FuelCell Energy Stock

FuelCell Energy, Inc., together with its subsidiaries, delivers environmentally responsible distributed baseload energy platform solutions through its proprietary fuel cell technology worldwide.

The company offers commercial technology that produces clean electricity, heat, clean hydrogen, and water and is also capable of recovering and capturing carbon for utilization and/or sequestration, depending on product configuration and application. It also continues to invest in product development and commercializing technologies that are expected to add new capabilities to its platforms' abilities to deliver hydrogen and long duration hydrogen-based energy storage through its solid oxide technologies, as well as further enhance its existing platforms' carbon capture solutions.

The company focuses on advancing sustainable clean energy technologies that address some of the world's most critical challenges around energy access, security, resilience, reliability, affordability, safety, and environmental stewardship. As a leading global manufacturer of proprietary fuel cell technology platforms, the company is uniquely positioned to serve customers worldwide with sustainable products and solutions for industrial and commercial businesses, utilities, governments, municipalities, and communities.

The company is a global manufacturer of stationary fuel cell and electrolysis platforms that decarbonize power and produce hydrogen.

Product Platforms and Applications

The company's product portfolio is based on two electrochemical platforms: carbonate and solid oxide. The platforms are similar in many ways, but they also have unique capabilities. Both platforms support power generation and combined heat and power applications using a variety of fuels, including hydrogen, hydrogen and natural gas blends, biogas, renewable natural gas, and natural gas. The fuel cells utilized in these platforms react fuel electrochemically, without combusting the fuel, which avoids emissions produced by combustion, such as nitrogen oxides (NOx), sulfur oxides (SOx), and particulates. In the electrochemical process, fuel and air are reacted in separate chambers in the fuel cell stack. The reactions producing CO2 happen before the fuel is mixed with air, and the CO2 is concentrated and therefore easy to recover and capture. Both the company's carbonate and solid oxide platforms are enabled to recover and capture their own CO2 for use or sequestration before it is emitted into the air. However, the company's carbonate platforms are unique in their ability to also capture CO2 from an external source, utilizing the flue stream of a power plant or an industrial boiler as a replacement for ambient air intake.

The company's solid oxide platform can operate on pure hydrogen fuel.

Both platforms can be used in electrolysis, which is the reverse of fuel cell operation - producing hydrogen from power and water. Carbonate platforms use a mixture of reforming and electrolysis, while solid oxide platforms can be used for zero emission pure hydrogen electrolysis.

The company's multi-featured platforms can be configured to provide a number of value streams, including electricity, hydrogen, high grade heat (including steam), water and CO2 upgradable to food and beverage grade and/or usable in cement or other industrial products, and to concentrate and separate CO2 from fossil-fueled industrial applications allowing the sequestration and/or utilization of the CO2.

The company focuses on using its proprietary technology to pursue the following five significant applications, each of which is important to the global energy transition and to limiting climate change, reducing nitrogen oxides (NOx), sulfur oxides (Sox), and particulate pollution, limiting noise pollution associated with traditional power generation and fostering more efficient utilization of land compared to traditional power generation, and intermittent renewable energy platforms:

Distributed generation from carbonate and solid oxide platforms (commercially available);

Distributed hydrogen production using carbonate-based Tri-gen to co-produce power, hydrogen, and water (commercially available);

Distributed and large-scale hydrogen production using high efficiency solid oxide electrolysis cell (SOEC) systems (commercially available);

Carbon capture from external sources (under development) and carbon recovery and utilization enabling carbon capture utilization and sequestration (CCUS) (commercially available); and

Long duration energy storage utilizing reversible solid oxide fuel cells (RSOFC), which alternate between electrolysis mode (to produce and store hydrogen using input power) and fuel cell mode, regenerating power from the stored hydrogen (under development).

Carbonate-Based Distributed Generation

The company's proprietary, patented platforms generate electricity directly from fuel, such as hydrogen, hydrogen and natural gas blends, biogas, renewable natural gas, and natural gas. This multi-fuel capability enables the company's platform to leverage the established natural gas infrastructure that is readily available in its existing and target markets, compared to some types of fuel cells that can only operate on high purity hydrogen. The company's proprietary technology also allows it to utilize on-site biogas, renewable natural gas or a hydrogen and natural gas blend, the application of which is rapidly expanding around the world, to fuel its platforms.

The company's market different configurations and applications of its platform to meet specific market needs, including:

On-Site Power (also known as Behind the Meter): Customers benefit from improved power resilience, energy security from on-site power that reduces reliance on the electric grid in an environmentally responsible manner, and long-term electric and other value stream price certainty. Additionally, thermal energy produced by the company's fuel cells can be used to produce hot water or steam or to drive high efficiency absorption chillers for cooling applications for commercial and industrial customers. The company's platform can also deliver hydrogen and carbon dioxide for beverage and food production in addition to other industrial uses. Carbon separated can also be sequestered depending upon the use case.

Utility Grid Support: The company's energy platforms are scalable, enabling multiple fuel cell platforms to be located together on a very small footprint per MW generated. This capability enables utilities to add multi-megawatt power generation to enhance electric grid resiliency where needed, without the associated cost and inefficiencies of a transmission system and without other associated above-ground transmission risks. The company's fuel cells can solidify the total utility power generation solution when combined with intermittent sources, such as solar or wind, or less efficient combustion-based equipment that provides peaking or load following power.

Microgrid Applications: The company's platforms can also be configured as a microgrid, either independently or with other forms of power generation, with the goal of providing continuous power and a seamless transition during times of grid outages. The company has deployed multiple microgrids leveraging its platform solutions, some individually and some integrated with other forms of power generation.

Carbonate-Based Distributed Hydrogen

The company's Tri-gen platform is configurable to deliver on-site hydrogen for transportation, industrial applications, natural gas blending, repowering combustion-based equipment with zero carbon hydrogen, and other uses. The company's Tri-gen platform utilizes proprietary fuel cells configured to simultaneously generate three value streams - power generation, hydrogen, and water. When operated on biogas or renewable natural gas, its Tri-gen platform produces renewable hydrogen, also known as green hydrogen, but, even when fueled with natural gas, its platform produces hydrogen with a lower carbon and criteria pollutant impact when compared to conventional steam methane reforming (SMR) applications because of the use of internal heat compared to burning fuel in the case of SMRs. Heat and steam are byproducts of fuel cell operation, allowing the company's Tri-gen platform to produce hydrogen without water consumption (in fact with net water production, making its Tri-gen platform a unique platform for hydrogen production) and with a low carbon footprint. Adding carbon separation or carbon capture to the company's Tri-gen platform when fueled with natural gas will deliver blue hydrogen (i.e., hydrogen produced with carbon capture).

Solid Oxide-Based Electrolysis

The company has commercialized a proprietary solid oxide electrolysis technology, which is expected to enable production of hydrogen with high electrical efficiency. The company's solid oxide stacks in electrolysis mode split water into hydrogen and oxygen using supplied carbon-free electricity. The hydrogen can be stored as compressed gas, creating the ability to produce a virtually limitless supply.

The company's solid oxide platform is among the most efficient available electrolysis technologies. Applications for this technology include centralized large scale hydrogen production from grid-scale renewables or nuclear power, and decentralized hydrogen production for industrial, transportation, repowered combustion generation assets, and synthetic or sustainable fuels for use in aviation and other applications.

The company has operated a sub scale demonstration project of its solid oxide electrolysis technology in its Danbury test facility, which demonstrated the high electrical efficiency discussed above. The company has also been awarded a pilot program to provide a packaged 150 kg/day system for demonstration at Idaho National Laboratory. Idaho National Laboratory is conducting stack tests to evaluate performance and durability, and the company expects its solid oxide electrolysis technology to be placed in service during fiscal year 2024.

Solid Oxide-Based Long Duration Hydrogen-Based Energy Storage

The company is in the process of developing a solution for long duration energy storage using its proprietary solid oxide electrolysis technology. The company's solid oxide stacks are designed to alternate between electrolysis and power generation mode, with one of its design goals being improved integration of intermittent wind and solar power generation sources into the modern electrical grid via long duration storage of energy. Hydrogen-based long duration energy storage has the ability to transform the way intermittent resources are supported today as an alternative to combustion energy sources for continuous or peaking power to fill in when intermittent resources are not online. Instead of producing power from fuel and air, a solid oxide fuel cell stack in electrolysis mode splits water into hydrogen and oxygen using supplied carbon-free electricity. During high demand periods or periods when intermittent resources are offline, the stored hydrogen can be sent back to the same solid oxide stacks, which react it with air to produce power and to regenerate the water, which can be stored for the next cycle.

The company has recently completed conversion of the Danbury electrolysis demonstration system to a reversible system, adding equipment for supply of hydrogen to the stack to make power. It has begun testing the system in RSOFC mode, alternating the test stack between production of hydrogen in electrolysis mode and consumption of hydrogen in fuel cell mode. This is an extension of previous tests with single cells or smaller stacks, which demonstrated stable operation in RSOFC mode.

Carbon Capture, Recovery, and Utilization

Carbon Capture - Power generation and industrial applications are the source of two-thirds of the world's carbon emissions. The company's carbon capture system is being designed to separate and concentrate CO2 from the flue gases of natural gas, biomass or coal-fired power plants or other industrial facilities as a side reaction that extracts and purifies the CO2 in the flue gas during the power generation process and destroys approximately 70% of NOx emissions during the power generation process.

The production of additional baseload power during the carbon capture process, as opposed to consuming power, differentiates the company's carbon capture system from other forms of carbon capture offerings. This added revenue attribute could make its carbon capture system more cost effective than other systems which are being considered, or are in use, for carbon capture. The company's carbon capture systems can be implemented incrementally, managing capital outlay to match decarbonization objectives and regulatory requirements. Since its solution generates a return on capital resulting from the fuel cell's production of electricity compared to an increase in operating expense incurred by other carbon capture technologies, it can extend the life of existing power plants and industrial facilities.

The company has a joint development agreement with ExxonMobil Research and Engineering Company (EMTEC), which first became effective on October 31, 2019 and was executed in 2020 (as amended from time to time, the EMTEC Joint Development Agreement). Under this agreement, the company has engaged in exclusive research and development efforts with EMTEC to evaluate and develop new and/or improved carbonate fuel cells to reduce carbon dioxide emissions from industrial and power sources.

Carbon Recovery and Utilization - In addition to the ability to capture carbon dioxide from an external source, the company is adding the capability to its platforms to extract and purify carbon dioxide produced by the fuel cell power generation process. The company's carbon separation technology allows carbon dioxide to be extracted and purified to the appropriate level for utilization or sequestration, significantly reducing the carbon footprint of the generated power from its fuel cell platforms. This requires a simple modification to the fuel cell module that can be incorporated into new platforms, as well as retrofitted for existing systems during stack replacements. Over time, as the company replaces fuel cell stacks in its deployed modules, it intends to integrate its carbon separation technology, making every platform receiving a module upgrade carbon separation ready. One attractive application for this technology is the on-site production of carbon dioxide for use in beverage and food production, in addition to other uses, such as pH balancing of water, the production of dry ice, as a binder in cement and concrete production, utilization in grow houses, the production of ethanol and synthetic fuels, such as sustainable aviation fuels, and numerous other industrial applications and building materials. The ability to provide clean power, heat, and useable carbon dioxide is a unique feature profile that is only available with the company's carbon capture platform. The company's systems are modular and scalable, so they can be deployed in a wide variety of applications where on-site carbon dioxide is consumed as a product solution, or carbon dioxide is delivered to multiple nearby consumers. Carbon separated from the company's platforms can also be sequestered in instances where the project does not include a use for carbon.

Strategy

The company's strategies are to optimize the core business; drive commercial excellence; expand geographically and by market; invest in its current manufacturing capabilities and build new capacity; extend process leadership; continue product innovations; deepen participation in the developing hydrogen economy; and diversify its revenue streams by delivering products and services that support the global energy transition.

Markets

The company targets distinct markets and applications, including utilities and independent power producers; industrial process applications; education and health care; data centers and communication; wastewater treatment; government; commercial and hospitality; microgrids; continuous manufacturing; industrial hydrogen applications (e.g., fertilizer); hydrogen for mobility and material handling; hydrogen fuel for high grade heat applications; port applications; oil and gas sector; high CO2 emitters; large scale wind and solar projects for the production of hydrogen via electrolysis; engineering, procurement and construction (EPC) firms; and food and beverage.

The utilities and independent power producer market has historically been the company's largest market with customers that include utilities on the East and West coasts of the United States, such as UIL Holdings Corporation, Inc. (owned by Avangrid, Inc., a wholly owned subsidiary of Iberdrola), the Long Island Power Authority (LIPA) and Southern California Edison. In Europe, utility customers include E.ON Connecting Energies, one of the largest utilities in the world. In South Korea, the company is contracted to operate and maintain a 20 MW power plant project (comprising five SureSource 3000 plants) for Korea Southern Power Company (KOSPO). In addition, the company is focusing on transitioning projects in South Korea, which are or were previously serviced by POSCO Energy Co., Ltd. (POSCO Energy) or its affiliates. As of October 31, 2023 (fiscal year 2023), the company entered into a long-term service agreement with Noeul Green Energy Co., Ltd. (Noeul Green Energy) pursuant to which the company is contracted to oversee the operation and maintenance of Noeul Green Energy's 20 MW fuel cell park over a term of 14 years. In addition, as of October 31, 2023, the company's platform technology was deployed across South Korea at an additional six sites totaling more than 100 MW. Although these other platforms are serviced by POSCO Energy or its affiliates, the company is actively engaging with these potential customers in discussions to enter into new long-term service agreements with it.

The company's power platforms are producing power for a variety of industrial, commercial, municipal, and government customers, including manufacturing facilities, pharmaceutical processing facilities, universities, healthcare facilities, and wastewater treatment facilities. These institutions expect efficient, clean, and continuous power to reduce operating expenses, reduce greenhouse gas emissions and avoid pollutant emissions to meet their sustainability goals, while boosting resiliency and limiting dependence on the distribution grid. Combined heat and power (CHP) applications further support economic and sustainability initiatives by minimizing or avoiding the use of combustion-based boilers for heat. The company's patented power platforms are unique in their ability to run on biogas.

The company markets its products primarily in the United States, Europe, and South Korea, and the company is also pursuing expanding opportunities in other countries around the world.

The company targets for expansion and development markets and geographic regions that benefit from and value clean distributed generation; are located where there are high energy costs, poor grid reliability, and/or challenged transmission and distribution lines; have a need for distributed hydrogen for transportation or industry; can leverage the multiple value streams delivered by the company's platforms (electricity, hydrogen, thermal, water, and carbon recovery); are aligned with regulatory frameworks that harmonize energy, economic, and environmental policies; and are committed to reducing their Scope 1 and Scope 2 emissions.

The company's business model focuses on providing these markets and geographic regions with highly efficient and affordable distributed generation that delivers de-centralized power in a low-carbon, virtually pollutant-free manner. Geographic markets that meet these criteria and where the company is already well established include the Northeastern United States and California. The company has also installed and are operating plants in Europe and Asia, mainly South Korea, in addition to North America.

The company has made significant progress in reducing costs and creating markets since the commercialization of its products in 2003, with more than 220 MW of its carbonate platforms installed and operating as of October 31, 2023.

Advanced Technologies Programs

The company's Advanced Technologies programs include research and development and demonstration programs funded by third parties. It undertakes both privately funded and publicly funded research and development to develop and grow these opportunities, reduce product and output costs, and expand its technology portfolio. The company's Advanced Technologies programs are focused on the continued development and commercialization of its solutions that advance solid oxide fuel cells, distributed hydrogen, and carbon capture.

The company has historically worked on technology development with various U.S. government departments and agencies, including the U.S. Department of Energy (DOE), the Department of Defense, the Environmental Protection Agency, the Defense Advanced Research Projects Agency, the Office of Naval Research, and the National Aeronautics and Space Administration. Government funding, principally from the DOE, provided 3% of its revenue for the year ended October 31, 2023. In addition to these U.S. government departments and agencies, the company has also executed contracts for other funded work with private companies like Canadian Natural Resources Limited (CNRL), Drax Group (Drax), and EMTEC.

Engineering, Procurement and Construction

The company provides customers with complete turn-key solutions, including development, engineering, procurement, construction, interconnection, and operations for its fuel cell projects.

Services and Warranty Agreements

The company offers a comprehensive portfolio of services, including engineering, project management and installation, and long-term operating and maintenance programs, including trained technicians that remotely monitor and operate its platforms around the world, 24 hours a day and 365 days a year. Under the typical provisions of both the company's long-term service agreements and power purchase agreements, the company provides services to monitor, operate, service, and maintain power platforms to meet specified performance levels.

Proprietary Rights and Licensed Technology

As of October 31, 2023, the company (excluding its subsidiaries) had 139 U.S. patents and 282 patents in other jurisdictions covering its fuel cell technology (in certain cases covering the same technology in multiple jurisdictions), with patents directed to various aspects of its carbonate technology, SOFC technology, PEM fuel cell technology, and applications thereof. As of October 31, 2023, the company also had 34 patent applications pending in the U.S. and 98 patent applications pending in other jurisdictions.

As of October 31, 2023, the company's subsidiary, Versa Power Systems, Ltd. (Versa), had 24 U.S. patents and 86 international patents covering SOFC technology (in certain cases covering the same technology in multiple jurisdictions). As of October 31, 2023, Versa also had 9 pending U.S. patent applications and 26 patent applications pending in other jurisdictions. In addition, as of October 31, 2023, its subsidiary, FuelCell Energy Solutions, GmbH, had license rights to 2 U.S. patents and 7 patents outside the U.S. (in certain cases covering the same technology in multiple jurisdictions) for carbonate fuel cell technology licensed from Fraunhofer IKTS.

Research and Development

During the year ended October 31, 2023, the company incurred a total of $61.0 million of company-funded research and development expenses.

Customers

For the year ended October 31, 2023, the company's top customers, KOSPO; Korea Fuel Cell Co., Ltd. (KFC); Connecticut Light and Power; and EMTEC, accounted for an aggregate of 68% of its total annual consolidated revenue.

License and Joint Development Agreements with EMTEC

EMTEC and FuelCell Energy began working together in 2016 under an initial joint development agreement with a focus on better understanding the fundamental science behind carbonate fuel cells for use in advanced applications and specifically how to increase efficiency in separating and concentrating carbon dioxide from the exhaust of natural gas-fueled power generation.

In June 2019, the company entered into a license agreement with EMTEC to facilitate the further development of the company's carbon capture platform (the EMTEC License Agreement). Pursuant to the EMTEC License Agreement, the company granted EMTEC and its affiliates a non-exclusive, worldwide, fully-paid, perpetual, irrevocable, non-transferable license and right to use its patents, data, know-how, improvements, equipment designs, methods, processes and the like to the extent it is useful to research, develop, and commercially exploit carbonate fuel cells in applications in which the fuel cells concentrate carbon dioxide from external industrial and power sources and for any other purpose attendant thereto or associated therewith. Such right and license is sublicensable to third parties performing work for or with EMTEC or its affiliates but shall not otherwise be sublicensable.

History

FuelCell Energy, Inc. was founded in 1969. The company was incorporated in Delaware in 1999.