The R&D Tax Credit Aspects of Fuel Cell Developments
Fuel cell technology has gained increasing
acceptance as a clean and viable energy source. A recent
report by the U.S. Department of Energy (DOE) highlights that
worldwide fuel cell industry sales surpassed $1 billion for
the first time in 2013, reaching $1.3 billion.
The growing adoption of fuel cell systems both in developed
and developing economies, particularly in transport and
stationary applications, creates considerable growth
prospects. According to Research and Market, the global market
for fuel cells is forecasted to peg over $3 billion by 2020.
Investments in R&D are crucial to bringing the fuel cell
industry to its full potential. The present article will cover
ongoing fuel cell innovation efforts and discuss the R&D
tax credit opportunity available to support such initiatives.
The Research &
Development Tax Credit
Enacted in 1981, the Federal Research and
Development (R&D) Tax Credit allows a credit of up to 13
percent of eligible spending for new and improved products and
processes. Qualified research must meet the following four
Eligible costs include employee wages, cost of supplies, cost
of testing, contract research expenses, and costs associated
with developing a patent. On December 18, 2015 President Obama
signed the bill making the R&D Tax Credit permanent.
Beginning in 2016, the R&D credit can be used to offset
Alternative Minimum tax and startup businesses can utilize the
credit against $250,000 per year in payroll taxes.
- New or improved products,
processes, or software
- Technological in nature
- Elimination of uncertainty
- Process of experimentation
In addition to tax credits that can support
fuel cell innovation, there are other governmental incentives
to help minimize the costs of fuel cell investments. With the
objective of fostering advances in fuel cell technology, the
DOE’s Fuel Cell Technologies Office (FCTO) periodically
selects research and development projects through open and
competitive procurements and encourages partnerships among
corporate, academic, and governmental agents.
The office has recently made available up to $35 million in
funding for R&D, demonstration, and deployment projects.
The opportunity aims to accelerate the adoption of hydrogen
and fuel cell technologies and help overcome key technical
challenges involved. Target areas include low platinum group
metals catalyst development and fuel cell-powered range
extenders for light-duty hybrid electric vehicles. At
the state level, there is a wide variety of incentives to
hydrogen fuel cells, ranging from state tax credits to grants
and rebates. The Department of Energy Database of State
Incentives for Renewables and Efficiency (DSIRE) lists 93
incentive programs targeting fuel cells using renewable fuels
currently available in 31 states.
Examples include New York State Energy Research and
Development Authority (NYSERDA)’s Customer-Sited Tier Fuel
Cell Program, which supports the installation and operation of
continuous duty fuel cell systems in New York State. The
initiative offers up to $50,000 for fuel cell systems rated at
25 kW or less and up to $1 million for fuel cell systems rated
larger than 25 kW. Funding is on a first-come, first-served
basis until December 31, 2015, or until funds are exhausted.
Fuel cells are electrochemical devices that
convert chemical energy into electricity. This is made
possible through the combination of a fuel (most commonly,
hydrogen) and an oxidizing agent.
In some ways, the functioning of fuel cells resembles that of
a battery, which also uses chemical reaction to provide
electricity. The difference lies in the fuel cells’ ability to
maintain a constant supply of electricity as long as it
receives a continuous provision of reactants. In other words,
they do not run down or need recharging.
Besides electricity, the chemical reactions involved in the
power generation process have water and heat as their only
byproducts. These can be used to provide hot air and water,
enabling fuel cell systems to be used in combined heat and
The accompanying diagram, created by the DOE’s Office of
Energy Efficiency & Renewable Energy, illustrates how
polymer electrolyte membrane (PEM) fuel cells work. One of the
most common types of fuel cells, the PEM fuel cell consists of
an electrolyte membrane sandwiched between a negative
electrode (anode) and a positive electrode (cathode).
Different from most energy sources, fuel cells have multiple
potential applications, including stationary, transportation,
material handling, portable, and emergency backup power
In addition to a variety of applications, fuel cell technology
is also flexible in its scale. Fuel cell systems are equally
capable of providing energy for hand-held electronic devices
as to utility power stations.
Benefits of Fuel Cells
Fuel cells provide a unique combination of
benefits. The electrochemical process eliminates the necessity
of combustion, generating low-to-zero emissions of carbon
dioxide. Even the fuel cells that use natural gas or
hydrocarbons as a hydrogen feedstock produce far fewer
emissions than conventional sources of energy.
According to the non-profit organization Fuel Cells 2000, “a
stationary fuel cell power plant using natural gas as a source
of hydrogen creates less than one ounce of pollution per 1,000
kilowatt-hours of electricity produced. Conventional
combustion generating technologies create 25 pounds of
pollutants for the same amount of electricity”.
In addition to being a non-polluting energy source, fuel cells
are highly efficient. While the electricity grid has an
average efficiency of 30 percent, fuel cell systems achieve
40-50 percent fuel-to-electricity efficiency using hydrocarbon
fuels such as natural gas (and up to 85 percent when the heat
waste is used for cogeneration). Even greater efficiency gains
occur in transportation solutions - fuel cell-powered vehicles
are expected to be three times as efficient as the ones using
internal combustion engines.
Fuel cells are also a highly reliable energy source. They
operate independently from the grid and do not require a
particular weather condition, virtually eliminating the fear
of losing power. Other benefits of fuel cells include fuel
flexibility, ruggedness and durability, scalability, and
compatibility with other electricity generating technologies.
These benefits are attracting a growing number of companies,
which turn to fuel cells to power corporate buildings and data
centers, provide backup power to telecom towers, and run
material handling equipment in warehouses.
According to a recent report by the Breakthrough Technologies
Institute, the list of Fortune 500 companies that utilize fuel
cells include Adobe, Apple, AT&T, Baker Hughes, Bank of
America, CenturyLink, Coca-Cola, CVS Caremark, eBay, FedEx,
Google, JP Morgan Chase, Juniper Networks, Kellogg’s,
Kimberly-Clark, Kroger, Lowe’s, Macy’s, Microsoft, Owens
Corning, Procter & Gamble, Safeway, Staples, Sysco,
Target, Urban Outfitters, United Natural Foods, Verizon,
Wal-Mart, Whole Foods, Williams-Sonoma, Xilinx, and Yahoo!.
Governmental institutions are also utilizing fuel cells as a
means to save taxpayer dollars, improve air quality, and
ensure reliable services. In addition to government buildings,
wastewater treatment plants, and other municipal sites, fuel
cells are beginning to make their way into public
transportation systems. Fuel cell buses, which are electric
vehicles power by fuel cells, are increasingly considered an
attractive alternative. Early adopters include Oakland and
Irvine, California; Cleveland, Ohio; Ithaca, New York; and
R&D efforts have enabled major
improvements to fuel cell systems. For instance, the cost of
automotive fuel cells has fallen by more than 50 percent since
2006. However, there are still significant obstacles to
a more widespread fuel cell commercialization. The DOE’s
Office of Energy Efficiency & Renewable Energy highlights
the following key challenges:
1. Cost: With unique
properties that perform outstandingly in fuel cell
electrochemistry, platinum dominates the choice of material
for this technology. According to a recent article published
in the journal, Platinum Metals Review, this costly component
can represent up to 17 percent the total cost of an 80 kW
proton exchange membrane (PEM) fuel cells system using 2012
technology at mass production scale. Being a commodity,
and therefore relatively insensitive to manufacturing volume,
platinum’s scarcity represents a significant cost barrier to
the widespread use of fuel cells.
Hoping to overcome this challenge, manufacturers should turn
towards innovative approaches that increase activity and
utilization of current platinum group metal (PGM) and
PGM-alloy catalysts, as well as non-PGM catalyst approaches
for long-term applications. In this context, nanotechnology
can be a strategic tool in enabling reductions in metal
loading without a loss of performance or durability.
2. Performance: By
enhancing cost-efficiency and enabling quicker returns to
investment, the optimization of fuel cell performance could
serve as a major incentive to wider adoption.
According to the DOE, R&D efforts should focus on the
following aspects: developing ion-exchange membrane
electrolytes with enhanced efficiency and durability at
reduced cost; improving membrane electrode assemblies (MEAs)
through integration of state-of-the-art MEA components;
developing transport models and in-situ and ex-situ
experiments to provide data for model validation; and
maintaining core activities on components, sub-systems, and
systems specifically tailored for stationary and portable
3. Durability: An
increase in the lifespan of fuel cell systems could also
encourage more widespread adoption. R&D efforts aimed at
enhancing the durability of fuel cell systems must understand
the degradation mechanisms involved and create strategic
processes to deter them. Examples of degrading conditions that
compromise the chemical and mechanical stability of fuel cell
systems’ materials and components can include impurities in
the fuel and air, starting and stopping, freezing and thawing,
and humidity and load cycles.
Academic Fuel Cell
According to Fuel Cells 2000, there are
over a hundred U.S. colleges and universities that offer
research and coursework in hydrogen and fuel cell
technology. Located in 37 states and the District of
Columbia, these institutions are a key force in advancing a
wider adoption of fuel cell systems. Many of them carry out
cutting-edge research efforts in partnership with the DOE and
the Department of Defense.
The following paragraphs offer a few examples of recent fuel
cell innovation in the academic world.
University: On March 10, a team of researchers from
Cornell University reported the creation of a new thin film
catalyst for use in fuel cells. They produced the first-ever
epitaxial thin-film growth of Bi2Pt2O7 pyrochlore, which had
previously been synthesized only as a nanocrystalline powder.
The material is thought to be one of the most promising oxide
catalysts for fuel cell applications and its synthetization as
thin film could unveil new and exciting possibilities for fuel
University of Delaware and Columbia University:
The most common way of obtaining hydrogen fuel is the steam
methane reform process, which uses natural gas, requires
significant energy, and generates carbon dioxide as a
byproduct. A more sustainable alternative would be
electrolysis, which consists of obtaining hydrogen from water.
This process, however, requires a platinum catalyst that is
too costly to use on large scale. Aiming to overcome this
barrier, researchers at the University of Delaware and
Columbia University have discovered a groundbreaking
alternative: a combination of copper and titanium, two cheap
and abundant elements, that imitates the structure of a
platinum catalyst. Due to its inexpensiveness and efficiency,
this innovative bi-metallic catalyst could revolutionize
hydrogen fuel cell technology.
of New Mexico: In partnership with Japanese car
manufacturer Daihatsu Motor Co. Ltd., researchers from the
University of New Mexico (UNM) developed a technology that
eliminates the need for precious metals, such as platinum, in
fuel cells. It consists of an innovative, non-metal catalyst
that relies on abundant elements, including iron, nitrogen,
and carbon. The technology was chosen as a "Top 10 Innovation"
at the first annual Innovation for Cool Earth Forum in Tokyo
in October, 2014. As of December, 2015, Daihatsu had developed
three demonstration vehicles with hydrogen fuel cells that use
the UNM catalyst technology.
IV. University of
Michigan: Advances in hydrogen storage technology could
pave the way for innovative uses of fuel cells, including
market-ready hydrogen-powered vehicles. Researchers at the
University of Michigan were recently awarded a $1.2 million
DOE grant for a project that investigates man-made compounds,
named metal-organic frameworks (MOFs), capable of storing
hydrogen at high densities. If successful, this effort could
develop MOF-filled tanks for hydrogen-powered vehicles. The
ultimate goal is to develop a storage system that allows for
driving ranges similar to the ones of gasoline-powered cars.
University: On April 16, scientists at Rice University
reported the discovery of a cobalt-based thin film that works
as a catalyst for the production of both hydrogen and oxygen.
Used in the water-splitting process, the innovative film
serves as both the anode and cathode of the electrolysis
device, generating the two elements necessary to feed fuel
cells. According to the researchers, the material is
inexpensive, easy to make, scalable, and robust in both
durability tests and in acidic and alkaline conditions.
Institute of Technology: Researchers MIT’s Laboratory
for Energy and Microsystems Innovation (LEMI) are working on
the development of microbial fuel cells capable of harvesting
energy from wastewater. Different from chemical fuel cells
that traditionally require costly metal catalysts, biological
fuel cells use bacteria, which release electrons as a
byproduct of respiration. LEMI’s scientists have investigated
how the local environment affects the ability of bacterial
cells to transform organic materials, sugars, and acetate into
electricity. They aim to apply microbial fuel cell technology
to wastewater treatment plants and have worked to overcome
outstanding scalability obstacles.
Corporate Fuel Cell
A growing number of companies are also
engaging in R&D efforts aimed at advancing fuel cell
technology. These corporate initiatives shed light on the
tremendous potential for growth in the fuel cell market and
unveil new and exciting applications of fuel cell systems.
The following paragraphs offer a few examples of recent fuel
cell innovation in the academic world.
Power Systems, Inc.: One of the global leaders in PEM
fuel cell technology, Canadian company Ballard designs and
manufactures clean energy fuel cell products for a variety of
applications, ranging from backup power to material handling.
In 2014, Ballard invested over $14 million in research and
product development. The company’s market focus is to
“put fuel cells to work” both in commercial and development
stage markets. Innovation has focused on fuel cell buses;
continuous power for off-grid telecommunication sites and
generator systems for off-grid homes in remote areas; and
distributed generation systems, in which fuel cells generate
clean energy right at the point of demand.
With the objective of creating a cost-competitive commercial
alternative to diesel and diesel hybrids in the transit bus
market, Ballard has worked on the development of improved fuel
cell modules for hybrid buses. Concrete goals include
increasing the durability of the PEM, which would enable the
extension of a module’s longevity to around 20,000 hours,
comparable to diesel engines.
The company recently unveiled its next-generation
FCvelocity®-HD7 fuel cell module for buses, which features a
reduced parts count – including fewer moving parts – an
integrated air compressor and coolant pump, along with a
reduced parasitic load. The solution went through an operation
trial in Hamburg, Germany, in December 2014 and should soon be
incorporated into zero-emission buses planned for deployment
On April 7, Ballard’s modules were used to power the world’s
first hydrogen fuel cell-powered fixed rail electric tram,
developed by Chinese rolling stock manufacturer CSR Qingdao
Sifang Company. This innovative and exciting application sheds
light on the unmatched adaptability of fuel cell
Energy: Founded in 2001, Sunnyvale, California-based
Bloom Energy provides on-site power generation systems that
utilize innovative solid oxide fuel cell (SOFC) technology
with roots in NASA’s Mars program.
Different from legacy fuel cell technologies, which require
expensive materials and often fail to provide a strong enough
economic value proposition, SOFCs use low cost ceramic
materials and present extremely high electrical efficiencies,
being able to deliver attractive economics without relying on
combined heat and power schemes.
Though very promising, SOFCs also pose major engineering
challenges, particularly because of extremely high operating
temperatures (typically above 800°C). With breakthroughs in
materials science and design, Bloom has overcome these
barriers and developed patented SOFC technology that is the
basis for an innovative class of power generators, producing
clean, reliable, and affordable electricity at the customer
The company has raised over $1.2 billion in equity since its
founding and, as of August 2014, had installed more than 130
megawatts of its units in the U.S. Its list of clients
include Apple, eBay, FedEx, AT&T, Wal-Mart, Macy’s,
Google, NASA, Verizon, Ikea, Staples, Coca-Cola, and
Bloom has been particularly successful as a provider of fuel
cell systems for data centers and mission critical facilities,
where energy consumption is a major cost and concern.
The company’s modular, always-on architecture draws fuel from
the highly reliable natural gas grid, and utilizes the
electric grid as backup, thus eliminating the need for
traditional backup equipment, such as diesel generators, UPS,
batteries, and complex switchgear. By generating power
on-site, the innovative system avoids 7-15 percent of losses
from transmission across the grid and also prevents similar
additional losses from duplicative UPS systems.
Cell Energy, Inc.: Headquartered in Danbury,
Connecticut, Fuel Cell Energy designs, manufactures, installs,
operates, and services stationary fuel cell power plants. The
so-called Direct FuelCell (DFC) plants have generated more
than 3 billion kilowatt hours of ultra-clean electricity,
equivalent to powering more than 245,000 average-size U.S.
homes for one year.
Fuel Cell Energy spent over $18 million in research and
development in 2014. The company performs both public
and privately funded R&D to expand the markets for DFC
power plants, reduce costs, and increase its technology
portfolio in complementary high-temperature fuel cell systems.
Examples of ongoing research efforts include distributed
hydrogen production, compression, and recovery solutions,
particularly with the development of a gas separation
technology denominated DFC-H2. The innovative mechanism
captures hydrogen that is not used by the fuel cell electrical
generation process, which can then be used for industrial and
vehicle fueling applications.
Fuel Cell Energy currently operates a tri-generation DFC300-H2
power plant at its Torrington, Connecticut manufacturing
facility, utilizing natural gas to supply 1) electricity for
the facility, 2) heat for the building, and 3) hydrogen for
the manufacturing process, replacing hydrogen that was
delivered by diesel truck. Supported by the DOE and the State
of Connecticut, this innovative installation serves as a
showcase for industrial users of hydrogen.
The company is also engaged in carbon capture research. While
the typical DFC application uses both natural gas and ambient
air for power generation, the innovative carbon capture fuel
cell solution uses the exhaust flue gas of a coal or gas-fired
power plant to fully or partially replace the use of ambient
The technology acts as a carbon purification membrane,
transferring CO2 from the air stream (where it is very
diluted) to the fuel exhaust stream, where it is more
concentrated, allowing the CO2 to be easily and affordably
removed for sequestration or industrial use. According to the
company, the fuel cell carbon capture solution can destroy
approximately 70 percent of coal and gas-fired plants’
Power, Inc.: Based in Latham, New York, Plug Power
designs and manufactures fuel cell systems that replace
conventional batteries in material handling equipment powered
The company’s innovative GenDrive fuel cells are productivity
enhancing, lead-acid battery replacements for electric lift
truck fleets. The drop-in solution provides continuous power
at all times, even in freezer environments as low as -22°F.
Different from batteries, GenDrive fuel cells never require
charging or changing, which can save up to 13 minutes per
shift (assuming that battery changing requires 15 minutes per
shift compared to two minutes for hydrogen refueling). This
reduction in vehicle and personnel downtime can increase
productivity and lower operational costs.
GenDrive fuel cells are also capable of maintaining constant
power and full speed at all times, avoiding an average 14
percent decrease in speed, which happens in the last half of
the battery charge. In addition, Plug Power’s solution makes
large battery charging rooms obsolete, freeing up valuable
Plug Power has created over seventy GenDrive products to fit
different models of electric lift trucks from all leading
global manufacturers. The company claims to be able to
seamlessly convert the entirety of its clients’ fleets’ to
hydrogen fuel cells.
According to Nasdaq, revenues for Plug Power almost tripled
over the past year. The first quarter of 2015 registered a 69
percent increase in relation to the same period of 2014.
Plug’s innovative solution has attracted major companies,
including Wal-Mart, Whole Foods, Kroger, P&G, Coca Cola,
CVS, and BMW.
With a myriad of potential applications and
unique benefits, fuel cell systems could become a major
element in our energy portfolio. Federal R&D tax credits
are available to support the innovative efforts that will pave
the way for a widespread adoption of this promising