AP Exclusive: Conn. rethinks costly fuel cells

November 20, 2011 - 1:30 PM

HARTFORD, Conn. (AP) — After spending millions of dollars to run a state complex with fuel cells, partly to boast of their size and also to tout a homegrown industry, Connecticut officials concede privately that the cost is too high and they're looking to get out of a complicated, long-term contract.

The state spends $1.4 million every year for the fuel cells at its 10-year-old juvenile center, an amount that Connecticut's energy commissioner, Daniel Esty, called excessive in an email Sept. 6 to the governor's budget chief.

"The fuel cells installed were oversized for the facility to be able to 'brag' about it being the largest fuel cell installation in the world" at that time, he wrote in the email that was obtained by The Associated Press in a Freedom of Information request.

He was responding to a message from the budget chief, Benjamin Barnes, who said removing the fuel cells would save that $1.4 million each year — "real money by any measure."

But state officials have been reluctant to remove the cells "because of the appearance that we were renouncing green technology and because it was launched with some fanfare," Barnes wrote. "This position deserves at least reconsideration."

The emails shed light on a pricey state subsidy and the cost of fuel cells at a time when policymakers want to wean energy users off such fossil fuels as natural gas and oil, and show the state's willingness to part with a long-promoted project to close its budget deficit in tough economic times.

The fuel cells were installed in 2001 at the Connecticut Juvenile Training School in Middletown, which was a debacle from the start. The contract to build it was corrupted in a scandal that took down a top adviser to then-Gov. John G. Rowland, who himself resigned after a corruption probe.

The fuel cells, chillers, boilers, switch gear and piping were installed as part of a 30-year deal, said Richard Ogurick, manager of plant operations for Ameresco, an energy services company that runs the fuel cell system.

"It was inconceivable they'd stop using fuel cells here," Ogurick said. "How can you on one hand be advocating for fuel cell development and be telling businesses that's what they ought to do and not do it at your own facility? It doesn't make very much sense."

Connecticut is home to two of the largest makers of fuel cells, UTC Power in Windsor and Fuel Cell Energy Inc. in Danbury.

Esty, who was a Yale University professor of energy and policy before Gov. Dannel Malloy appointed him to state government, gained a national reputation as an energy expert and has written extensively about how businesses can use environmental policy to improve their competitive advantage.

In an interview last week, he told the AP that his emphasis has been to promote "clean and cheap energy" and the Middletown site fell short.

"We want to be very careful how we use taxpayer and shareholder money," he said.

The fuel cell installation at the juvenile center was "not well thought-out and did not make sense," Esty said.

Backers tout fuel cells as energy sources that do not produce pollution or noise. A fuel cell makes electricity from chemical reactions involving hydrogen and oxygen, producing only water vapor as a byproduct. They're used for buses and recreational vehicles, heating and cooling systems for buildings and backup power.

Fuel cell manufacturing is labor-intensive, making fuel cells expensive in comparison with everyday fuels such as oil and natural gas, said Adam Weber, a staff scientist at Lawrence Berkeley National Laboratory.

Stationary fuel cells, used to heat and cool buildings, are rare. The Pentagon has a few at military bases and a few operate at courthouses and jails in California, he said.

In an interview, Barnes told the AP that the review of the power produced at the Middletown site reflects Connecticut's "tremendous cost pressures" rather than an effort to abandon an industry in the state.

"It does not have anything to do with our commitment to fuel cells," he said.

The Malloy administration, in office for about eight months when Esty and Barnes were discussing the fuel cells, was trying to close a budget deficit of more than $3 billion with tax increases and cost-cutting.

As part of a statewide tour to promote jobs, Malloy in August visited UTC Power, the United Technologies Corp. subsidiary that manufactured the fuel cells at the juvenile center.

Barnes cited "non-economic benefits" such as government supporting a Connecticut-based industry and a state agency taking the lead in using alternative energy. The Middletown site also was unaffected by the loss of power affecting hundreds of thousands of utility customers for a week or longer following the late October snowstorm.

The fuel cells produce electricity and the plant recovers heat that is used to make hot water and chill water, Ogurick said.

He said the state would not save $1.4 million by moving to the utility grid because it would still have to operate the chillers, and other equipment, he said.

Fuel cells are not inexpensive but the return on investment depends on how comparing their costs to those of electricity and natural gas costs and that depends on where a fuel cell is located, said Mike Glynn, spokesman for UTC Power.

"It's not one size fits all," he said.

Connecticut is not quitting them, though. UTC Power has signed contracts to install fuel cells at the University of Connecticut and Eastern Connecticut State University, and a power plant will be built at Central Connecticut State University. Electricity and steam will be generated by the plant, which will be maintained by Fuel Cell Energy.

As for the future of the Middletown plant, Barnes said state officials are examining a "very complex" and lengthy set of legal agreements binding the state to the fuel cells, he said.

"We need to understand the complex transactions the state is engaged in," he said. "Maybe the best option is to continue the arrangement as it currently exists," he said.

Esty said one possibility is to move the fuel cells to another state site that would be a better fit. He did not have details where the fuel cells could go.

"We're digging into it," he said.

Ogurick said the contract doesn't leave state officials with much of a choice.

"The state has to pay it even if it walks away from it," he said.