Industry Market Trends

With Each Passing Superstorm, More Companies Seek Alternatives to the Grid

Nov 06, 2012

Credit: UTC Power

When Hurricane Sandy began crawling up the Atlantic Coast and on its way to merging with a Nor'easter just before Halloween that would give it especially frightening strength and staying power, meteorologists gave it a new nickname: "Frankenstorm." A full week in the wake of Sandy, over a million electricity users still wait for power restoration.

The U.S. has seen a spate of so-called "superstorms" in the last 10 years that have caused billions of dollars in damage to infrastructure, homes and businesses. U.S. businesses are absorbing huge losses from these superstorms. It has been estimated that even very brief power outages caused by interruptions in power transmission systems result in between $3 billion and $5 billion in financial losses each year in the U.S.

If power-disrupting storms are the new normal, U.S. businesses are in for an expensive future.

While businesses are increasingly carrying what's known as "business interruption insurance," which may help pay for losses from power outages due to natural or man-made disasters, there are only so many times they can collect before premiums go sky-high. So what's the next step after that? Ensuring that next time the grid shuts down, the energy still flows. While few businesses are altruistic enough to turn to alternative energies simply because it is the right thing to do, many more are willing to tread that path for the financial and practical benefits of minimizing storms' impact upon operations.

Supermarkets represent a prime example in illustrating such financial impact from power-disrupting events, often having to throw out hundreds of thousands of dollars' worth of spoiled inventory due to loss of refrigeration, and fuel cells have been a particularly good fit for them. Many are following the example of Whole Foods, which routinely installs fuel cells in its new stores.

"We are seeing increased interest from both supermarkets and the big box retail industry for our fuel cells," said Neal Montany, director of UTC Power, a stationary fuel cell supplier. "Energy-intensive businesses that need power around the clock and can use the heat byproduct are very good fits for fuel cells."

To date, supermarket chains Safeway, Stop & Shop, Albertson's, Krogers, Star Market and Price Chopper all have installed fuel cell technologies at some of their new stores, both to save on energy costs and prevent losses from power interruptions.

In 2010, a Price Chopper store in Albany, N.Y., was one of the first supermarkets to install a fuel cell. Supplied by UTC Power, it re-forms natural gas to produce hydrogen to generate electricity, heat and water. The installation provides 90 percent of the power required to run the 69,000-square-foot store.

"You have to plan your own destiny," Benny Smith, vice president of facilities for Golub Corp., which owns Price Chopper, told the New York Times. "After meeting with the UTC folks, we decided to go with a fuel cell since a combined heat and power system is more efficient and had a positive cash flow."

Positive cash flow? In many cases, companies running large fuel cells can sell extra power back to the local grid. Smith told the Times that another major push behind the investment in fuel cells was the availability of financial incentives from the New York State Energy Research Development Authority. The agency provided UTC Power with an $800,000 grant, which the company factored into a lease agreement with Golub Corp.

But it is not just electricity a fuel cell can bring. Its "waste" products include heat and water; if a fuel cell is physically situated inside or adjacent to the facility, the waste heat can be captured, in a process known as cogeneration. A fuel cell can provide hot water, space heating or cooling.

Such a combined heat and power (CHP) installation can deliver between 80 to 90 percent overall fuel efficiency - about twice the efficiency rate of grid power. Waste heat can also be used for refrigeration using absorption chillers -- a particularly useful setup for supermarkets. In other types of buildings (read: manufacturing plants), fuel cell cogeneration units can reduce facility energy costs by 20 to 40 percent compared with conventional energy sources.

Other types of retail businesses are turning to fuel cells to insulate themselves against losses

A Cabela's retail store in Connecticut relies on decoratively painted fuel cells for power.

from power outages (and spiking energy prices). Cabela's, the sporting goods retailer, installed fuel cell technology at its East Hartford, Conn., location in 2007 to provide base load power for the store's operations, according to EarthToys.

Increasingly, office buildings, hospitals and data centers are tapping into fuel cell and alternative energy technologies to offset energy costs and cut carbon emissions. Apple's new data center in North Carolina is built next to a colossal 20-megawatt solar farm, and the facility will draw another 12 megawatts of electricity from solar- and gas-powered generators.

Once it's fully operational, the center, which underpins Apple's iCloud service, will require no power from the traditional grid. The result is full independence from the grid and elimination of prolonged infrastructural outages.

It makes sense that data center companies and operators are unwilling to bet their fortunes on the aging power grid. Fuel cell technology is also ideal for data centers built on smaller spaces that cannot accommodate massive solar arrays on the level of Apple's). Many tech companies are turning to fuel cell company Bloom Energy, which makes the Bloom Energy Server, a solid oxide fuel cell (SOFC) that can be located on roofs; each "Bloom Box" is about the size of an SUV.

In 2010, eBay became one of the first major tech companies to use fuel cell technology as its primary source of power, placing it at its data center in South Jordan, Utah. The data center has about 6 million watts of power on site, thanks to the SOFCs. It remains connected to the grid for backup.

Said eBay President and CEO John Donahoe to the Times: "Does it have risk? Sure. Did it require investment? Sure. But it's an investment and a risk that is worth taking." Google, Staples and FedEx, as well, have installed SOFCs from Bloom Energy in recent years.

While critics continue to underscore the high costs and short lifespans of fuel cells and even solar arrays, many companies are realizing that banking their future on a grid that seems more vulnerable with each passing year is a kind of shortsightedness that untimely sink them.