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The Benefits of Distributed Fuel Cell Power Plants and Their Role in the Hydrogen Transition

Joel N. Swisher, PhD, PE

The Benefits of Distributed Fuel Cell Power Plants and Their Role in the Hydrogen Transition Joel

The Hydrogen Transition - Why?

• Hydrogen (H 2 ) is neither a final product with any inherent demand nor a new source of energy that exists in any significant quantity (on Earth)

• Rather, H 2 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 H 2 delivery infrastructure until there is substantial demand from H 2 users

– No incentive to produce H 2 technology (e.g., cars) until there is adequate H 2 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

renewable generation • …suggests a possibility of carbon-free energy delivery from ‘scrubbed’ fossil fuels
renewable generation • …suggests a possibility of carbon-free energy delivery from ‘scrubbed’ fossil fuels
What does the bridge to a hydrogen economy look like?
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 H 2 -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 H 2 appliances get cheaper, put them at “gas” stations

4. As both H 2 and fuel-cell vehicles become widespread, bulk production and central distribution of hydrogen becomes feasible

5. Produce H 2 via electrolysis with renewable electricity

H 2 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 H 2 transition!

- I will discuss these distributed benefits further

2. H 2 fuel-cell vehicles - Radically improved (~3x) efficiency in vehicle platform physics (weight, drag)

- Makes the fuel cell affordable

- Makes room for the H 2 (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. •

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

T&D can no longer be considered simply an extension of the generation system - the costs

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.

in grid cost and ancillary services – Utility and customer reliability value – Externalities: emissions, noise,

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
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
$330 to $440
$220 to $330
$110 to $220
(3)
(2)
(4)
(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

MW

Capacity

(or Load)

low cost to start, stop, defer MW Capacity (or Load) Electric Load Install Central Source Install
low cost to start, stop, defer MW Capacity (or Load) Electric Load Install Central Source Install

Electric Load

Install Central Source

Capacity (or Load) Electric Load Install Central Source Install DG Source Lead-time and cost of large
Capacity (or Load) Electric Load Install Central Source Install DG Source Lead-time and cost of large

Install DG Source

Lead-time and cost of large resourceLoad) Electric Load Install Central Source Install DG Source Idle capacity of large resource Overbuilt capacity

Idle capacity of large resourceInstall DG Source Lead-time and cost of large resource Overbuilt capacity Capacity: large sources Capacity: DG

Overbuilt capacityand cost of large resource Idle capacity of large resource Capacity: large sources Capacity: DG sources

resource Idle capacity of large resource Overbuilt capacity Capacity: large sources Capacity: DG sources Electric load
resource Idle capacity of large resource Overbuilt capacity Capacity: large sources Capacity: DG sources Electric load

Capacity: large sources

Capacity: DG sources

Electric load

Time

Idle capacity of large resource Overbuilt capacity 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

Based on analytic advances in determining utilities' area- and time specific (ATS) marginal costs

Depend most on distribution and local transmission costs (unlike the system-level costs, which depend most on generation and bulk transmission costs)

q

q

Benefits of this approach:

q

q

q

q

Prioritizing DG plant siting to maximize cost-effectiveness

Targeting high-impact DSM programs by area and time

Understanding T&D cost structure

Improving T&D planning criteria

high-impact DSM programs by area and time Understanding T&D cost structure 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!

Area Area Area 1 3 2 Area 4 Area 5 Area 6 Area 10 Area
Area
Area
Area
1
3
2
Area
4
Area 5
Area 6
Area 10
Area
7
Area
Area
8
9 Area
11

Utility Service Territory

High Cost Areas – Year 1

Area Area Area 1 3 2 Area 4 Area 5 Area 6 Area 10 Area
Area
Area
Area
1
3
2
Area
4
Area 5
Area 6
Area 10
Area
7
Area
Area
8
9 Area
11

Utility Service Territory

High Cost Areas – Year 5

Area Area Area 1 3 2 Area 4 Area 5 Area 6 Area 10 Area
Area
Area
Area
1
3
2
Area
4
Area 5
Area 6
Area 10
Area
7
Area
Area
8
9 Area
11

Utility Service Territory

MDCC (PP/kW)

ATS Marginal Capacity Costs

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

ATS marginal capacity costs (excluding low-voltage works) 16000 14000 12000 10000 8000 6000 4000 2000 0
16000 14000 12000 10000 8000 6000 4000 2000 0 1995 2000 2005 2010 2015
16000
14000
12000
10000
8000
6000
4000
2000
0
1995
2000
2005
2010
2015

2020

year

West13West34 Cent13 Cent34 East 69kV

West34West13 Cent13 Cent34 East 69kV

Cent13West13 West34 Cent34 East 69kV

Cent34West13 West34 Cent13 East 69kV

EastWest13 West34 Cent13 Cent34 69kV

69kVWest13 West34 Cent13 Cent34 East

Percent of Utility Load Greater

than MDCC

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

high-cost areas. Amount of Load at Different Levels of MDCC 100% 90% 80% 70% 60% 50%
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
$0 $140 $280 $420 $560 $700 $840 $980 $1,120
$0
$140
$280
$420
$560
$700
$840
$980
$1,120
$1,260 $1,400 $1,540 $1,680
$1,260
$1,400
$1,540
$1,680

Marginal Distribution Capacity Cost

PG&E PSI KCP&L CP&L
PG&E
PSI
KCP&L
CP&L

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

Power supply reliability/resilience EPRI-website synthetic satellite image, 10 August 1996…utilities routinely keeping
Power supply reliability/resilience EPRI-website synthetic satellite image, 10 August 1996…utilities routinely keeping

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

Problems for renewables: must be dispatchable and reliable • Early market niches with substantial distribution

• 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 m 2 ; 47 floors non-toxic, low-energy materials 40% energy savings/ft 2 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

at lower floor(s)) Experiment in Performance Based Fees rewarding savings, not costs • Market average construction

Which distributed benefits apply to each resource?

Type of distributed benefit:

Targeted DSM

Distributed

Renewable

co-generation

sources

Option value

Yes

Yes

Yes

Electric

Yes

Yes

Yes

energy

value

Thermal

Possible

Yes

Unlikely

energy

value

Deferral value, engineering cost savings, ancillary services

Possible

Possible

Difficult for intermittent source

Reliability

Some (reduced cost of backup)

Yes, with

Difficult, but can provide fuel independence,

modular

design

Environment

Yes

Depends on technology

Yes

H 2 from Renewable Sources

The ultimate goal, but demands a deliberate approach along a difficult, complex path

a deliberate approach along a difficult, complex path Bottom line: The H 2 economy needs Hypercar
a deliberate approach along a difficult, complex path Bottom line: The H 2 economy needs Hypercar

Bottom line: The H 2 economy needs Hypercar ® and DG more than Hypercar ® and DG need the H 2 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.