How Can Fuel-Cell Powered Microgrids Fed by Methane from Coal Mines Meet Data Center Demand?

Now comes a new idea–fuel-cell powered microgrids whose fuel source is methane from coal mines. The goal is to deliver net-zero power to data centers by converting methane to hydrogen for use in fuel cells. Solar, energy storage and other clean resources could be included in the microgrids.

“Right now, grid capacity is oceanfront property for data centers, the greener the better,” said Mark Feasel, executive vice president and chief commercial officer, FuelCell Energy.  “There’s going to be a need for a lot of this to be serviced by decentralized systems with some or no connection to the grid.”

Partnership plans to initially sell power in Virginia and Kentucky

FuelCell Energy, Diversified Energy, which produces, transports and markets natural gas, and Tesiac, an investment and development platform company, have agreed to create an acquisition and development company that will offer net-zero power from natural gas and captured coal mine methane to data centers.

Coal mining in 2022 emitted about 52.3 million tons of methane per year, more than oil extraction, which emitted 39 million tons.

At first, the new development company will operate in PJM territory–taking advantage of incentives there–and sell microgrid power in Virginia and West Virginia, where many data centers are located and may need power that’s more reliable than the grid can provide, Feasel said.

The fuel cells will be the cornerstone of a  reliable and efficient microgrid that will meet the power and cooling needs of data centers without the emissions associated with conventional power generation such as gas turbines, said Feasel.

Initially, the new investment and development company will supply up to 360 MW of electricity to three locations in Virginia and West Virginia, along with Kentucky.

Under the plan, Diversified Energy will dedicate gas supplies and coal mine methane to FuelCell Energy projects.

Microgrids will augment utility or offer off-grid power

“What we will build together is essentially a utility augmentation or utility replacement strategy,” Feasel said. One example would be an existing data center that needs 50 MW of power, but only has access to 20 MW of hosting capacity. In that case, a microgrid would be connected to the grid to augment what’s provided by the utility. The microgrid might provide grid services such as frequency support, voltage support and black start capabilities.

Ultimately, the utility might buy the microgrid assets, he added.

In areas where no utility hosting capacity is available, an off-grid microgrid would provide the needed power, likely adding distributed energy resources such as solar and batteries to the fuel cells.

In one scenario, a data center could be built on property next to a coal mine and directly take advantage of methane for fuel cells.

How methane from coal mines can feed fuel cells

Using methane works well for FuelCell Energy’s carbonate fuel cells because they operate at temperatures of about 1,000 Fahrenheit, which is a high enough temperature to allow the conversion of methane to hydrogen in the fuel cell stack. It also allows the fuel cell to produce hydrogen directly from methane-based sources such as natural gas or biogas.

Diversified Energy will extract methane from coal mines and transport it through a pipeline to data centers, generating power through the electrochemical conversion of methane to hydrogen, and then to electricity.  Because this process is virtually free of air pollution emissions, the fuel cell-based microgrids can be brought online more quickly than combustion-based systems that may involve air permitting delays. Heat cogenerated by the fuel cells can be converted to chilling, which would increase system efficiency.

In some scenarios, the coal mine molecule could be converted to electricity and sold into markets, assuming there were no transmission distribution constraints.

“I think you'll see a combination of these things,” said Feasel. “You'll see a coal mine creating a molecule. The molecule is either piped a little bit and then converted to electricity, or converted to electricity immediately and then sold.”

The role of alternative and renewable energy incentives

To help finance the systems, the new acquisition and development company will take advantage of alternative energy and renewable energy credits that are available in some jurisdictions to fuel cell projects, depending on the kind of feedstock used.

The company will also be on the lookout for ways to stack credits, grants and incentives.

For example, Pennsylvania has an alternative energy portfolio standard under which utilities can procure alternative energy credits.

“We are developing some projects together in regions where we will be creating renewable energy credits or alternative energy credits that will be traded in that market,” explained Feasel.

The new acquisition and development company might also be able to get low-interest loans or grants associated with providing resilience or sustainability or might be eligible for incentives for building in economically disadvantaged areas, he said. The goal is to find as many incentives and grants as possible and stack them up.

A number of factors will influence the price of the power

Prices for the microgrid power will vary depending on the priorities of the data centers.

“You can design systems to solve for resilience at the cost of sustainability or sustainability at the cost of resilience or get both of them at an expensive price,” he said. A fourth factor is access to power, which data centers value.

“I think they're going to set a floor for what the resilience needs to be. And you know that that resilience is probably a little higher than a grid. So you probably can expect a resilience premium to be paid,” Feasel said.

Just as important, the agreements with data centers and utilities will be structured in a way that ensures only the data center pays for the power, not the ratepayers, an important issue right now for utilities.

For example, in Oregon, proposed legislation would ensure that ratepayers don’t bear the costs of paying for new generation and transmission required by data centers.

Addressing two major data center challenges

Providing net-zero energy for data centers without requiring ratepayers to pay for the extra costs associated with that energy would solve two important issues plaguing data centers today: ensuring the power is clean and not subsidized by residential ratepayers.

“In this case the data center would bear all the cost associated with their own power, even if they’re just supporting the grid,” Feasel said.

In other words, if the   property is expensive, the data centers pick up the costs.