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Lawyers Warn of Fuel Cell ‘Black Boxes’

From the c-suite perspective, a $250,000 fuel cell is essentially a “black box” posing significant operational risk, two lawyers have warned in the latest issue of Executive Counsel.

Roy Palk and Samuel Brumberg of LeClairRyan write that companies may turn their fuel cells on or off, but can’t open the box to make routine repairs or maintenance. Warranties and service contracts are therefore crucial when buying such devices. Fuel cell buyers must be sure that manufacturers will keep servicing older models even after they make new launches – or the fuel cell could become a very big paperweight.

This is just one arena of distributed generation in which companies need to exercise caution and ask the right questions, Palk and Brumberg write. If companies begin to depend on distributed renewables for part of their power supply, they must plan what they will do if that generation goes offline, either short-term or long-term. Can the replacement power be obtained quickly? Will it need to itself be renewable energy, and if so, is that power available?

In addition, installation of new power generation can force foot traffic through a higher-risk area, which may have an insurance impact. If a fuel cell is dropped before installation, projected savings could disappear. Companies should also consider the insurance implications of installers injuring themselves or causing damage to another part of the facility.

Throughout the procurement process, companies should keep focused on costs and risks. It’s easy to get wrapped up in renewable power’s benefits to brand identity – but in the end, such deals must stand on their business merits alone, the authors say.

In little over a year, 34 corporate customers have installed, deployed or purchased more than 250 fuel cell power systems and hundreds of backup power units, totaling more than 30 MW of power, plus more than 1,000 fuel cell-powered forklifts, according to a November report by Fuel Cells 2000.

The non-profit said that Walmart, Coca-Cola, Sysco and Whole Foods are leading the charge of companies deploying fuel cells. Walmart now has 6.8 MW of fuel cell power at 17 stores, plus over 70 fuel cell-based forklifts. Coca-Cola has 2.1 MW of stationary fuel cells at four locations and 72 forklifts at two bottling facilities.

NBCUniversal, Kroger and Kaiser Permanente have all started buying fuel cells recently, Fuel Cells 2000 says. Other companies using the technology include Adobe, AT&T, Bank of America, BMW, Cox Enterprises, CVS Caremark, Diversey, Google, Kimberly-Clark, Price Chopper, Staples, Stop & Shop, Supervalu, Time Warner Cable and T-Mobile.

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