Fuel cells that use natural gas to chemically produce electricity with small onsite distributed generation units are receiving increased attention because of low natural gas prices, according to Danbury, CT-based FuelCell Energy Inc. (FCEL), a leading manufacturer of gas-based units that are up to 2.8 MW in size.

FCEL on Tuesday extended contracts for operations and maintenance of Direct FuelCell power plants with four existing customers in three separate markets -- education, municipal wastewater treatment and food processing. The new contracts collectively carry a value of about $15 million.

The fuel cell units are only used directly for stationary, baseline power generation units, said Kurt Goddard, vice president for investor relations. However, indirectly, the fuel cells produce excess hydrogen and can be harnessed to use in vehicle transportation, something that is part of an installation at a municipal wastewater treatment plant in the Orange County Sanitation District in Southern California.

"It is one possible way of working to build the 'hydrogen highway' that [former California] Gov. Arnold Schwarzenegger promoted hard in recent years," Goddard told NGI. California and the mid-Atlantic are the two major domestic markets and South Korea is the leading overseas market.

Although publicly held FCEL has yet to record a profit and competes against seasoned rivals, such as Bloom Energy Corp. and United Technologies, Goddard said the company is edging closer to being in the black, fueled by the low natural gas prices that are bringing the cost of power from one of its units down to the 15 cents/kWh level, better than solar-generated power that is averaging just under 17 cents/kWh but still higher than average utility-generated power that runs a little more than 11 cents/kWh. FCEL's net losses are expected to decline this calendar year to $22.2 million, according to financial data compiled by Bloomberg.

Goddard said a broader awareness of plentiful U.S. natural gas supplies at bargain-basement prices is helping foster a greater appreciation for natural gas as "the most likely significant source of energy for power generation for decades to come."

FCEL's Tracy Reid, western regional vice president, said, "Existing customers extending service agreements is a strong testament to the favorable economic profile of our fuel cell power. The high efficiency of the fuel cell power generation process is valued by clients as it reduces fuel costs and the virtual lack of pollutants from the fuel cell power generation process supports compliance with clean air regulations and sustainability goals."

FCEL officials said fuel cell units are providing power at more than 50 locations worldwide with more than 180 MW of installed onsite generating capacity. The company promotes "ultra-clean baseload" generating capability that is being used by utilities, industrial operators, universities, water treatment plants, government installations and consumers around the world.

"With our power plants, you can spot them around a service area and that is what some electric utilities are looking for," Goddard said. "If you need to add power generation capacity for a period time, you can do so with our units without taking a lot space or encountering a lot of environmental siting issues. If you need that power, coal and oil are probably not options, and solar and wind are intermittent, and a combined-cycle gas-fired plant would probably have to be done away from the coast, so you would need added transmission, too."

While acknowledging that fuel cells have their limits and "are not the answer to everything," Goddard said they are good for quickly adding incremental power supplies. He said FCEL has spoken to some oil and gas producers, but that is market for the future.

©Copyright 2012 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.