We need to make more renewable electricity. We need to reduce energy waste. We need to cut carbon dioxide (CO2). We need to create green hydrogen. We need to do many things to solve the climate crisis, which leaves us chasing many technologies to do the job.
So, it was fascinating to learn recently about a single energy resource, a fuel cell, and all that it does — and can do later, in a recent conversation with Mark Feasel, executive vice president and chief commercial officer for FuelCell Energy.
We spoke after clean-tech integrator Ameresco announced last month that it is using FuelCell Energy technology as part of a 13.4 MW cogeneration plant for the Sacramento Area Sewer District in California.
The $140 million facility will produce electricity and heat from biogas (methane), which is a byproduct of treating solids at the EchoWater Resource Recovery Facility. Ameresco describes this as an example of the circular economy in action. Waste is not discarded but is turned into an asset that displaces fossil fuel that would otherwise be needed to process the waste.
Ameresco says that the 2.8-MW carbonate fuel cell, which uses an electrochemical process to convert the biogas to electricity, improves the project’s overall system efficiency and reduces emissions.
Positioning for green hydrogen and CO2 markets
That’s what it does now. But the fuel cell also anticipates the future, positioning the facility for a time when green hydrogen and carbon dioxide markets gain traction, as Feasel explained.
To understand how this will happen, it’s important to understand the fuel cell’s outputs and the market for those commodities.
The plant’s inputs are biogas and air. From those, it creates four outputs:
- Electricity to run the wastewater treatment plant
- Heat to speed up the breakdown of the waste, improving the facility’s efficiency
- Carbon dioxide
- Green hydrogen
While electricity and heat provide immediate service for the plant, carbon dioxide and hydrogen open up future possibilities as technology and markets evolve.
Although it’s considered carbon-neutral for climate accounting purposes, biogas does produce some carbon dioxide, which the plant now recycles to produce electricity. In the future, the carbon dioxide, which becomes concentrated in the fuel cell process, could be separated and used elsewhere or sequestered.
Similarly, the fuel cell also creates hydrogen that is currently recycled within the plant to generate electricity but could be separated and sold elsewhere in the future. The downside is that less electricity would be available for the facility—2.3 MW rather than 2.8 MW.
However, financially, it appears to make more sense to separate the hydrogen and sell it elsewhere, given that the US government offers a $3/kg tax credit. “If you do the math that works out a lot better than the extra power that you would generate,” Feasel said.
The gotcha
That all sounds good, but Feasel added that there is a “gotcha.” Who would buy the commodities today?
The fertilizer and oil refining industries are heavy users of hydrogen but not green hydrogen because it would significantly drive up the cost of their products. The transportation industry does offer a market, but the volume isn’t high enough yet for green hydrogen to achieve scale.
“So we’ve got a bit of a chicken and egg challenge. If you could find the place where someone would use all the hydrogen that you could make, you absolutely would want to create the hydrogen,” Feasel said.
That’s what happening at another FuelCell Energy project at California’s Port of Long Beach. In this case, the fuel cell is creating three outputs: electricity, water and green hydrogen. The output is being sold to Toyota Logistics Services, a vehicle processing and distribution center at the port. The 2.3 MW fuel cell produces up to 1,200 kg/day of hydrogen, available to fuel Toyoto’s light-duty fuel cell electric vehicle, Mirai, as well as a hydrogen refueling station at the port for heavy-duty operations.
The Port of Long Beach project is an exception; for the most part, the market for green hydrogen remains promising but nascent.
Carbon dioxide also faces market challenges. Again, the federal government has created an incentive known as the 45Q enhancement sequestration tax credit. In essence, the tax credit provides payment for injecting carbon dioxide into the ground rather than letting it release into the air.
However, there is no easy way to get it into the ground — few pipelines or wells exist — making it an illiquid commodity unless you find a “Goldilocks” situation, such as a Coca-Cola plant next door that uses carbon dioxide in its drinks, Feasel said.
Market liquidity forecast
But the markets for carbon dioxide and hydrogen are forecast to grow.
According to McKinsey, the climb is expected to be moderate through 2030 and then spike after that, with demand increasing nearly fivefold by 2050. At that point, the forecast shows green hydrogen serving 75% to 100% of a market now dominated by gray hydrogen. Carbon dioxide use is also on an upward trajectory, with an expected compound annual growth rate of about 5.4% from 2023 to 2033.
“Those markets are becoming more liquid. Eventually, we’ll be mixing hydrogen into our natural gas supply. There will be more hydrogen fuel cell trucks and buses and trains and all these things. Eventually, there will be a premium for green fertilizer and green steel for hydrogen,” Feasel said.
Fuelcell Energy’s approach to making facilities ‘future-ready’ is in keeping with a growing trend in energy projects. Energy technology is changing fast but it takes time for markets to catch up. Meanwhile, facilities must install new systems and equipment that make sense for today. Given that energy systems often last decades, they can easily be outdated before the end of their useful life if they are not built to anticipate change.
“Hydrogen and CO2 capture have massive promise,” Feasel said. “When, and how fast, is a million-dollar question.”
In Sacramento, the EchoWater Resource Recovery Facility will be ready.