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Are fuel cells worth the investment?

Technology finds comfy niche at companies such as Microsoft, Morgan Stanley and Legrand.

In mid-April, giant electrical component supplier Legrand flipped the "on" switch for a 500-kilowatt Bloom fuel cell at its manufacturing facility and North American headquarters site in West Harford, Connecticut.

It was the company’s first such investment. There were also sorts of motivations for the installation, according to Legrand executives, ranging from an interest in current electricity costs to a desire for grid independence after Legrand suffered an unprecedented nine-day blackout in the autumn of 2013. The technology is expected to cover about 88 percent of the power needed to run the 263,000-square-foot, 100-year-old campus.

"We’re constantly working to take a portfolio approach to energy," said Susan Rochford, vice president of energy efficiency, sustainability and public policy for Legrand North America, when GreenBiz spoke with her about the strategy behind the selection.

Five years ago, the $4.5 billion company committed to reducing its energy intensity by 25 percent for its 14 U.S. facilities with a decade. The technology in West Hartford will reduce intensity by 10 percent within the next two years, according to the company.

"Legrand now has its sights set on achieving another 25 percent total reduction in energy intensity across all of its North American facilities from a 2012 baseline, and the fuel cell is going to help us meet that lofty goal here," Rochford said at an April event dedicated to showing off the installation.

What’s the appeal?

In a world where solar and wind power becomes cheaper by the month, fuel cells are still generating plenty of revenue. Annual sales through 2023 could reach $57.8 billion, according to projections last year by Navigant Research.

So why are fuel cells still a compelling option? Financial incentives, apparently, are still a powerful deal closer. "Fuel cells should be an economic decision first," suggested Vince Digneo, sustainability strategist for corporate responsibility at Adobe Systems. The company maintains 1.6 megawatts of fuel cell capacity at offices in San Francisco and San Jose, California.

California has provided more than $1.3 billion in incentives for fuel cell installations since 2001, although the state is considering a halt to that program. Its rationale is that fuel cells powered by natural gas aren’t as "clean" from an emissions standpoint as previously suggested. Other states, including Connecticut, are still firmly behind them. That means a company can use the technology to qualify for low-emission renewable energy credits (LRECs). That was a factor in the Legrand evaluation process.

Real estate considerations were also a factor. For the Hartford site, solar wasn’t practical because of the age of the buildings and the strain that the panels would have put on the roofs, said Bill Luchon, senior manufacturing engineering and environmental leader for Legrand’s electrical wiring systems division. Using solar would have required additional investments in the buildings, which Legrand wasn’t prepared to make.

Incentives likewise were instrumental in financial services firm Morgan Stanley’s decision to install a first-of-its-kind fuel cell project on top of its headquarters high-rise building in New York. The massive installation will produce about 6 million kilowatt-hours of power annually after it goes live in late 2016. It was funded by a long-term credit contract arrange through the New York State Energy Research and Development Authority.

This is potentially a very disruptive approach.

"Following on the success of our fuel cell installation in Purchase, New York, this project further exemplifies how we can improve the sustainability and resiliency of our facilities, while controlling costs and being responsible to our business, our shareholders and our planet," said Jim Rosenthal, chief operating officer for Morgan Stanley. 

Morgan Stanley’s installation in Westchester County is actually adjacent to a six-acre solar field composed of more than 3,000 panels. Together, the technologies produce about 3 million kilowatt-hours of power annually. 

Keeping the lights on

Another big ongoing perceived benefit of fuel cells is predictability, especially if other sources of power aren’t available. "The cell will produce all the time," Legrand’s Luchon said, underscoring his company’s decision to select fuel cells instead of solar for its Connecticut site.

Not coincidentally, Legrand’s home city of Hartford is also investing in Bloom fuel cells to build a 800-kilowatt project that will provide power for several buildings. "When the power goes out elsewhere, our state-of-the-art microgrid will keep the power running at a senior center, library branch, school, health center, supermarket and gas station," said Hartford mayor Luke Bronin.

Tech giant Microsoft also continues to invest in fuel cells, although it doesn’t consider them to be "inherently renewable." Instead, the company views the technology as a way of better distributing and balancing power loads (PDF) across its massive data centers. That’s the main focus of the ongoing test at its biogas-powered data center in Wyoming, which also includes FuelCell Energy.

By using fuel cells, Microsoft believes it can deliver power more directly to the servers and other computing equipment that run applications and cloud services. It does this by designing the fuel cells right into the "racks." That helps eliminate certain electrical distribution equipment and could allow more data centers to be run off the grid, more efficiently. "This is potentially a very disruptive approach," said Sean James, senior research program manager for Microsoft.

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