit from CFCL is 2kWe - and are twenty-four hour base load generators. This model also allows for exporting of surplus power to the grid. (It will be an interesting experiment to see if adoption of this type of fuel cell leads to the further adoption of electrically efficient appliances and the smoothing out of demand to minimise grid draw.) CFCL, Baxi Innotech and Hexis all expect their units to be in showrooms within five years and are working with utilities to promote the products.
One thing that is obvious from the above text is that this form of product fits into the current energy paradigm of grid-tied units being supplied by utilities to the consumer. They are used to take the load off the grid allowing, in theory, less strain, increased stability and longer grid lifetime.
The other form of development in this sector is fuel cells for off-grid homes, representing a potentially game-changing scenario creating distributed control of power. Here the units work within a family of other technologies such as ground source heat pumps, wind and solar to provide all the heating and electrical requirements of a home or a small series of homes (often known as mini-grids). In terms of market development this is far less advanced, with units that have been deployed so far being in the range of 5-8kWe, used in a UPS function to supply all the electrical requirements<5>.
The reason for the development of this specific market is seen as future proofing of homes, removing the home owners from the grid in a sustainable fashion, neatly ticking all the current societal meta-trend boxes in one go. With the current rate of growth of off-grid developments in the USA alone being 33% per annum, then this particular niche could add up to a significant market within the decade.
Technology Landscape – Commercial
Outside of the house fuel cells have seen deployment for DG in areas which have clear financial incentives from government. These include South Korea and the US States of California, Connecticut and New York.
For commercial applications fuel cells are often linked in series, with installations being from 250kW, for a hotel or hospital, up to a number of MWs for power plants being run under Power Purchase Agreements (PPAs).
There are substantially fewer companies in this space as compared with the smaller 1-5kW units with, at present, the main technological options being MCFC, PAFC and, to a lesser extent, PEM units. To put this in perspective, there is one company developing MCFC (FuelCell Energy<6> ), three developing PAFC (HydroGen, UTC Power, both based in the USA, and Fuji Electric in Japan) and Nedstack, which is developing large PEM units.
Example Installation – Verizon Switching Centre New York
Verizon Communications HQ took the decision to employ fuel cell technology when it assessed its need for continuous reliable power. Since 2005 it has used seven natural gas fuelled 200kW PAFC units operating in series to provide the building with 1.4MW of electric power, working in a grid parallel UPS function. The units’ waste heat is also captured and either employed as heating during the winter, or goes into the building’s chiller system during the summer, taking the units’ efficiency to a reported 90%.
At the time the capex cost was in the region of US$1 million per fuel cell<7>. As well as providing the building with high reliability of power and a number of green buildings awards, the units have been reported as having saved between US$250,000-600,000 per annum in fuel costs and reduced the operation’s carbon footprint by 5,400 tonnes per year<8>.
New York is an interesting case of a region where grid demand is saturated and the authorities have been actively looking at implementing DG to ease the load off the grid whilst still allowing the development of new energy intensive buildings. As part of this, there exists a large suite of incentives and policies<9> to promote the adoption of DG technologies, including fuel cells, which include:
1. Executive Order 111 - this order requires that by 2010, 20% of electricity used by buildings owned or leased by state agencies must be generated from wind, solar thermal, photovoltaics, sustainably managed biomass, tidal, geothermal, methane waste or fuel cells.
2. Peak Load Reduction Programme – this programme is aimed at encouraging the adoption of clean baseload generating technologies which reduce peak electrical demand in New York State, with special emphasis on New York City. Renewable energy and fuel cells are eligible for funding.
Other programmes that include fuel cells are the Fuel Cell Electric Generating Equipment Tax Credit and the New York Green Building Tax Credit.
Off-grid developments using fuel cell technology outside the residential space are even more limited. The need for power in remote bush hospitals and schools is there and often acute, but to date the commercial fuel cell installations have followed the subsidies or rebates that some locations offer. One of the non-finance based reasons given for this lack of adoption is the concern by potential adopters that fuel cell technology is not yet reliable enough to outweigh the high capex cost. This is one challenge where the fuel cell industry will have to step up to the plate and prove itself. Once it does, we could see a fast adoption process supported by a number of agencies such as the World Bank.
Political Landscape
Politically the concept of distributed generation has gained real traction over the last decade, with countries like Denmark, Finland and the Netherlands<10> now being at the forefront. As countries such as Japan and the UK and some states in the USA start to actively promote and target DG, especially CHP, we can fully expect to see fuel cells become increasingly adopted into this sector.
Japan
Since 2005 Japan has specifically focused on developing a fuel cell DG base in its residential sector by actively supporting the fast track commercialisation of 1kW mCHP units. In 2005 the New Energy Foundation launched the large scale demonstration of stationary fuel cells with the aim of forcing development of the application to speed up, reach pre-assigned commercially acceptable targets and reduce costs. These targets, both technical and commercial, fit into the long term RD&D plan for fuel cells in Japan.
For reference, some of the key targets for PEM systems include costs by 2020 of ¥500,000/kW (~£2,500/kW) (assuming a per company manufacturing capacity of 50,000kW/year), an electrical efficiency of 34% (HHV) and durability of up to 90,000 hours. For SOFC systems they are working with a more challenging cost target of <¥250,000/kW (production quantity per company of 50,000kW/year) by 2020. Data coming out of Japan now is showing an electrical efficiency of over 30% already and a per home carbon dioxide reduction of one third. The data is from units running off natural gas.
Outside of the residential sector there are a number of other developments using fuel cells for DG in commercial applications, but to date these do not have the same level of Governmental support.
UK
In a number of respects the UK is similar to Japan in that is has selected CHP as its DG of choice, seeing this as a route to removing some of the peak demand from the ubiquitous national grid. Unlike the Japanese, though, it is promoting both mCHP and CHP and has not selected a preferred technology.
In 2000 the UK Government announced an ambitious target of achieving 10,000MW of CHP capacity by 2010. By 2005 this target was some way from being reached, with only 7,500MW of recorded CHP electricity.
The silver lining of this slow growth has been for the Government to assess a range of market based barriers to DG in the UK and systematically address many of them. These included interconnection issues, feed-in tarrifs, lack of product accreditation, lack of skilled fitters and servicers, a number of specific issues to do with renewable energy credits <11> and high capex costs.
Interestingly, from the reports published it appears that at present the UK Government is focusing virtually all of its attention on mCHP and is potentially missing a large market-based demand for units of 10kW plus size in commercial applications.
USA – California
A growing number of states are actively promoting grid-tied DG including, as already mentioned, Connecticut, New York and California.
California has a long tradition of somewhat pro-environment seditious behaviour, launching such provocative, at least to the automotive industry, policies as the California Clean Air Act, including the Zero Emission Vehicle mandate. In 2000 it added to this cannon of pro-environmental actions the Self Generation Initiative Programme (SGIP), which in essence subsidises the uptake of renewable and fuel cell power generation technologies. Now in its second iteration, the programme has hived off solar to a separate scheme and has kept wind and fuel cell technology together.
Within SGIP new single installations of up to 5MW can apply for subsidy, with the first 3MW being eligible for funding at a rate of 100% for the first 0-1MW, 50% for 1-2MW and 25% on the final MW. The fuels that can be used to power the fuel cell include the full suite of renewable fuels and biogas and the non-renewable fuels such as natural gas, but not diesel.
The table below from the 2008 SGIP handbook outlines the current levels of subsidy available.
{mosimage}
Barriers to fuel cells in DG
When talking about barriers to using fuel cells in DG, the first thing to highlight is that the technology itself is not a barrier. Molten Carbonate, Phosphoric Acid and PEM fuel cells are all commercial, with MCFC and PAFC being sold with certification and warranty. Unlike in light duty vehicle applications or, more challenging still, aerospace, fuel cell technology is fit for purpose for this sector now. The technology is still getting better and cheaper with, for example, the new UTC 400kW PAFC unit being forward priced at half that of its predecessor 200kW unit, and unit size now averaging over three quarters of a MW, but this is normal for any emergent technology and should not be seen as a sign of technology unreadiness.
The barriers that do exist for fuel cells being used in DG applications are fundamentally the same as for other DG technologies. These include interconnection issues, feed-in tariffs, some utilities being forbidden to own generating equipment (and therefore seeing fuel cells as a challenge), for residential use the high discount rate being placed on purchase decisions and, underpinning it all, a lack of understanding by a high percentage of the population of the potential of DGs.
Looking forward
The next decade could see a real shift in demand patterns for DG, with fuel cells expected to take a market share of this. One recent report by Element Energy<12> looked at the growth potential for microgeneration in England, Wales and Scotland and, depending on the level of support, showed a market penetration of fuel cell mCHP units in these countries alone as being between half a million and up to two million units by 2020. Apart from the UK, we expect to see Germany having around hundreds of thousands of mCHP fuel cells installed by 2015, once again backed by strong Government incentive, and Japan being more aggressive still with hundreds of thousands of mCHP units sold by 2013. These will all be grid-tied units.
In the off-grid sector we expect to see the highest uptake of fuel cells under 10kW in regions with high grid vulnerability, as in the hurricane region in the US, and areas with no grid connections such as islands and very isolated communities. There could be an interesting synergistic effect in this sector with the increased adoption of micro-renewables such as solar and wind, with a handful of companies producing turn-key packages of technologies now.
Leaving the residential space, fuel cells operating as CHP units could see strong adoption by institutions with high heat demands such as hospitals, schools and swimming pools. Interestingly, what could end up being the limiting factor, at least for the next decade, is the low number of companies involved in this space and their ability to service demand.
Apart from CHP, other areas which we anticipate will contribute significantly to demand for fuel cell based DG will be the UPS sector, especially telecoms and datacentres. We are already seeing movement in the US to support the initial cost buy-down for these applications and, with a swathe of successful field trials in the last twelve months, this application could experience a serious expansion of demand within the next decade.
Finally, in regions such as South Korea fuel cells are already being used to expand and stabilise the grid. POSCO Power has plans to bring online a manufacturing facility for MCFC units with initial capacity of 50MW per annum (stacks supplied by FuelCell Energy) at some point this year (2008). Other companies in the area are looking at doing something similar with PAFC.
Bringing all this together, we expect to see the next decade being one of the stationary fuel cell industry fast tracking from fairly limited demand to a major global player, not just in DG but in the broader cleantech space. Used in conjunction with other DG technologies, the next decade could well be the decade of energy production becoming smaller, more localised and produced from not so beautiful compact boxes.
<1> For distributed generation the main types of fuel cell being promoted at present are some DMFC (commercial, power requirements under 10kW), MCFC (commercial power requirements over 250kW), PAFC (commercial, power requirements over 100kW), PEM (commercial, power requirements up to 1MW) and SOFC (late stage R&D, power requirements up to 200kW).
<2> For more information on countries such as Argentina, Chile, India, the United Arab Emirates and Saudi Arabia see the forthcoming Fuel Cell Today Industry Review 2009, "Fuel Cells: Emergin Markets", published Jan 2009.
<3> Note that this market is expected to go commercial in Japan in 2009 with sales in the tens of thousands of units per year range, and to be fully commercial by 2012/2013.
<4> The unit requires an external hot water tank.
<5> One recent installation that has been recorded is via Hydra Fuel Cells which has installed a unit in a Florida home, taking it off the grid.
<6> FuelCell Energy sells its stack technology to a further two companies, CFC Solutions (Germany) and POSCO (S.Korea) for integration into their own pockets.
<7> Since 2005 the capex and installation costs have come down to the point where the new UTC 400kW installed cost is US$1 million per unit.
<8> To put this in context, if this was included ina carbon trading scheme at a $45 carbon price this would equal an annual saving of $245,000.
<9> For a full list and description of state level fuel cell initiatives in the USA please see http://www.fuelcells.org/dbs/
<10> Source: WADE
<11> For those interested int he wonderful world of ROCs, LECs and REGOs, I recommend the UK BERR website with its guidance notes on the difference between them and how to apply for them.
<12> Element Energy, 2008, "The Growth Potential for Microgeneration in England, Wales and Scotland", available to download from http://www.berr.gov.uk/energy/sources/sustainable/microgeneration/research/page38208.html .
The Fuel Cell Technology Knowledge Transfer Network (www.fuelcellktn.org ) provides an accessible and flexible platform for communication and cooperation between members of the UK specialist fuel cell community, as well as non-specialist groups which will also play a vital role in bringing products to market.
The Fuel Cell KTN is managed by Fuel Cell Today.
| < Prev | Next > |
|---|
