Verizon heeds call of fuel cells

Worried about prices and power outages, the telecom company is a case study of a business out to deliver its own energy. Photos: Verizon fuel cell project

Marguerite Reardon Former senior reporter
Marguerite Reardon started as a CNET News reporter in 2004, covering cellphone services, broadband, citywide Wi-Fi, the Net neutrality debate and the consolidation of the phone companies.
Marguerite Reardon
5 min read
As energy prices soar and increased consumption threatens the stability of the commercial power grid, companies such as Verizon Communications are looking at new technologies to put them in control of their energy destinies.

For more than a year, Verizon has been using fuel cell technology to power one of its facilities in Garden City, N.Y., on Long Island. Fuel cells, which were first developed by NASA for manned space flight, are considered an extremely clean and efficient energy source. They generate electrical power through the combination of hydrogen and oxygen atoms, giving off water and heat as byproducts.

The technology has been adopted by the automotive industry as an alternative source of power for cars. But it has also been used to provide energy to large buildings.

Verizon's Garden City project is unique because it uses fuel cells as its primary source of energy. Seven fuel cells generate power for a 292,000-square-foot facility that provides telephone and data services to some 35,000 customers on Long Island. And it's connected to the commercial power grid as backup. This is a complete paradigm shift for a company that traditionally uses diesel-fueled generators as backups to the commercial grid.

By producing its own energy, Verizon is adding another layer of network reliability that it can fully control. And as luck would have it, new, cleaner technologies such as fuel cells also help the company reduce energy costs, as well as the impact on the environment over time, making the situation a win-win.

"We developed this project for a few reasons," said Jeremy Metz, the energy team leader for Verizon. "It's clean, quiet and helps us become energy independent. We rely heavily on the power grid, and we wanted to look for alternatives."

While there are numerous benefits in using fuel cells, the upfront capital costs to install the technology and operate and maintain it are barriers for many companies.

"The biggest downside of the technology is the cost," said Rob Roche, product manager for fuel cell products at UTC Power, the company that manufactured the fuel cells Verizon uses in Garden City. "The challenge for us is to simplify the system and increase production volumes to reduce the cost of deploying it."

Verizon's fuel cell project

Verizon's fuel cells use natural gas piped in from a local gas company to obtain the hydrogen atoms for the chemical process. The natural gas is not burned. Instead, the hydrogen atoms are detached from the gas as it is fed into each of the seven cells, and then combined with oxygen atoms from the air to generate direct current electrical power. Heat and water are then vented from each cell, and direct current is converted to alternating current electricity for use in the building.

Each of the seven fuel cells deployed at Verizon's Garden City facility is capable of generating 200 kilowatts of electrical power per hour. That's enough power to supply the energy needs of about 400 single-family households, or 57 homes per fuel cell.

One of the benefits of fuel cell technology is that the waste that's created from converting the hydrogen and oxygen to electricity--water and heat--can be harnessed and used as a source of energy to heat and cool the building. About a third of Verizon's cooling needs for the Garden City facility comes from fuel cell waste, according to Tom Donnelly, the New York area real estate operations supervisor for Verizon.

By using electricity from fuel cells and reclaiming the heat and water they produce to help heat and cool the building, Verizon can reduce the impact its facility has on the environment. In fact, Verizon estimates that by using the heat and water generated from its fuel cells rather than relying on a fossil-fuel-based power plant, it has eliminated some 11.1 million pounds of carbon dioxide in one year that would have been emitted into the atmosphere.

"You have to come up with an economically compelling reason why businesses should invest the millions of dollars necessary to buy and operate fuel cells."
--Rob Roche, product manager, UTC Power

Richard Brent, chairman of the World Alliance for Decentralized Energy (WADE), a nonprofit research group that promotes the development of decentralized renewable energy systems, believes that, collectively, companies following in Verizon's footsteps could greatly reduce the dangerous effects of carbon dioxide emissions.

"We are damaging our fragile environment," he said. "And we have to band together to change the tide. I believe it can be done. WADE believes that energy produced near or at the load center that is actually using the energy is a more economically, environmentally and fuel-efficient way of generating energy."

While it would be nice if every company adopted greener energy policies, the reality is that what changes corporate behavior is not benevolence but economics.

"We used to market the fuel cells based on the environmental appeal," UTC Power's Roche said. "But at the end of the day, you have to come up with an economically compelling reason why businesses should invest the millions of dollars necessary to buy and operate fuel cells."

Fuel cell technology doesn't come cheap. Verizon spent about $13 million to build its facility, and it spent about $300,000 in the first year to operate and maintain its seven fuel cells. The company has benefited from federal and state tax breaks that have helped offset the initial cost of deploying the fuel cells. But the real economic benefit has come from better-than-expected cost savings.

When the project was launched last year, Verizon predicted it would save $250,000 per year in energy costs. The real savings exceeded those expectations, and came to about $680,000.

While $680,000 may be small potatoes for a company that spends $600 million a year to buy electricity from commercial power sources throughout the country, Verizon's Metz believes it provides another incentive to invest in developing the technology.

The biggest benefit fuel cells bring to a company such as Verizon is the control they give the company over its power supply. As the power industry has transitioned toward deregulation, it has become somewhat unstable in certain regions of the country.

Metz said this instability was the main reason Verizon wanted to explore developing its own energy sources.

"We saw what was happening in 2000 and 2001 with California's energy crisis," he said, "and we knew it was only a matter of time before we'd start seeing power grid issues in the Northeast."

Sure enough, Metz and his team were right. In August of 2003, North America experienced its largest blackout in history when much of the Northeastern United States and parts of Canada went dark.

"When the blackout happened in 2003, we knew we were on the right track," he said.

For now, Verizon is still evaluating the economics of its fuel cell project in Garden City. So far, the company has no immediate plans to convert other facilities to fuel cells.