🔒Pivot to new hydrogen-based technology ignites FuelCell Energy’s hiring spree

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Danbury-based FuelCell Energy — a closely-watched Connecticut company that received significant state support and was on the brink of bankruptcy less than four years ago — is on a hiring spree as it pivots from legacy natural gas fuel cells to newer, zero-emission technology.

“We are just on the ground floor, at the beginning of a significant energy transition,” FuelCell President and CEO Jason Few said in an interview with the Hartford Business Journal. “And that energy transition is going to be enabled by the technologies that we provide.”

The company, which designs, manufactures, installs, operates and maintains fuel cell power plants on three continents, has more than 220 megawatts (MWs) of generation capacity — enough to power about 220,000 homes.

It also operates the largest fuel cell power plant in the United States, a 14.9-MW facility in Bridgeport, and has numerous projects underway.

Fuel cells are energy converters that generate electricity from a fuel source, such as natural gas or hydrogen, through a chemical oxidation process.

Recently, FuelCell developed a solid oxide fuel cell technology, powered by hydrogen, which is more efficient than the company’s older natural gas-powered technology, an industry expert said.

While natural gas is considered a low-emission fuel source, it has drawbacks, including that it produces carbon dioxide as a byproduct. Also, the price of natural gas has spiked amid a tight energy market and supply disruptions from the war in Ukraine.

Those are among the reasons why Few said he’s bullish about increasing demand for solid oxide fuel cells.

Not only does using hydrogen as a fuel source produce zero emissions, it’s also the most abundant element on the planet and can be reproduced and stored. The only byproduct of hydrogen fuel cells is water.

Also, company officials said the solid oxide technology can be produced at scale and is more compact than its natural gas-fired counterpart.

Sustainable technologies

FuelCell Energy in December began accepting orders for its solid oxide technology, and Trinity College, which has an existing 1.4-MW fuel cell that powers many of its buildings, has made the first order. The company plans to install the fuel cell, which will produce 250 kilowatts of electricity, on Trinity’s Hartford campus by the end of 2023.

The energy market has been evolving to prioritize renewable energy, and the cost of hydrogen production has dropped, said Joel Rinebold, director of energy at the Connecticut Center for Advanced Technology.

“We’re seeing more and more policy that is favoring low-emission green technologies, sustainable technologies and technologies that support climate control,” Rinebold said. “The public wants to see more renewables and zero-carbon, and the industry has been developing technologies that are lower cost and can utilize some of these renewable, zero-carbon technologies to produce energy for consumers.”

At the end of October 2021, there were 166 operating fuel cell electric power generators at 113 facilities in the United States capable of producing about 260 MW, according to the U.S. Energy Information Administration.

While nascent technology allows hydrogen to be produced without fossil fuels, Rinebold said natural gas is still relatively inexpensive, and he expects it to continue to play a role in energy production.

However, hydrogen storage technology will be increasingly important as solar and wind power become more prevalent in the Northeast, he added. During favorable weather conditions, there will be an excess supply of energy — and that surplus can be used to produce hydrogen, which can be stored.

“We can store it as long as we want,” Rinebold said. “We can move it through pipelines, we can put it in trucks, and then we can utilize that hydrogen and a fuel cell to make electricity, to make heat, and its emissions will be water. Think of it as an energy ecology.”

Hiring spree

In an effort to meet anticipated demand, FuelCell hired more than 200 people over the last 18 months, Few said. He expects the company to hire additional employees as it deploys new technology this year.

The company has grown from roughly 300 employees in 2021 to more than 500 today — 400 of whom are based in Connecticut.

Also, FuelCell has reopened its Torrington manufacturing facility, which closed during the COVID-19 pandemic, and plans to double the size of its Canadian operation in Calgary, Alberta, Few said.

FuelCell has been closely watched in Connecticut, especially after the state Department of Economic and Community Development (DECD) in 2014 announced a major incentive package for the company, making it eligible for up to $20 million in low-interest (2%), partially forgivable loans, and $10 million in Urban and Industrial Sites Reinvestment Tax Credits.

The funding was to support a 90,000-square-foot expansion of FuelCell’s Torrington facility, which broke ground in late 2015, and the hiring of hundreds of workers.

Under the original terms of the deal, half of the first $10-million loan was forgivable if FuelCell created 165 full-time jobs and retained 538 full-time positions, for a total of 703 jobs maintained for two consecutive years. Half of a second $10-million loan was forgivable if FuelCell created another 160 full-time positions and retained 863 full-time jobs for two consecutive years.

But the company struggled to reach those benchmarks and faced several headwinds in the years following the deal’s announcement. In late 2016, FuelCell laid off 75 people in Torrington and 11 more in Danbury, and it reported only 458 employees in October 2017, according to the Republican-American.

In 2019, FuelCell announced another round of 175 layoffs at its Torrington plant and was facing the threat of bankruptcy. That same year, the company’s board of directors fired then-CEO Chip Bottone, and appointed Few, who refinanced loans that were on the verge of default.

Since FuelCell’s deal with the state was originally hatched, it’s been amended twice, according to Jim Watson, a DECD spokesman.

The loan has been reduced to $10 million and DECD has agreed to forgive $2 million if FuelCell retains 538 jobs and creates 91 more, Watson said.

FuelCell has not earned any forgiveness, Watson said.

Thomas Gelston, FuelCell’s senior vice president of investor relations, said his company will have to make an estimated $3.3 million accelerated payment on the $10-million loan as a result of missing the revised deal’s employment targets.

Project backlog

And despite the recent growth, analysts weren’t impressed with the company’s fiscal fourth-quarter earnings report on Dec. 20, 2022, which showed revenues below their expectations.

FuelCell reported fourth-quarter revenue of $39.2 million — $5.1 million less than analysts predicted. However, revenue increased from $13.9 million in the fourth quarter of 2021.

FuelCell reported a fourth-quarter loss of $15.2 million, greater than an $8.4-million loss in the year-ago period.

Most of the company’s revenue — $24 million, or 61.2% — came from product sales, followed by electricity generation, which totalled $8.8 million, or 22.4%, according to the earning’s report.

For all of fiscal year 2022, which ended Oct. 31, the company reported a $147.2-million loss, compared to a $101-million loss in the previous year.

FuelCell’s stock price has dropped 18.5% over the last six months, and plummeted to $2.65 per share on Dec. 20. The stock price has since rebounded to over $3.

“While the tech progress is encouraging, expenses are elevated and international growth in South Korea and other locations is unclear,” according to a report by Jeffrey Osborne, managing director and senior research analyst at Cowen Inc., who follows FuelCell.

FuelCell’s generation backlog was $1.1 billion at the end of the fourth quarter, falling 14% from 2021. The company announced during its earnings call that, to reduce the backlog, it would drop two Hartford generation projects — proposed on a vacant lot at 441 Homestead Ave. — totalling 8.4 MW.

The projects, part of a 2018 power-purchase agreement with utility giant Eversource, were based on FuelCell’s older, natural gas-powered technology and no longer deemed economical, according to FuelCell’s Chief Financial Officer Mike Bishop.

But Bishop pointed to strong product sales of $60 million in 2022, as it reentered the Korean market following a settlement agreement with POSCO Energy, the largest energy supplier in the Asian country. FuelCell in 2015 sued POSCO, a business partner at the time, for $200 million, claiming breach of a contract. POSCO countersued in 2020, before a settlement was reached a year later in 2021.

FuelCell said it recently filled orders for 20 molten carbonate fuel cell modules from Korea Fuel Cell, a POSCO subsidiary.

It’s had other significant recent deals:

• It completed a 7.4 MW natural gas-powered fuel cell park at the Naval Submarine Base in Groton.
• It has a power-purchase agreement with Eversource and United Illuminating to install a 14-MW fuel cell park in Derby; site work has begun and the project is expected to go online during the fourth quarter this year.
• It’s also constructing a distribution hydrogen platform for Toyota at the port of Long Beach, Calif.

FuelCell Energy’s position today is a far cry from where it was several years ago, the executives said.

Bishop said the company has transitioned from focusing on its generation portfolio and product sales and service, to investing in new technology including hydrogen production and carbon capture, along with solid oxide power generation.

“So, what you’ve seen is that our expenses go up over the last couple of years, because we’re making measured investments in our new hydrogen technologies,” Bishop said. “We ended the fiscal year with about $458 million of unrestricted cash on our balance sheet, so that gives us strong confidence in being able to invest the capital both in research and development for the commercialization of these technologies as well as capital expansion plans.”