Dan Haar: A stunning clean energy reversal in the works
It’s been a roller coaster year at Danbury-based FuelCell Energy, and not just because of coronavirus. The hydrogen energy company has shown signs of new momentum and for a while at least, had a boost from its home state and planned to hire 100 people.
Until the boost ended abruptly, perhaps unfairly.
One of the upswing moments came on Sept. 28, when FuelCell Energy won — or rather, appeared to win — bids for the right to sell power from four locations totaling 11 megawatts to Eversource and United Illuminating. Doosan Fuel Cell America, based in South Windsor, also won a bid, and a fuel cell maker from California won a bid.
Then on Nov. 16, in a highly unusual move, Connecticut utility regulators told Eversource to go back and “re-evaluate” solar power bids that had been disqualified in September and again rejected in October after seven solar companies appealed. Eversource is set to announce the new set of winners Friday.
For FuelCell Energy, a company that has long struggled to gain a foothold in the clean power market with its technology based on chemical conversion of hydrogen, it could become another in a long line of snubs by the state in awarding contracts for renewable energy projects.
“I think there is an agenda bias for solar,” said CEO Jason Few, who joined the company in 2019.
I’m not going to weigh in on whether I believe that bias exists. What matters are the facts behind the bids and the facts of what’s happening behind closed doors at Eversource, at the Public Utilities Regulatory Authority and at the state Department of Energy and Environmental Protection, which implements policy and oversees PURA.
Fuel cells do consume natural gas — which some environmental activists oppose in any form for new plants. The technology uses about 80 percent of the natural gas of conventional plants, per megawatt-hour, but it creates no pollution or greenhouse gases because it doesn’t burn the fuel.
It also hasn’t come down in price as fast as solar power, though fuel cell industry executives say they’re competitive on price when all factors are included.
There should be no bias because the General Assembly has deemed fuel cells Class I renewable generation.
Unlike grid-scale solar and wind power, fuel cell is localized, right where the power is needed, so it doesn’t require costly and environmentally nettlesome transmission. It runs 24/7, not intermittently, so it replaces existing power capacity on the grid, unlike solar and wind, which still need back-up power until someone invents batteries for the whole grid.
When those batteries do come on line, said FuelCell Energy CEO Few, a longtime power industry executive, we’ll have to figure out how to mine and handle all that lithium.
Fuel cell companies pay local property taxes and state sales taxes, unlike exempt solar. And fuel cells take up very little space, compared with wind and solar power. One of the solar projects that did win a bid would gobble up several acres of a suburban woodland in North Haven — a town that might have very little say over permits for the project.
In short, as state House of Representatives Majority Leader Jason Rojas put it, there ought to be room for all of these technologies. “Clearly there’s a need to review the process here,” Rojas said.
Stock price triples
The apparently winning bids for FuelCell Energy in Danbury, Derby, East Hartford and New Britain, and for Doosan in Enfield, mostly at old industrial sites, were part of a new effort called the Shared Clean Energy Facility (SCEF) Program. (Energy people love acronyms almost as much as military people do.) The idea is to spread the benefits of renewable energy credits to families that don’t live in big, sunny houses where they can cover a roof with solar panels.
FuelCell Energy badly needs more installed generation to demonstrate that its technology works, to bring the cost per kilowatt-hour down, to show support from its home state and to increase the up-and-down employment we’ve seen over the years at the Danbury headquarters and Torrington plant.
FuelCell, a publicly traded corporation, issued a press release on Sept. 29 announcing the awards. After the presidential election, starting on Nov. 12, FuelCell saw its stock price triple, apparently as the market came to believe President-elect-in-waiting Joe Biden will back the industry.
“To have the state of Connecticut reverse a decision after we’ve already announced an award would be extremely harmful to the company and certainly doesn’t support the growth objectives that we have in terms of hiring new people,” Few said. “It’s a very important part of our growth efforts.”
FuelCell executives had worried over the summer that they’d be iced out. Then in early September, Eversource told state regulators that most of the solar power bids didn’t follow the bid instructions, largely related to their documentation of control over the proposed sites. PURA took a look and on Sept. 18, told Eversource to carry on, and pick from the ones that met the rules.
Naturally, the solar companies appealed. In a sharply worded rebuke on Oct. 9, PURA told them to try again next year; it’s a 6-year program with 25 megawatts per year.
A re-evaluation would be unwieldy, PURA said, and “would be unfair to those projects” that met the standards.
‘Unreasonable, arbitrary, and capricious’
Over the years that’s pretty much what the fuel cell companies have been told when they complained about not being picked. In open bidding between 2013 and 2019, the state awarded bids for nearly 800 megawatts of alternative power generation, most of it outside of Connecticut, mostly solar and wind, zero for fuel cells.
The exception was a carve-out, mostly for fuel cells, by the General Assembly, which led to successful bids in 2018. FuelCell Energy has about half of its nearly 90 megawatts of installed power base in Connecticut, so the story is mixed and clearly the company needs to generate sales elsewhere as well as here.
The Nov. 16 reversal by PURA came as a surprise. “This ruling is not intended to favor any particular bidder or technology,” the order stated. “The success of the SCEF program depends upon an open and competitive procurement process that encourages participation.”
PURA spokeswoman Taren O’Connor explained in an email that the bids were not “awarded” back in September; rather, certain bidders received notifications from Eversource and UI that they had been selected.
“All bidders are told up front....that actual awards are subject to PURA review and approval, which is consistent with all other clean energy programs administered by PURA,” O’Connor wrote.
That’s true, but, as FuelCell Energy and Doosan both said in hastily filed responses, that’s not how PURA has always operated. And more to the point, nothing had changed since PURA rejected the solar appeals.
“Those long-standing principles have been uprooted in this case by the Authority’s sudden and drastic about-face,” FuelCell said in a filing calling the order “unreasonable, arbitrary, and capricious.”
“They certainly did not change the rules on our behalf when we’ve lost bids,” Few said in my interview.
“It’s a big deal. It’s crazy what they did,” said David Giordano, head of government relations at Doosan. “What bothers us the most is, they’re more concerned with how it affects the bidders that were disqualified but they’re not concerned with how this affects the bidders that were selected.”
Giordano said the company that would host Doosan’s plant in Enfield had already started hiring and work on the site.
FuelCell Energy is down to 270 employees at the two main Connecticut locations, from a high of nearly 550 just four years ago, when the state Department of Economic and Community Development approved a $30 million aid package. Earlier this year the company received between $5 million and $10 million in the coronavirus Paycheck Protection Program aimed at small companies — which it is, technically — and that saved a lot of jobs.
With two rounds of new capitalization, and a stock that’s suddenly back up from the dumps, FuelCell Energy is set for new momentum, Few says. We’ve heard that before and the company does have a good story to tell despite losing tens of millions of dollars a year so far.
What’s happening in its home state is part of that story, and bears watching closely.