1. STATIONARY FUEL CELLS Economics 101 Jane Price Hill, P. E.February 13, 2003

2. Stationary Fuel Cells: Economics 101 1839 Fuel Cell 1893 Diesel Engine Late 1800s Steam Turbine 1930s Combustion Turbine Jane Price Hill, P. E.February 13, 2003

3. Fuel cell economics compared to electric utility rates Fuel cell economics compared to other distributed generation technologies Stationary Fuel Cells: Economics 101 Jane Price Hill, P. E.February 13, 2003

4. Stationary Fuel Cells: Economics 101 Income tax consequences for capital intensive projects Load factor issues Risk Jane Price Hill, P. E.February 13, 2003

5. Stationary Fuel Cells: Economics 101 Expenses can be written off for tax purposes in the year in which they are incurred: $Fuel $O&M $Property taxes $Insurance $Labor $Electricity Jane Price Hill, P. E.February 13, 2003 Capital expenditures must be written off over many years: $Equipment $Installation $Engineering $Freight $Site preparation $Construction

6. Stationary Fuel Cells: Economics 101 While there are several acceptable ways to evaluate capital costs, there is one common method which is fundamentally inadequate: Jane Price Hill, P. E.February 13, 2003 Annualized capital cost = Capital Cost Equipment Life

7. Stationary Fuel Cells: Economics 101 Time value of money Income tax consequences for capital expenditures versus expenses Salvage value and tax consequences of salvage Jane Price Hill, P. E.February 13, 2003 Because this method ignores:

8. Stationary Fuel Cells: Economics 101 Income tax rate Discount rate Project life Jane Price Hill, P. E.February 13, 2003 35 % 10 % 10 years

9. Stationary Fuel Cells: Economics 101 Jane Price Hill, P. E.February 13, 2003 % of capital cost

10. Stationary Fuel Cells: Economics 101 Diesel engine generator Spark ignited engine Combustion turbine Fuel cell Jane Price Hill, P. E.February 13, 2003 400 $/kW 800 $/kW 700 $/kW 3,000 $/kW

11. Stationary Fuel Cells: Economics 101 Jane Price Hill, P. E.February 13, 2003 Annualized Capital Cost

12. Stationary Fuel Cells: Economics 101 Jane Price Hill, P. E.February 13, 2003 Assumptions for Small Commercial Application

13. Stationary Fuel Cells: Economics 101 Jane Price Hill, P. E.February 13, 2003 = What is used What could be used = kWh generated kW capacity * 8,760 hours Load Factor

14. Stationary Fuel Cells: Economics 101 Jane Price Hill, P. E.February 13, 2003 Cost per KWH, Commercial Site Average 2001 US commercial electric rate

15. Stationary Fuel Cells: Economics 101 Jane Price Hill, P. E.February 13, 2003 Cost per KWH, Industrial Site Paper mill LF = 89%

16. Stationary Fuel Cells: Economics 101 Jane Price Hill, P. E.February 13, 2003 Comparison of Commercial and Industrial Sites

17. Stationary Fuel Cells: Economics 101 Jane Price Hill, P. E.February 13, 2003 Target Values

18. Stationary Fuel Cells: Economics 101 Jane Price Hill, P. E.February 13, 2003 Comparison of Technologies Using Targets - Commercial

19. Stationary Fuel Cells: Economics 101 Jane Price Hill, P. E.February 13, 2003 Comparison of Technologies Using Target Costs and Efficiencies Industrial Gas Prices

20. Stationary Fuel Cells: Economics 101 The ability to reach capital cost and efficiency goals Identifying sites where high load factor operation is feasible Economic value attributed to reduced emissions Subsidies provided by governments and/or utilities Jane Price Hill, P. E.February 13, 2003 Factors which will affect fuel cell penetration:

21. Stationary Fuel Cells: Economics 101 IC engines: trucks, passenger cars, earth-moving equipment Combustion turbines: military and commercial jets Fuel cells: the space program Jane Price Hill, P. E.February 13, 2003