The Benefits of Distributed Fuel Cell

Power Plants and Their Role in the

Hydrogen Transition

Joel N. Swisher, PhD, PE

 The Hydrogen Transition - Why?
• Hydrogen (H2) is neither a final product with
any inherent demand nor a new source of energy
that exists in any significant quantity (on Earth)
• Rather, H2 is an intermediate energy carrier for
which there is presently almost no existing
infrastructure for production and delivery
• And, there is the ‘chicken-and-egg’ problem:
– No incentive to develop H2 delivery infrastructure
until there is substantial demand from H2 users
– No incentive to produce H2 technology (e.g., cars)
until there is adequate H2 delivery infrastructure
On the Other Hand, the Hydrogen Transition...
• …offers the potential for near-zero emissions at
the end-use (hot water for onboard espresso…)
• …sets the stage for the emergence of fuel cell
technology in vehicles and for stationary power
• …provides a potential way to store electricity
from central, intermittent renewable generation
• …suggests a possibility of carbon-free energy
delivery from ‘scrubbed’ fossil fuels
 What does the bridge to a
hydrogen economy look like?
 Fuel Cells and the Hydrogen Economy:
A Practical, Profitable Transition Path
1. Stationary fuel cells first in buildings for efficient
cogeneration
Fuel with natural-gas reformers or off-peak electrolyzers

2. Introduce H2-ready vehicles

Fleets (return nightly to the depot for refueling)
Customers who work near buildings that have fuel cells
Use buildings’ hydrogen appliances for refueling
Sell kWh and ancillary services to grid when parked
Earn back part of the cost of car ownership
 Fuel Cells and the Hydrogen Economy:
A Practical, Profitable Transition Path
3. As H2 appliances get cheaper, put them at
“gas” stations
4. As both H2 and fuel-cell vehicles become
widespread, bulk production and central
distribution of hydrogen becomes feasible
5. Produce H2 via electrolysis with renewable
electricity
H2 storage makes wind/PV power firm and fully
dispatchable, able to capture ‘distributed benefits’
 Necessary (but not sufficient!) Prerequisite
Conditions for the Hydrogen Transition

1. Stationary fuel-cell cogeneration in buildings -

Capture the distributed economic benefits inherent in
a clean, dispatchable, reliable source of power
- Realizing economic value is key to early market adoption of
stationary fuel-cell generation, step #1 in the H2 transition!
- I will discuss these distributed benefits further...
2. H2 fuel-cell vehicles - Radically improved (~3x)
efficiency in vehicle platform physics (weight, drag)
- Makes the fuel cell affordable
- Makes room for the H2 (and the passengers and cargo)
- (I won’t discuss this further - see www.hypercar.com)
 Economics of Fuel
Cell Generation

• Fuel cells are a high-capital-cost, low-energy-cost power source.

• There are two ways to reduce fuel cells’ capital cost
disadvantage against central combined-cycle stations:
• One way is to reduce the cost of fuel cells, and numerous
manufacturers are working hard to achieve cost reductions in
each of the fuel cell technologies under development, as they
enter high-volume production.
• The other way is to build the value side of the equation––to find
additional economic benefits that fuel cells can deliver by virtue
of their smaller size and greater flexibility, their quiet, clean
operation, and their ability to co-generate heat and electricity.
 Changing Economics of Central Generation
• Utilities can no longer build hugely expensive nuclear and coal-
fired plants with full confidence of recovering capital costs.
• The reasons include industry restructuring, environmental
constraints, reliability needs, new technology, aging and
deterioration of the existing power supply infrastructure, and
renewed concerns about energy supply security.
• Central steam-turbine generation plants stopped getting more
efficient in the 60s, stopped getting cheaper in the 70s, stopped
getting bigger in the 80s, and stopped getting built in the 90s.
• Similarly, T&D can no longer be considered simply an extension
of the generation system - the costs might not be justified.
• Increasingly today, “small is profitable.”
Economic Benefits of Distributed Energy

– Electric energy and capacity value

– Thermal energy value (co-generation)
– Option values and risk management
– Savings in grid cost and ancillary services
– Utility and customer reliability value
– Externalities: emissions, noise, etc.
 Energy Values
Energy value of power generated from a DG source
depends on:
• System size and voltage level of connection
• Customer load factor (variability of load)
• Co-generation potential (thermal energy value)
• Relative electricity and gas prices (the ‘spark
spread’) for gas-fired sources
• The applicable utility pricing structure &
regulations
 Energy value is very sensitive
to electric and gas prices...
Max. Fuel Cell Cost by State - No Cogen ($/kW-year)
Based on 1999 DOE Data on Electricity and Gas Rates
272.5047
111.8188
205.4735

137.2829 486.18
205.4735

460.8447
139.8165
153.5147

236.7347

235.9188

186.4506

125.2594

548.4018
Maximum Fuel Cell Cost by State
by Max Fuel Cell Cost
$440 to $549 (3)
$330 to $440 (2)
$220 to $330 (4)
$110 to $220 (7)
$0 to $110 (35)
 Option Value of DG Sources
Small scale and modularity provide an option value from:
•Increased planning flexibility
•Shorter lead-time, and
•Decreased risk of overbuilding
•Optionality: low cost to start, stop, defer

Install Central Source

MW
Capacity
Electric Load
(or Load)
Lead-time and cost of
large resource
Idle capacity of large
resource
Overbuilt capacity
Install DG Source
Capacity: large sources
Capacity: DG sources
Electric load
Time
Analysis approach to estimate deferral value and
other distributed utility benefits:
Area- and time-specific (ATS) utility costing
q Based on analytic advances in determining utilities' area-
and time specific (ATS) marginal costs
q Depend most on distribution and local transmission costs
(unlike the system-level costs, which depend most on
generation and bulk transmission costs)

Benefits of this approach:

q Prioritizing DG plant siting to maximize cost-effectiveness
q Targeting high-impact DSM programs by area and time
q Understanding T&D cost structure
q Improving T&D planning criteria
 Comparison of conventional plant-siting
or DSM to targeted (ATS-based) approach
4 Conventional approach: Distributed generation or targeted DSM:
4 Based on system-level costs Based on area- and time-specific costs
4 Each area looks the same! High-cost (red) areas move around in time!

High Cost Areas – Year 1 High Cost Areas – Year 5

Area Area Area Area Area Area

1 Area 1 Area 1 Area
3 3 3
2 2 2
Area Area Area
4 4 4

Area 5 Area 6 Area 5 Area 6 Area 5 Area 6

Area 10 Area 10 Area 10

Area Area Area
7 Area 7 Area 7 Area
Area Area Area
8 Area 8 Area 8 Area
9 9 9
11 11 11

Utility Service Territory Utility Service Territory Utility Service Territory

 ATS Marginal Capacity Costs
Cepalco ATS marginal capacity costs
(excluding low-voltage works)

16000
14000 West13
12000
MDCC (PP/kW)

West34
10000 Cent13
8000 Cent34
6000 East
4000 69kV

2000
0
1995 2000 2005 2010 2015 2020
year
 Deferral Value - based on area MDCCs
• The deferral value depends on the marginal distribution
capacity cost, which varies by location and time.
• The MDCC value can range from zero to over $1000/kW,
with most areas at $100-$400/kW.
• By selecting high cost areas, a utility can offset their
revenue loss in cost savings through deferral of capacity
increases in high-cost areas. Amount of Load at Different Levels of MDCC
100%
Percent of Utility Load Greater 90%
80%
70%
than MDCC

PG&E
60%
PSI
50%
KCP&L
40%
CP&L
30%
20%
10%
0%
$0
$140
$280
$420
$560
$700
$840
$980
$1,120
$1,260
$1,400
$1,540
$1,680
Marginal Distribution Capacity Cost
 Engineering Cost Savings and Ancillary
Service Value
In a common “problem area,” DG operation can:
• Eliminate the need to re-conductor feeders
• Improve voltage levels at the feeder ends
• Eliminate the need for capacitor banks
• Provide reactive power (VAR) compensation
• Eliminate the need for voltage regulators
• Reducing feeder loading and delay replacement
• Reduce line losses and transmission system load
Power supply reliability/resilience
EPRI-website synthetic
satellite image, 10 August
1996…utilities routinely
keeping the lights on. But
~98–99% of U.S. outages
are caused by the grid.
For example...

35 seconds later, after an

Oregon powerline sags into a
tree limb, operational goofs
plus poor communications
black out four million people
in nine Western states and
parts of Canada. Local supply
can prevent that—and up to
95+% of grid failures are in
the distribution system
 Customer Reliability Value
• By itself, a DG source cannot provide peak
availability as high as wires-only solution
• DG requires redundancy to improve reliability
• But if most of the reliability value depends on
specific, critical loads, wires-integrated DG can
achieve more value than a wires-only solution by
improving reliability for critical loads
• DG can give critical uses premium power quality
and reliability (>99.9%) if ”islanding” is feasible
• DG can provide improve reliability even if backup
power must be non-firm (to avoid standby charge)
• On-site renewable sources can provide additional
insurance against fuel interruption, price volatility
The bottom line – there are many sources
of DG value, but few occur together
• All of these values are site- and technology-specific
• Similar value also provided by DSM, T&D band-aids
• Realizing the value requires distribution utility cooperation
• Most values are difficult to monetize in the present market
• Competition with other distributed generation technologies
– Problems for turbines and engines: must be clean and quiet
– Problems for renewables: must be dispatchable and reliable
• Early market niches with substantial distribution benefits
– High-cost distribution ‘hot spots’
– Premium reliability markets
– Non-attainment areas with NOx emission constraints
– Portable generation support for T&D grid
 Four Times
Square, NYC
(Condé Nast
Building)
• 149,000 m2; 47 floors
• non-toxic, low-energy materials
• 40% energy savings/ft2 despite
doubled ventilation rates
• Gas absorption chillers
• Fuel cells
• Integral PV in spandrels on
S & W elevations
• Ultra-reliable power helped recruit
premium tenants at premium rents
• Fiber-optic signage (signage
required at lower floor(s))
• Experiment in Performance Based
Fees rewarding savings, not costs
• Market average construction cost
Which distributed benefits apply to each resource?
Type of Targeted DSM Distributed Renewable
distributed co-generation sources
benefit:
Option value Yes Yes Yes
Electric Yes Yes Yes
energy
value
Thermal Possible Yes Unlikely
energy
value
Deferral Possible Possible Difficult for
value, intermittent
engineering source
cost savings,
ancillary
services
Reliability Some Yes, with Difficult, but
(reduced cost modular can provide
of backup) design fuel
independence,
Environment Yes Depends on Yes
technology
 H2 from Renewable Sources
The ultimate goal, but demands a deliberate
approach along a difficult, complex path

Bottom line: The H2 economy needs Hypercar® and DG

more than Hypercar® and DG need the H2 economy
Distributed Benefits and Utility Planning
• Distribution utilities can realize cost-saving measures
revealed by ATS costing methods, which can be
integrated into their expansion planning at the local level,
i.e., via local integrated resource planning (LIRP).
• In a competitive market, this provides a market niche for
distributed generation and targeted DSM.
• With regulated distribution utilities, this provides for least-
cost expansion planning.
• Now labeled energy resource investment strategies
(ERIS), this planning approach is making a comeback
with municipal utilities and local energy authorities, such as
the SF PUC and Hetch Hetchy Water and Power.