Expensive though they are, fuel cells have also begun allowing some companies to save money. In 2007, Whole Foods Market installed a 200-kilowatt phosphoric acid cell in a supermarket in Connecticut, where subsidies fund 25 to 40 percent of the cost of a fuel-cell system. The fuel cell, which runs on natural gas, is made by UTC Power, a subsidiary of United Technologies Corporation. It provides about half of the store’s power, and the market pays 30 percent less for energy than similarly sized stores that use the same electric utility. Whole Foods has since installed two 400-kilowatt fuel cells and plans more, but not everywhere. “Fuel cells only make sense where there are state incentives,” says Kathy Loftus, Whole Foods’ global leader of sustainable engineering and energy management. Rather than buying the fuel cells, Whole Foods reduced its risk with a 10-year lease, which includes a requirement that the technology produce at least a certain amount of power.
The fuel cells are still “not inexpensive,” says Michael Glynn, communication and marketing manager at UTC Power. But if a business needs power and heat night and day, and its buildings are engineered to use the waste heat, “companies can see payback in energy savings within five years and as low as three years,” he says.
One up-and-coming fuel-cell provider for large businesses is Bloom Energy, which makes what’s called a solid oxide fuel cell. The startup came out of stealth mode last year to a great deal of fanfare, with announcements that its customers included Walmart and eBay. It also faced a healthy dose of skepticism. Several other companies have developed technologies similar to the one it uses, and its initial costs ($700,000 to $800,000 for a 100 kilowatt system) seemed in line with what other types of fuel cells cost. What’s more, Bloom’s cells weren’t designed so that their waste heat could be put to use. Although this makes installation simpler, it eliminates a significant source of energy savings. Yet 200 of Bloom’s systems have been sold and installed so far.
Bloom’s success seems to be due in large part to a successful marketing campaign and federal and state subsidies that cut the costs of its systems in half. This month it announced a new financing plan that could help even more. Instead of buying fuel cells, companies can just buy the electricity the cells produce, with rates locked in for 10 years. Bloom claims that for some companies, this can reduce electricity costs by 20 percent.
For all the cost reductions and financing innovations, fuel-cell companies are still leaning heavily on government subsidies, and it’s not clear how long those will last. “The real long-term challenge is to reduce production costs at the same rate as these subsidies are drawn back,” Jaffe says. He estimates that costs have to be cut in half for fuel cells to be economical without subsidies.