High hopes, low support for growing the fuel cell industry

In the last decade, fuel cells–those extremely efficient electro-chemical devices that make power from hydrogen and oxygen–have been seen as Connecticut’s ticket to the alternative energy ball.

The state remains a hub of the fuel cell industry, but it is a glass half full and half empty.

Half full, it has created jobs and increased business despite an economic downturn that all but killed financing for multi-million-dollar fuel cell projects, even as improved technology has made them cheaper.

Half empty, gains have been small, with projects mainly overseas or in California. Connecticut’s own fuel cell plans have languished, undermining a strategy to become home to fuel cell demonstration projects that would spur business.

State funding and incentives are nearly nonexistent and companies headquartered here say if they weren’t already in the state, they would have no reason to come and expect other fuel cell manufacturers won’t.

“I get calls regularly from a handful of states and a couple of countries: ‘What can I do to get you to come here?'” said Mike Brown vice president for government affairs and general counsel at UTC Power in South Windsor, a division of United Technologies. UTC Power has supplied fuel cells to NASA for every manned space flight since 1966 – a relationship that ended in April.

UTC Power has doubled employment in the last five years, has had a steady stream of clients and can boast nearly 300 systems in 19 countries. But Brown and others say Connecticut’s hold on the fuel cell industry is tenuous.

“If you’re going to have an energy industry in the state, the first thing you better do is figure out what energy means to that state and I don’t think we’ve done that,” said Brown, who advocates creation of a cabinet-level energy position in state government. “Connecticut has its head in the sand on lot of this energy stuff.”

Nowhere near as imposing as wind turbines or sleek as solar panels, fuel cells sit in industrial-looking boxes or motor vehicle engine compartments. Their only waste products – water and heat – are often put to use as well.

While UTC Power developed the one fuel cell bus in use in Hartford since 2007 — four more are finally scheduled for delivery to CT Transit in the next six months – the core of Connecticut’s fuel cell industry is stationary fuel cells, essentially mini power plants. They can serve specific sites, like the Cabela’s in East Hartford and a new state-of-the-art high-rise apartment building in New Haven, or they can be connected to the power grid. Plans to use fuel cells to generate grid power in Connecticut through the Connecticut Clean Energy Fund’s Project 150 have stalled, with eight projects still in need of financing.

In Connecticut, according to a preliminary white paper by the Connecticut Center for Advanced Technologies, there are about 80 companies, organizations, and governmental and academic entities related to fuel cells – a number that has not changed since about 2006. In that time the related jobs have increased from around 2,100 to more than 2,900. Revenues remain flat at about $340 million.

The state still boasts the most widely renowned academic center for fuel cells at the University of Connecticut, though recently many other universities have created or enlarged similar programs.

A 10-year projection three years ago anticipated 120,000 fuel cell related jobs in Connecticut and $18.6 billion in revenue. Many insist it’s still possible, though admit the state no longer has attractive enough incentives to win the lion’s share of the industry’s growth.

“If the market does develop, will Connecticut catch this market?” asked Joel Rinebold, the director of energy initiatives at CCAT. “That’s a big question.”

Money is part of the problem. Federal investment tax credits typically cover about one-third of fuel cell costs, but the upfront expense is often too steep without assistance. The Clean Energy Fund’s 2011-2012 comprehensive plan, still awaiting approval by the Department of Public Utility Control, earmarks $8 million in federal stimulus funds for fuel cells, but is effectively already allocated to projects in the pipeline. The Fund’s Best in Class program, which would include money for fuel cells, is out of money and awaiting approval for more. A $5 million pilot project for fuel cells in state buildings was included in an energy bill that passed the legislature last session but was vetoed by Gov. M. Jodi Rell.

Most parties also suggest policies such as carbon taxes, a federal standard for renewable energy and innovations like a smart grid instead of the large centralized electrical grid throughout the U.S. now would help push fuel cells into greater use.

“It is a jigsaw puzzle and you have to put all the pieces together,” Rinebold said. “But you have to put them together in the right way.”

For companies like Proton Energy Systems of Wallingford, which as a hydrogen generation company does about 35 percent of its business for fuel cells, even one piece of that puzzle would be welcome.

“Connecticut, despite being a hub, does a very poor job,” said Mark Schiller, vice president for business development, who said Proton hasn’t received a dime from Connecticut for demonstration projects since 2004. Next month, it’s opening the state’s first public hydrogen fueling station – funded on its own. (Toyota is supplying fuel cell cars as part of a nationwide promotion.)

“Quite honestly,” Schiller said, “I think Connecticut is at risk of losing some of its technological know-how to other parts of the country.”

Such sentiment frustrates Rep. John Larson, D-1st District and founder of the Congressional Fuel Cell Caucus in 2004. He advocates a mandate to convert new state buildings to green technology, including fuel cells, and lays part of the blame on a Wall Street mentality that looks for short-term profits. Connecticut’s failure to step up to the plate is at its own peril, he said.

“Someone else is going to make the investment because they get it and they’re going to bet on patient capital and bet on the long term result,” Larson said.

While not a focus of the current governor’s race, Democratic candidate Dan Malloy has criticized Rell for not using more stimulus funds for fuel cells.

“The state either demonstrates the desire to retain this industry, and I mean the manufacturing not just the research,” he said, “or we lose it.”

Republican candidate Tom Foley is more cautious. “I don’t think it’s an appropriate role for government to pick technological winners and losers and invest an awful lot in a particular technology,” he said.

Fuel Cell Energy in Danbury, the state’s only other fuel cell manufacturer has never turned a profit. The company’s stock is hovering slightly over a dollar a share 10 years after it was more than $50 and stock analysts tend to rate it a hold. Its fuel cells are the ones stalled in Project 150 and recent business relies on a partnership with the South Korean power company POSCO (which owns 10 percent of its stock) and projects in California.

Vice President Frank Wolak is also frustrated, but optimistic. The state, he said, is squandering an opportunity to build on the export economy Fuel Cell Energy and UTC Power created. “The industry has continued in sort of a struggling way to keep moving forward while external pieces remain disjointed,” he said, but added that there is a “real potential for erosion.”

“Connecticut had the right framework and right leadership in place,” he said. “What’s gotten lost is the willingness to move forward in a really aggressive way. This is a good industry. Let’s find a way to let this grow.”