Hydrogen Fuel Cell Economy Slowing, Not Stopping In Connecticut

Connecticut has emerged as a leading center for U.S. hydrogen and fuel cell development over the past several years. But the Connecticut hydrogen industry is about to become an unwilling test case for the ability of the national hydrogen sector to survive lean times.

Two key setbacks should serve as a warning sign for fans of the hydrogen economy -- or they could demonstrate its resiliency, depending on perspective.

Goodbye, federal fuel cell tax credit

As reported by the Connecticut Mirror last month, one of the setbacks was national in scope.

That story started in 2015, when Congress passed a law that extended federal tax credits for major league wind and solar energy development.

Unfortunately for hydrogen economy fans, several minor league clean-power sectors were omitted from that legislation, including small-scale distributed wind, geothermal heat pumps, and combined heat and power, as well as fuel cells.

Apparently Republican leadership in Congress pledged to extend those credits at the earliest opportunity. However, a Dec. 31 deadline came and went without action after the Koch-funded group Americans for Prosperity launched a campaign against extending the credits.

As a result, projects in those sectors lost an investment tax credit of 30 percent as of 12:10 a.m. on Jan. 1.

When renewables eat each other

The other blow was specific to Connecticut. It came down last fall, when the Connecticut Department of Energy and Environmental Protection decided to skip over fuel cells for 25 state-awarded, clean-energy projects covering almost 800 megawatts in Connecticut, Massachusetts and Rhode Island.

By way of explanation, DEEP cited the low cost of competing forms of alternative energy, primarily solar.

Hydrogen and fuel cell advocates warn that the narrow focus on solar costs could come back to bite Connecticut ratepayers.

One factor that could boost costs is the need for additional energy storage, grid connections or backup power plants to supplement solar farms.

Another factor is the possibility that bidders on the contracts may have predicted lower costs that fail to materialize, due to rising demand for solar panels in the U.S. and globally.

Hydrogen economy forges on

Hydrogen stakeholders may yet be proven right about DEEP's decision. But as the Mirror reported, the fallout has already begun:

"Failure to win those contracts led FuelCell Energy to announce layoffs at its corporate offices in Danbury, its manufacturing site in Torrington, and several 'remote locations.' A total of 96 people were laid off, representing 17 percent of the company’s work force," wrote the Mirror's Ana Radelat.

"Chip Bottone, president and CEO of FuelCell Energy said failure to extend the tax breaks contributed to the decision to shrink the workforce."

In the same interview, though, Bottone provided an important clue regarding a key factor that could help sustain the domestic hydrogen and fuel cell industry through lean times.

That would be the need for a robust domestic fuel cell industry in support of national security interests. The Department of Defense is a major consumer of fuel cell technology. NASA is another federal agency that relies heavily on hydrogen fuel and fuel cells.

Bottone pointed out that the U.S. has become a global fuel cell technology leader with an established domestic supply chain and strong demand for its products overseas.

In contrast, the U.S. solar cell manufacturing industry has seen its global market share fall off a cliff. Starting at a 1995 benchmark, the tailspin lasted until 2006 before leveling off far behind the current industry leader, China.

Connecticut has already established itself a one of top three states for the U.S. hydrogen and fuel cell economy (the other two are California and New York state), which could also help local companies lobby for a renewal of federal support.

The state's fuel cell industry is also credited with vaulting Connecticut into the Clean Tech Leadership Index Top Ten in 2014.

What about sustainable hydrogen?

Another factor that may sustain Connecticut's hydrogen economy is the interest of the Energy Department in sustainable hydrogen production.

The Connecticut company Precision Combustion is one example. Last June, the company won a competitive Energy Department small business grant to develop a solar-powered system for capturing carbon from industrial gases and converting it to other carbon-based products.

Renewable hydrogen -- sourced from water using wind or solar in a power-to-gas system -- would bump things up a notch up the sustainability ladder. If all goes well, power-to-gas facilities could begin sprouting in Connecticut.

Last year the Hartford Business Journal reviewed FuelCell Energy's proposal for the world's largest fuel cell "park" and noted the potential boost for wind and solar production in the state:

"... the renewable energy industry will have the ability to make use of off-peak electricity to generate energy and then store it as hydrogen. That energy can be used to fuel zero-emission vehicles, produce thermal energy and electricity with fuel cell technology whenever needed, or be introduced into the natural gas pipeline. This power-to-gas application could potentially develop a new renewable gas credit market."

Unfortunately, the fuel cell park proposal was one of those skipped over by DEEP last fall.

However, FuelCell Energy is still pursuing the fuel cell project through other pathways and it has several additional proposals on DEEP's desk.

A decision on those is expected by the end of the month so stay tuned.

Image (screenshot): via Connecticut Hydrogen-Fuel Cell Coalition, chfcc.org.

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