The Role of Hydrogen in the Energy Transition: FuelCell Energy CEO Jason Few in Conversation

Jason Few:

It's really energy intensive to run direct air capture. If you're going to get to net zero mathematically, there must be something that gets you to a negative. Right? We think there'll be a place for that, but we don't necessarily believe that that's the large scale answer. We think technology is more like ours that are capturing at the source are the ways in which you're going to have the biggest reduction in CO2 emissions.

Michael Torrance:

Welcome to Sustainability Leaders. I'm Michael Torrance, Chief Sustainability Officer with BMO Financial Group. On this show, we will talk with leading sustainability practitioners from the corporate, investor, academic and NGO communities to explore how this rapidly evolving field of sustainability is impacting global investment, business practices and our world.

Speaker 3:

The views expressed here are those of the participants and not those of Bank of Montreal, its affiliates or subsidiaries.

Jonathan Hackett:

Hi. I'm Jonathan Hackett, Co-head of Energy Transition for BMO Capital Markets. Today, I'm joined by Jason Few, president and CEO of FuelCell Energy, a company who defines its purpose as being to enable the world to be empowered by clean energy. Jason, thank you for joining us.

Jason Few:

Jonathan, thank you for having me.

Jonathan Hackett:

So for our listeners who are not familiar with FuelCell, can you give us a high-level explanation of what you do? What does the company create? What are fuel cells? How do they work and why is it significant?

Jason Few:

Sure. So FuelCell Energy, we are a 53-year-old company, and what we do is that we manufacture stationary fuel cell energy platforms for decarbonizing power and producing hydrogen, leveraging our proprietary fuel cell technologies.

Jason Few:

So what does that mean? We produce energy platforms that provide electricity, that provide high grade heat, for example, all the way up to steam, commonly referred to as CHP for combined heat and power. We provide platforms that provide hydrogen and actually that produce water. In addition to that, we are commercializing our technology to do electrolysis, which will allow us to use excess electricity, to produce hydrogen and to store that hydrogen and ultimately use it for power. And we have the ability to capture carbon, and we're optimizing our technology today to be really efficient at capturing carbon, which we think is one of the important things that are required in order to achieve the climate goals that we have set. So at our heart and core, we are a manufacturer of stationary fuel cell energy platforms that deliver a number of different value streams to our customers.

Jonathan Hackett:

So you touched on both carbon capture and then combined heat and power generation there. So much of the discussion of the energy transition and net zero seems to focus on either new infrastructure or how to convert and improve existing infrastructure. You seem to sit in a unique place where you have solutions for both of those. How do you think about what can seem like competing demands across those two parts of your business?

Jason Few:

We think that the energy transition as it's set today really plays well to the strengths of our company. And as you go back to our purpose, to enable a world empowered by clean energy, we think we fulfill that purpose as a company in three ways. We think that baseload power is important. So even at that intersection, we deliver a clean baseload platform that we believe is an important part of the energy transition. Not only because of energy security, which is top of mind right now, reliability and resilience traditionally in the energy industry, the focus has always been make things bigger. That's what you do. You need more power. You make it bigger.

Jason Few:

We believe that the right way to approach this in this transition is to number up versus scale up, and we think that by deploying distributed assets the same way you might think about what's happening in the telecom world with 5G and putting things closer to the edge where the demand actually is, we think it's going to be quite helpful for a number of reasons. One we eliminate or significantly reduce a lot of the above ground risk. Two, because our platforms are utility scale, we can put utility scale power in urban areas. We operate at a decibel level less than that of a hair dryer or a vacuum cleaner as an example. So we can be co-located even in highly populated residential areas.

Jason Few:

And when you think about the fact that we're going to continue to deploy more intermittent technologies, our baseload power platforms can serve as a great way to help provide support for or firm capacity, if you will, for those intermittent technologies. And then from an environmental standpoint, because we run 24 hours a day, seven days a week, we actually avoid more emissions than traditional renewable resources because if you take Connecticut where we're headquartered, solar is roughly 15% efficient. So 85% of the time, you're getting power from somewhere else. And so we avoid far more emissions than solar, for example, utility scale solar.

Jason Few:

Secondly, we believe very strongly that two things are needed to achieve either the one and a half degree C scenario or the two degree scenario. And those two things are hydrogen and carbon capture. And we have the platforms that deliver hydrogen. As an example, we're developing right now, constructing a distributed hydrogen platform for transportation application for Toyota at the Port of Long Beach in California where our tri-gen platform will deliver grid resiliency and reliability to Toyota because California is a very unreliable grid. We'll do that by providing 2.3 megawatts of power.

Jason Few:

Secondly, we will deliver 1.3 tons of hydrogen a day. That hydrogen will be used for the Toyota Mirai, which is their passenger vehicle. And they've jointly developed a class eight truck with Paccar under their Kenworth brand, so using the Toyota fuel cell electric vehicle components, that will also serve as the fuel for that vehicle as well. And then we do something really unique. We're the only platform we know of that can produce hydrogen and produce water, and we'll provide water to Toyota so they won't have to use it as a natural resource.

Jason Few:

And then that third piece is carbon capture. There's roughly eight gigatons of CO2 emitted, and today roughly 0.02% of that carbon is sequestered. And so having a platform that can scale to large scale is critical. Having a platform that will bring down the cost to capture is essential. And so having the only platform that we know of in the world that can capture carbon from an external source while producing power, and that power that you can produce allows you to sell that power to the grid to bring down the cost of capture or to use that power on site versus buying power from the grid, to bring down the cost of capture, and with that same platform we can produce hydrogen.

Jason Few:

So we think that there are a number of industries that you're just not going to be able to decarbonize but that are essential to the way we live today. Cement, petrochemicals, refining, glass, just to name a few, are great examples of where carbon capture must be part of the solution. And so we think about this notion of old technologies versus new technologies as fuel cells really being for us, as a company, what's really, really exciting around here is we get to act like a 53-year-old startup because we've got great technology that really addresses the needs of the energy transition.

Jonathan Hackett:

So can I dive in first on the carbon capture piece? Because I think it's really interesting the examples you gave, which are industrial uses, but not often we get carbon capture divided between direct air capture where it's extremely dilute or what I'll call heavy flue stack where people are saying, "Well, I just need you to give me something that's a very intense, very concentrated source." It sounds like you're somewhere in the middle where you can have industrial applications that are broader and you're using it to generate power. Is that the right way to think about where you sit in that spectrum?

Jason Few:

Partially. The way that we look at it is we think industrial, let's call it industrial for sake of a better argument, somewhere between a flue stream that might have 6% to 8% CO2 concentration. We think that our platform is ideally suited to go after those kind of applications. And then you have more dilute streams, let's say, from a natural gas combined cycle plant. Let's call that 4% for lack of a better argument. That's exactly the work that we're doing to optimize our platform to be able to go even after those very low carbon intensity flue streams so that we can provide a solution across the complete spectrum. Because again, going back to one of the points I made earlier, we think baseload power is important. We think that natural gas will continue to be a part of that solution for some time. And so we think having a platform that will enable the billions of dollars that have been spent in that existing infrastructure to have a longer life is a great opportunity for our company.

Jason Few:

And so we're very focused on that, and we think about things like direct air capture. Just as an example, it's really energy intensive to run direct air capture. And so the question becomes how do you implement that? I would argue that if you're going to use renewable energy sources to drive direct air capture, you probably would get a bigger carbon reduction by just putting that power on the grid than through a direct air capture type platform.

Jason Few:

However, that being said, we believe very strongly that capturing carbon at the source is the most efficient and the way we are to approach it, but we also know there's going to be limits to that. And so having other technologies in addition to the natural technologies like trees, having something like direct air capture will help because if you're going to get to net zero mathematically, there must be something that gets you to a negative, and so we need to have other ways to get at this. And so we think there'll be a place for that, but we don't necessarily believe that's the large scale answer. We think technology is more like ours that are capturing at the source are the ways in which you're going to have the biggest reduction in CO2 emissions.

Jonathan Hackett:

No, that makes a lot of sense. As you think about the other part of what you produce, so low carbon hydrogen, there are lots of discussions around the demand profile, how that's evolving, how are you seeing the demand and adoption of hydrogen as somebody directly involved in that space?

Jason Few:

Yeah. So we see significant demand growing for hydrogen. We think about hydrogen as perhaps the most flexible energy source that's being talked about in this whole transition. And I say that because hydrogen has the ability to serve transportation, many modes of transportation from light duty transportation to heavy duty expectation to marine applications to locomotives. It has the ability to serve as a replacement, as a fuel to create heat for some of those applications that we've talked about from steel making to glass making as an example. And it has a tremendous opportunity to serve as an energy storage system.

Jason Few:

And we believe with the deployment and continued deployment of intermittent technologies, there has to be a long duration energy storage solution. We think the right answer to that is a hydrogen solution versus a mineral-based solution for a number of reasons. Because one, you can basically produce and store almost endless amounts of hydrogen. Secondly, hydrogen is regenerative. You produce it locally, and its waste product is water. And so when you think about the environmental attributes, hydrogen is a great answer.

Jason Few:

When you look at that from an energy storage standpoint versus batteries as an example, so let's take lithium ion batteries. Today, if you look at lithium ion batteries, you've got issues around mining environmentally. You've got issues around just the availability of lithium and cobalt, for example. You also have the facts that over 60 plus percent of rare earth minerals are excavated out of China, and over 80 plus percent of all rare earth minerals are processed in China, and you've got well over or close to almost 80% of cobalt comes out of the Congo.

Jason Few:

And so when you talk about what we're experiencing today and what you see happening around the world, the tragic events that we're seeing happen around the world has really brought this notion of energy security back to the fore. So if you think about your ability to produce locally an energy source that is also environmentally friendly, we think hydrogen is a great platform for that, and so we're really excited about our technologies to produce green hydrogen, blue hydrogen, and you do that in multiple ways. Rather that's taking excess wind and solar or even hydro, for example, which Canada is blessed with hydro as one of its energy sources to produce hydrogen or to use fuel and to do it in a clean way. In our Toyota project, we're using directed biofuels. So we're going to be producing green hydrogen using fuel exactly where it's needed at the port. And so we're really excited about those opportunities.

Jonathan Hackett:

So it's interesting. You touched on, I think, ESG as you were talking about the different elements of energy security and the international considerations there. You recently launched a sustainability report. As a company that clearly is an impact company to begin with, you're in the energy transition, that's your core business, why was it important to do the work to produce a sustainability report?

Jason Few:

Yeah. Great question. We deliver solutions to our customers that reduce scope one, two and three emissions; however, it's essential that we're equally focused not only on the E as a company, but the S and the G, which we think is really important, and our sustainability report speaks to all of those things. We've committed to net zero on our own scope one and two emissions by 2030, and we've committed to scope three by 2050.

Jason Few:

And so as a company, we've made that commitment and we're doing the work over the course of the next several years to get there. We're focused on eight of the UN goals that we can actually impact as a company. And then when you think about the S in ESG, today, 22% of our team members are women and we're working really hard to increase those numbers as well as the numbers of people of color in our company. And we're doing that because we think that that creates a competitive advantage for the company. A lot of research has been done and it clearly demonstrates that companies that are diverse and public companies that have diverse boards just perform better. They outperform their competition. Today, our board is 63% diverse. We're a board of eight people, four of which are women, two are people of color, and so take this very seriously as part of our company.

Jason Few:

And then when you look at our board and you look at the diversity of the experiences, everything from financial to manufacturing to ESG-related issues, that diversity of experience also contributes to our ability to really put in place good governance mechanisms and to practice good governance across the company. And so we've been focused on this for a while. We just never put it in a report. And so now we've put it in a report and we've told the world what we're doing and we're committed to making it happen.

Jonathan Hackett:

As you think about that journey through the sustainability report, what were the lessons you learned through that process? What advice would you share for leaders of other energy transition companies that are thinking about their sustainability disclosures and their strategy?

Jason Few:

Great question. One of the things that we say as part of this energy transition beyond our purpose of enabling the world to be empowered by clean energy, we also say that we strongly believe and advocate for a safe and practical journey to getting to carbon zero. And so we believe that also applies to any company that's starting their journey to net zero. We recently just did a brand refresh and we changed our brand and our logo. And if you look at our logo, we used gradient colors, and one of the reasons we did that is to actually signal that it is a transition to net zero. So we have a gradient color scheme in our logo to try to communicate that, and we also chose a color pattern that's very friendly environmentally.

Jason Few:

But as you think about a safe, secure and practical journey to carbon zero, we think the first thing to do is that you take small, simple steps because you could look across an enterprise and there's probably hundreds, if not thousands of things that you could go tackle, but it's really important first and foremost to get started. And so we've looked at this very much in the same context you might think about Six Sigma around a DMAIC type approach to this, so we did the work across the company and we defined what we needed to do. We've set up ways in which we're going to measure the progress that we're making. We have a team dedicated to this that's focused on analyzing what we're doing, and then also how we improve on that, and then ensuring that we have the controls in place that we don't go backwards or that we don't lapse in terms of the improvements that we make.

Jason Few:

And so what I would say to any organization is, one, ensure you have executive level sponsorship. The team needs to know it's important at every level in the organization. What we've done even at our board level is we extended the charter of our nominating and governance committee that now also has responsibility for ESG. And we changed the name of that committee to the ESG and nominating committee, and so we have clear oversight at the board level. I am an executive sponsor, as is Mike Bishop, our CFO, to just show how important we think this is as a company. We've dedicated a team of people that are responsible for ensuring that we have the right definitions around the things we're going after that have set up the ways in which we're going to measure. And then from an analyzing and improving and controlling, we read out on this and it's the old saying, if it's important, you measure it and if you don't measure it, you can't manage it.

Jason Few:

And so I would say make sure you have those systems set up to be able to do this, but keep it simple with small digestible things that you can do. So I think about it as look, here's the first 10 things we identified we need to go do. Let's go get those done then we'll do the next 10, as opposed to peanut butter spread a bunch of stuff that never gets completed in an organization. And so that's the way we're approaching it, and I advise others to take the same approach.

Jonathan Hackett:

I think that's really great advice, Jason. I was wondering if I could ask you on the personal level, what has led you to working at this nexus of sustainability and energy and what has your journey been to get there?

Jason Few:

It's an interesting story as to how I got here. I originally became part of FuelCell Energy by becoming an independent member of the Board of Directors. And at the time I was recruited to join the board, they were looking for a board member that really could bring two things to the board. One, a perspective in technology understanding; and two, someone that has had experience in turnarounds or driving turnarounds, both of which I've had. And as I'm sure you can appreciate, Jonathan, if you hang around the oil and gas business long enough, you've been through the boom bust cycle, so you've seen the movie before, and so I was able to bring that to the board. But in the eight or nine months I was on the board as an independent member, we made a decision to move in a different direction, and that created the opportunity where my colleagues on the board asked me to consider running the company.

Jason Few:

And the reasons that I really said yes to the opportunity centered around a few things. Number one, being on the board and then going through the restructuring work that we were doing, I got to spend more time with the team here at FuelCell Energy. And what I saw was a team that was really passionate about what we were doing. We were a company at that time going through some pretty tough financial challenges. And in a lot of those instances, people jumped ship, but I saw people staying and being committed and passionate about what we were doing.

Jason Few:

Secondly, I got to learn a lot more about the technology, and I really saw amazing technology that if we could just execute on the technology and commercialize the things we had in the lab, this company could have a real impact on the climate goals that have been set.

Jason Few:

And then thirdly, I viewed it as the third opportunity in my career to be involved in something that you could really measure and see that you could have a demonstrable impact on society in a real way.

Jason Few:

And so to answer the first part of the question, the journey that got me, the first time I got to do that is when I launched the broadband business for SBC, which is now AT&T. I think about broadband and the role that it plays in society today. We couldn't have shut the world down without broadband during COVID. The way we consume information and entertainment, it's all through broadband or primarily through broadband. And so I got to play a small part in that. I helped take what was a new idea and enabled that through at least one company where we were the first company to reach a million subscribers on DSL of any company in the world. And I got to lead that. And I look back at that and I say, "Wow, that's had a real impact on the world."

Jason Few:

I got into the energy business when I left Motorola to join Reliant Energy, all with the focus of creating a technology business all around both hardware and software products and services that were focused on the digitization of the grid. I used to say all the time that if Alexander Graham Bell came back and saw the telephone industry, he'd be amazed. You can walk around with these phones. You can talk anywhere. You can now get phone calls in the middle of the ocean. But depending on who you want to give credit to for energy, Nikola or Thomas Edison or whoever you want to pick, they would've come back and looked at the grid and say not much has changed.

Jason Few:

And so digitization of the grid I felt was a really great opportunity to have yet another impact on the industry. And so I got to do some of that. I didn't really realize the full dream around that because the digitization of the grid has been maybe a little bit slower than I think we thought originally. But then I look at this opportunity. And for the third time, I say, look, the team, the FuelCell Energy team, and with me being a part of that really have an opportunity to have a meaningful, measurable impact on climate change and achieving the one and a half C or the two degree C scenario for reducing warming of the earth.

Jason Few:

And so I'm excited about that, and that's how I got here, and that's why I think we are a passion organization. We're a purpose driven organization. And I think that's helping us attract amazing new talent to our team as we pursue our purpose. And so I'm really excited about that.

Jonathan Hackett:

It's interesting, Jason. I thought I might ask you, what gives you hope when you think about the journey to climate change? But I feel like that question might be well answered by what you just said, given your sight on what your company is doing and the passion that your employees have. I want to really thank you for joining us. It's been a great discussion. Thanks so much.

Jason Few:

Jonathan, thank you. I really appreciate it. And I thank your audience for listening and being interested in this topic. It's an important topic. And as I said, our company is all about enabling the world empowered by clean energy, and I can guarantee your audience that we come to work every day passionate about making that happen. So really appreciate speaking with you today.

Michael Torrance:

Thanks for listening to Sustainability Leaders. This podcast is presented by BMO Financial Group. To access all the resources we discussed in today's episode and to see our other podcasts, visit us at bmo.com/sustainabilityleaders. You can listen and subscribe free to our show on Apple Podcast or your favorite podcast provider, and we'll greatly appreciate a rating and review and any feedback that you might have. Our show and resources are produced with support from BMO's marketing team and Puddle Creative. Until next time, I'm Michael Torrance. Have a great week.

Speaker 3:

The views expressed here are those of the participants and not those of Bank of Montreal, its affiliates or subsidiaries. This is not intended to serve of as a complete analysis of every material fact regarding any company, industry, strategy or security. This presentation may contain forward-looking statements. Investors are cautioned not to place undue reliance on such statements as actual results could vary. This presentation is for general information purposes only and does not constitute investment, legal or tax advice and is not intended as an endorsement of any specific investment product or service. Individual investors should consult with an investment, tax and/or legal professional about their personal situation. Past performance is not indicative of future results.