A new law passed by the state legislature without much fanfare could have a major impact on Connecticut’s energy industry, providing a potential lifeline to two important, but struggling sectors: fuel cells and waste-to-energy power plants.
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A new law passed by the state legislature without much fanfare could have a major impact on Connecticut's energy industry, providing a potential lifeline to two important, but struggling sectors: fuel cells and waste-to-energy power plants.
While the two sectors are vastly different, the law provides one common benefit: the chance for more business and revenue.
For fuel cells, the law tees up a sizable opportunity to win coveted long-term power-purchase contracts with utility companies.
And for waste-to-energy plants, policy tweaks could help drive up long-stagnant prices of renewable energy credits, which plants earn and sell to reap a secondary revenue stream.
The stakes are high for both sectors, which employ thousands of workers in the state but have experienced layoffs and cutbacks recently due to slower demand.
In December, for example, Danbury's FuelCell Energy said it was cutting 96 jobs, or 17 percent of its workforce, as a result of weakened demand for its products. It, along with all other fuel cell manufacturers in Connecticut, also lost out last year on major long-term energy contracts put out to bid by the state.
Meantime, a trash-to-energy plant in Wallingford recently closed.
Energy attorney Lee Hoffman recently told an industry crowd that Public Act 17-144, which was signed by Gov. Dannel P. Malloy on June 28, could be a boon to both sectors. “It has so much in it,” said Hoffman, who practices at Pullman & Comley in Hartford.
Fuel cells
Connecticut's energy policies have treated fuel cells more favorably than most states, helping manufacturers like FuelCell Energy and South Windsor's Doosan install more of their clean-energy units here than in any other parts of the country, except California.
But hopes of further expanding the homegrown industry were dashed late last year when the Department of Energy and Environmental Protection (DEEP) failed to select any of the dozen or so fuel cell projects — some looking to find buyers for as much as 20 megawatts of power — that bid into a competitive selection process for utility contracts.
The fuel cell projects lost out because they submitted higher-priced bids than solar and wind developers.
For example, DEEP recently disclosed that the average cost of the highest-ranked fuel cell bid was 14.3 cents per kilowatt hour, higher than solar (8.1 cents per kilowatt hour) and wind (9.9 cents per kilowatt hour).
The new state law, originally proposed by Malloy, puts out to bid new long-term utility contracts with different selection criteria.
In particular, it excludes solar projects, leaving the competition to fuel cells, wind power, landfill methane, anaerobic digestion and certain hydropower and biomass facilities.
And while bidders will still be competing on price, new additional scoring criteria could give a leg up to fuel cells.
For example, greater weight will be given to projects that improve distribution system reliability; fuel cells are considered a steadier source of power than many other renewables like wind and solar, which depend on weather conditions to produce energy.
It's not yet clear when DEEP would open up the new bidding process but the agency could select as much as 1,100 gigawatt hours worth of generation, which equals 4 percent of the total electricity distributed annually by utilities Eversource and Avangrid.
Utilities could finance or even own an additional 30 megawatts of fuel cells.
“The short answer is it's a big opportunity,” said Arthur “Chip” Bottone, CEO of FuelCell Energy.
The new bidding process could revive the prospects of a 63-megawatt fuel cell park proposed in Beacon Falls, which was sidelined last year after DEEP didn't select it for any long-term utility contracts, Bottone said.
Torrington's O&G Industries and FuelCell Energy are construction partners on the proposed project.
David Giordano, Doosan's manager of government affairs, said the new law represents “another opportunity for us to do multi-megawatt projects.”
Doosan was part of an unsuccessful bid last year to develop a data center and 20-megawatt fuel cell park in New Britain.
“We were very disappointed last time when we weren't selected,” Giordano said. “I hope this makes a difference.”
Fuel cell advocates say supporting the industry would benefit Connecticut's economy by preserving and growing jobs in the state and generating additional tax revenues.
Greater reliance on fuel cells and other renewable energy sources, however, could result in higher energy costs for consumers.
Waste-to-energy
For waste-to-energy plants, Connecticut's move away from landfilling its non-recyclable trash has made it the nation's most prolific incinerator. But competitively priced natural gas has driven down prices waste-to-energy plants can fetch for the power they generate, putting pressure on their bottom lines.
In addition, when plants burn trash they also generate renewable energy credits, which they sell to New England utilities and retail suppliers as an added revenue source.
But for years, the supply of waste-to-energy credits has outpaced demand, lowering their overall market value. Meantime, solar, wind and fuel cell renewable credits sell for much higher, making them more attractive to buyers.
Those tough economic conditions led New Jersey-based Covanta to recently close its Wallingford trash-to-energy plant. Five plants remain in the state, the largest of which are in Bridgeport and Hartford, and combined they incinerate more than 2 million tons of trash a year.
The new law aims to revive waste-to-energy credit prices by increasing the number of credits utilities and other electricity retailers must purchase. The law also tweaks the penalties companies must pay if they fail to acquire the mandated number of credits.
Connecticut is trying to reduce the amount of trash it burns, but the plants will likely continue to play an important role, even if the state can eventually reach its goal of diverting 60 percent of its waste stream through recycling, reduction and other methods.
Ted Michaels, president of the Washington, D.C.-based Energy Recovery Council, said in an interview that the new law “will make a real difference on market value.”
“It's going to value the attributes of waste-to-energy accurately,” said Michaels, whose members include trash-to-energy Connecticut operators Covanta and Wheelabrator.
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