CT fuel cell program shuns CT fuel cell industry

Photo | Contributed K.R. Sridhar, co-founder and CEO of California-based Bloom Energy, which won 86 percent of Connecticut's LREC contracts in 2012.

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A 20-year, $300 million secretive state program designed to bolster the struggling Connecticut fuel cell industry instead awarded nearly all its money this year to a California firm, public disclosures show.

The Connecticut General Assembly in 2011 created the Low-emissions Renewable Energy Credit (LREC) program to subsidize fuel cell installations. It was assumed Connecticut companies — FuelCell Energy in Danbury and ClearEdge Power in South Windsor — would win the contracts, as the program favored in-state technology.

“It absolutely was designed to help the Connecticut fuel cell industry,” said Lee Hoffman, partner with Hartford law firm Pullman & Comley and member of Gov. Dannel P. Malloy's energy task forces.

Instead, nearly all the $60 million first round went to Bloom Energy of Sunnyvale, Calif., according to records unsealed in August after Hartford Business Journal's Freedom of Information Act request.

Bloom won 12 LREC contracts, valued at $35.4 million. By comparison, FuelCell Energy won one $13 million contract, and UTC Power came up empty. UTC Power had a deal with West Hartford manufacturer Legrand North America for a fuel cell that won a $4.4 million award. After Clearedge Power purchased UTC in February, Legrand withdrew from the deal.

“Bloom just beat out the other guys. It isn't any more complicated than that,” Hoffman said.

Since LREC is administered by Connecticut Light & Power and United Illuminating using ratepayers funds, the program is designed to maximize the number of awards with finite funding. For five years, the program annually awards 15-year contracts, with $60 million in total contract value available each round.

CL&P and UI chose projects with lowest subsidies first and added more until money ran out. Last year, they used $52.8 million. “Selection of projects (is) based on cost — low bidders win,” said Dennis Schain, Department of Energy & Environmental Protection spokesman.

Bloom won contracts by partnering with deep-pocketed companies -- Walmart, AT&T, Staples -- allowing them to rely less on subsidies, making their proposals more attractive.

“We want more awards to go to Connecticut companies, but we have to be fair because this is ratepayer money,” said State Sen. Bob Duff (D-Norwalk), co-chair of the legislature's Energy & Technology Committee.

Bloom declined to comment on the story.

The LREC winner identities have been secret for a year, as the Public Utilities Regulatory Authority initially ruled CL&P and UI would not be forced to disclose program participants. Office of Consumer Counsel and trade group Solar Connecticut fought PURA, but the regulatory body finally reversed itself after HBJ filed a FOIA request in June.

The legislature created the LREC program alongside the Zero-emissions Renewable Energy Credit (ZREC) program, which is mostly for solar. Having two separate programs is unique to Connecticut as most states have just one large allotment. Since the two largest fuel cell manufacturers in the world are based in Danbury and South Windsor – FuelCell and Clearedge – Connecticut is one of the few states to consider fuel cells a Class I renewable, helping an industry where no company has ever turned a profit because of the high costs of technology and limited sales.

Fuel cells produce significantly more electricity than traditional renewables, so all fuel cells in a traditional renewable credit program can underbid any solar or wind proposal in vying for contracts. This necessitated the need for two Connecticut programs.

Thus, the LREC program gained nationwide attention. Companies such as Bloom were intrigued by a program for fuel cells with guaranteed revenue for 15 years, as opposed to most other states with only guaranteed revenue for one year. “It speaks to the success of the program that everyone wanted to participate,” Hoffman said.

To this end, the program worked, as competition lowered bids, enabling more contract awards. “Even with the selection of out-of-state firms this will generate jobs in Connecticut for installation, maintenance,” Schain said.