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2004 Lipman FC Economy

2004 Lipman FC Economy

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April 2004byTimothy LipmanUniversity of California, BerkeleyBerkeley, CA 94720Ph (510) 642-4501Fax (530) 642-0910telipman@socrates.berkeley.eduwithJennifer L. EdwardsandDaniel M. Kammen
Institute of Transportation StudiesOne Shields AvenueUniversity of CaliforniaDavis, California 95616Tel: 530-752-0247 Fax: 530-752-6572http://www.its.ucdavis.edu/ email: itspublications@ucdavis.edu
Energy Policy 32 (2004) 101–125
Fuel cell system economics: comparing the costs of generatingpower with stationary and motor vehicle PEM fuel cell systems
Timothy E. Lipman, Jennifer L. Edwards, Daniel M. Kammen*
Renewable and Appropriate Energy Lab (RAEL), Energy and Resources Group, University of California,4152 Etcheverry Hall, Berkeley, CA 94720, USA
This investigation examines the economics of producing electricity from proton-exchange membrane (PEM) fuel cell systemsunder various conditions, including the possibility of using fuel cell vehicles (FCVs) to produce power when they are parked at officebuildings and residences. The analysis shows that the economics of both stationary fuel cell and FCV-based power vary significantlywith variations in key input variables such as the price of natural gas, electricity prices, fuel cell and reformer system costs, and fuelcell system durability levels. The ‘‘central case’’ results show that stationary PEM fuel cell systems can supply electricity for officesand homes in California at a net savings when fuel cell system costs reach about $6000 for a 5kW home system ($1200/kW) and$175,000 for a 250kW commercial system ($700/kW) and assuming somewhat favorable natural gas costs of $6/GJ at residences and$4/GJ at commercial buildings. Grid-connected FCVs in commercial settings can also potentially supply electricity at competitiverates, in some cases producing significant annual benefits. Particularly attractive is the combination of net metering along with time-of-use electricity rates that allow power to be supplied to the utility grid at the avoided cost of central power plant generation. FCV-based power at individual residences does not appear to be as attractive, at least where FCV power can only be used directly orbanked with the utility for net metering and not sold in greater quantity, due to the low load levels at these locations that provide apoor match to automotive fuel cell operation, higher natural gas prices than are available at commercial settings, and other factors.
2002 Elsevier Ltd. All rights reserved.
Fuel cell; Distributed generation; Net metering
1. Introduction
California’s net metering program is one of about 40state net metering programs currently in place aroundthe United States. These net metering programs allowexcess local electricity generation to be supplied to theregional utility grid for a credit that can then be usedlater to supply demands that are not met by the localgeneration. In some cases, excess generation must be‘‘taken back’’ from the utility on a monthly basis, withnet energy use calculated each month, and in other casesany excess can be carried over from month to monthwith the final net billing accounted for annually. In a fewstates net excess generation can be credited at theavoided cost of utility generation, but in most states anyexcess is simply ignored and customers cannot earn netcredits.A principal motivation for creating policies to allownet metering has been to make better use out of intermittent renewable generating systems, such as solarPV and wind power generators. These clean andtherefore socially attractive generating systems tend toproduce electricity with a profile that roughly matchesthe demand profile on the overall utility grid, with peakproduction often occurring in the middle of the day andinto the afternoon. For this reason, excess electricitygeneration is likely to be available when the demands onthe utility grid are greatest, and this strengthens theargument for offering net metered billing for customerswith PV and wind power systems. Of the state netmetering programs, some states like California onlyallow PV and wind systems to be net metered, andothers specify that all renewable power systems, includ-ing hydro-power, can qualify for net metering. However,a few states allow natural gas powered fuel cells,
*Corresponding author. Tel.: +1-510-642-1640; fax: +1-510-642-1085.
E-mail address:
dkammen@socrates.berkeley.edu(D.M. Kammen).0301-4215/04/$-see front matter
2002 Elsevier Ltd. All rights reserved.PII: S0301-4215(02)00286-0
microturbines, and other non-renewable systems to alsobe net metered.In April of 2001 and under AB 29X, the Californialegislature broadened the State’s net metering program(described in Section 2827 of the California PublicUtilities Code) by raising the maximum size of net-metered PV or wind power system from 10kW to 1MW. AB 29X also lifted the overall limit of 0.1% of each utility’s peak demand level that can be net metered.However, this expansion of the State program is set toreach a ‘‘sunset’’ at the end of 2002 and, barring anyfurther legislation, the 0.1% limit will be reinstated andthe previous system limit of 10kW will be applied againat that time.This paper analyzes the potential for a future changeto California’s net metering program to extend qualify-ing systems to natural gas powered fuel cell systems aswell as fuel cell systems powered by renewably producedhydrogen. The focus of this analysis is on fuel cellsystems that are powered with hydrogen produced fromnatural gas reformers, because such systems are likely tobe more economically feasible in the near term than fuelcell systems that run exclusively on hydrogen producedfrom renewable sources. In the future, technologicaldevelopments and various incentives could help tostimulate the installation of systems to produce hydro-gen renewably. Installing fuel cell systems that run onnatural gas initially could thus prove to be an importantfirst step to renewably powered fuel cell systems, butthese future development paths are far from clear.
2. Fuel cell systems for distributed power generation
Fuel cell technology holds the promise to produceelectricity at local sites from a wide range of fuels, andwith high efficiency. Most types of fuel cells operate onhydrogen fuel, but this hydrogen can be produced fromnatural gas, liquid hydrocarbon fuels including biomassfuels, landfill gases, water and electricity (via the processof electrolysis), biological processes including thoseinvolving algae, and from gasification of biomass,wastes, and coal. Fuel cells are being proposed for usein powering electric vehicles, providing remote powerfor buildings and communication facilities, providingpower as distributed generation (DG) in grid-connectedapplications (as either primary power or backup power),and for small electronic devices such as laptopcomputers and cell phones.One principal attraction of fuel cell technology, asevidenced by this diverse array of potential applications,is that fuel cells can produce power with high efficiencyin a wide range of system sizes. This feature is a functionof the modular design of fuel cell systems (whereindividual cells are compiled into ‘‘stacks’to achievehigher voltage and power levels), as well as the fuel celloperating principle that allows electricity to be producedwithout combustion. Several types of fuel cells arecurrently being developed, including proton-exchangemembrane (PEM) fuel cells, solid-oxide fuel cells(SOFCs), alkaline fuel cells (AFCs), phosphoric acidfuel cells (PAFCs), molten-carbonate fuel cells(MCFCs), and direct-methanol fuel cells (DMFCs).Low temperature PEM fuel cells are considered theleading contenders for automotive and small stationaryapplications, with SOFC, PAFC, and MCFC operatingat higher temperatures (from 200
C to 1000
C) andexpected to be used for larger stationary applications,and DMFCs for portable electronics and possibly forfuture electric vehicles.There are several potential operating methods forusing both stationary fuel cells and fuel cell vehicles(FCVs) as distributed generating resources. Thesesystems could be used to:
produce power to meet the demands of local loads;
provide additional power to the grid in a net meteredor electricity buy-back scenario, helping to meetdemands in times of capacity constraint;
provide emergency backup power to residences,offices, hospitals, and municipal facilities;
provide ‘‘peak shaving’’ for commercial sites, redu-cing demand charges;
provide ancillary services to the grid, such as spinningreserves, grid frequency regulation, power qualitysupport, reactive power, and possibly other services;and/or
provide buffering and additional power for grid-independent systems that rely on intermittent renew-ables.In general, stationary fuel cells are expected tooperate nearly continuously (with the exception of thoseused for emergency backup), and they also have thepotential to act as cogenerators, simultaneously produ-cing electricity and useful waste heat. FCVs wouldprovide power more intermittently, when parked atsuitable locations for obtaining fuel and dischargingelectricity. The fuel cell systems in FCVs would likely beless readily usable for cogeneration (also known ascombined heat and power or CHP) than stationary fuelcells due to the additional cost and complexity of tryingto capture the waste heat from these systems, for usesinside nearby buildings.Depending on the type of fuel cell system, waste heatis available at different temperatures and can be used forvarious heating and cooling applications. For PEM fuelcells, the waste heat is available at only about 80–90
C.Some other types of fuel cells run much hotter, up to900
C or even 1000
C. The low grade of waste heat fromPEM fuel cells is suitable for heating water and/orproviding space heating, thereby displacing energy thatis otherwise used for that purpose, while higher grade
T.E. Lipman et al. / Energy Policy 32 (2004) 101–125

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