Status Update

May 5, 2016

Good day, ladies and gentlemen, and welcome to the ExxonMobil Media Call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will be given at that time. As a reminder, this conference call is being recorded. I'd like to introduce your host for today's conference, Alan Jeffers, Media Relations Manager with ExxonMobil. Please go ahead, sir. Thank you, and good morning, everyone. Thank you very much for joining us this morning for our media call regarding the ExxonMobil and Fuel Cells Energy, Inc. Carbon Capture Technology press release. I'm joined today by Vijay Swarup. He's Vice President for Research and Development at ExxonMobil Research and Engineering Company and Chip Batone, President and Chief Executive Officer of FuelCell Energy, Inc. Vijay will open with a few opening comments followed by Chip and then we'll go to the go to questions. Thanks again for joining us, Vijay. Thank you, Alan, and thank you all for joining. We're very pleased and excited to announce this agreement with FuelCell Technology today. As many of you know, we at ExxonMobil have been conducting research in carbon capture for years and have an active portfolio of programs. What we're talking about today is actually a concept that came up by one of our scientists literally while he was thinking about this over the weekend. And that's what we do in R and D. We are constantly looking for solutions, constantly looking for ways to solve the biggest challenges that are out there. And obviously, carbon capture is a big, big challenge. He came up with the idea. We reached out to FuelCell Technology. We started doing some feasibility testing. We've been doing that over the past few years. And we're at the point now where we think this technology warrants further research to build off of the idea that our scientists came up with a few years ago. This agreement allows that research and development to be conducted to understand better at the chemistry level what is happening in the fuel cell, how to optimize the fuel cell, things of that nature. It's a multiyear program with a focus on fundamentals that could lead to pilot scale or larger demonstration units. As I said, carpet temperature is a big challenge and it's important that we have a wide range of programs trying to solve this And it's going to take solutions and that's what we're looking for. So we're really pleased to have you on the call today. We at SM Mobile are really pleased to be working with fuel cell technology on this carbonate fuel cell program. And with that, I'll turn it over to Chip. Thank you, Vijay, and good morning to everyone on the phone call. My name is Chip Patone, President and CEO of FuelCell Energy. I'll just add to what Vijay said. This is a huge opportunity to make a significant impact on carbon reduction in the world. We're very pleased to be working with Exxon. We have been working with Exxon, in fact, over the years, as Vijay mentioned, as well as other people like the Department of Energy. So I think this is a tremendous opportunity for us to combine forces here with the expert disciplines and expert people that we have to really focus and accelerate the development of what we think is a very important solution in the world. And on top of that, this is a meaningful near term material impact for fuel cell energy as well. So we'll turn it over to questions at this point, and P. J. And I'll do our best to answer your questions. Thank you. Ladies and gentlemen, today's Q and A session is for media only. Our first question comes from Richard Martin of MIT Technology Review. Your line is open. Yes. Thank you. Have you done any estimates on what the likely cost of electricity from the fuel cell component of the system will be? Richard, this is Chip. I'll take that and we will correct it. MIT. Correct. For the Georgia Tech guy, that's anyway, yes, we have done so far in the studies we've done, we have done the economics on coal based solutions. What we've announced today with Exxon is the introduction of gas based CO2 reduction. The economics on that I think are still in development based on some more work we're going to be doing as well as a pilot plant we're going to be building here in the near term. But relative to the economics in general and the reason I say in general is because the amount of CO2 that you'd have in gas would be less than that of CO2 than coal. But the key thing here is that with the carbonate fuel cell, under normal conditions, we're making we're just power generation device and we take ambient air and we bring in methane either natural gas or biogas. What we're doing here is we're going to continue to take that intake of methane and for the most part here is natural gas and then introduce from the ambient air, the fuel slipstream from either the coal plant or the natural gas exhaust. So the economics here, economics here are slightly different than you would have as another device that basically just removes or concentrates CO2 because as we're concentrating or removing that CO2, we're actually producing power. So that's our offset. So we actually have revenue on this as compared to just cost of operation. And obviously, the result is that we're cleaning up or reducing or capturing our concentrated CO2. So we have different scale answers for that depending on how big the plant, But it's safe to say that when we've done our original studies, we have economics that are very interesting or we would say affordable for basically what is a bolt on device to an existing power plant. So ultimately what we're trying to get to is large scale where the economics speak for themselves, meaning that there it becomes a pull rather than a push strategy here for the utility companies to deploy these things, get all the economic benefits. And by so doing that, we see that being able to be financed with private equity or private capital that they might themselves deploy, as well as other forms of capital for the private sector. Thanks. Thank you. Our next question comes from Chris Holly, The Energy Daily. Your line is open. Good morning, gentlemen. Thanks for doing this. Can you give us an idea of the size of the initial small scale pilot project and the subsequent larger scale pilot facility? Sure. I'll start, maybe I'll turn it over to Vijay. So the vision here is this technology would scale globally in fact to gigawatts of kind of plants, but obviously you got to start somewhere. So our typical power generation business today using the same technology, we build plants in an area 50, 60 megawatts of the plant. The concept here is this is a new application. Remember, I said we're going to introduce instead of ambient air, these flue gas elements from these different sources of power. And so we're going to start out with the 2.5 Megawatt pilot plant to be specific in the near term, while we're doing some other testing as well. And then we would expect to kind of scale from there. So but ultimately, these are very large plants that have a meaningful impact on CO2 reduction in the world. Dan, while you talked about the power plants, I think one of the things that we'll be focusing on over the next period of time is more in the kilowatt scale, which will be done in the labs up in Danbury, Connecticut. And what that will allow us to do is to build on the idea that we have around how to connect these stops or take these various process pieces and really understand its capability to concentrate the CO2 while meant generating power, which is the uniqueness of this carbonate fuel cell. So we'll be doing fundamental work in the lab scale, which is to the watts, sorry, range, while we're looking at a college unit. And again, with those two components, we can then think about how this would scale because that's the game here. It's got to be scalable. It's got to be sized. And it comes back down to this is a big challenge and we really are excited about the potential for this technology to reduce emissions from big emitters like power plants, which is a key element to mitigate the risk of climate change. And if I could follow-up quickly, gentlemen, is the idea of this initial year or 2 of testing solely to try to improve the carbon capture capabilities of the fuel cell membrane? This program focuses on the carbon capture and the carbon concentration across the fuel cell. That is a very, very important piece of the energy company. And we are looking for solutions. We need solutions to this challenge. And our scientists have been working on this for years. As I said, this was an idea that one of our scientists came up with a few years ago that led us to the feasibility testing that has now taken us to the point where we want to unleash the best scientists we have in our company with the leaders in the fuel cell technology that reside up in fuel cell energy. But we as a corporation start with fundamentals, and it's critical that the fundamentals are sound. And what this lab testing in internal energy will allow us to do is to really get into the detailed fundamental understanding. And that will take as long as it takes. So we don't put a time line on fundamental research. We look to gain the fundamental understanding and then advance to the next steps. And we're very, very excited about this program and very much looking forward to working with Chip's team at Egal Energy. Thank you. That's fine. Thank you. Our next question comes from Barbara Schuch of Energy Intelligence Group. Your line is open. Thank you. A few years ago, Exxon announced a technology called Control Free Zone. That also sought to clean up the exhaust stream from power plants and gas processing plants and such, whatever happened to that process? So as we talk about when we talk about our portfolio, we have several options to address carbon capture that, what you mentioned, is one of them. And it is in our research portfolio, and it's a technology that can be deployed when we have the appropriate opportunity to deploy it. So it did work. And now it's just a matter of having the right fit at the right time for a technology. And again, that's why you need multiple options. That's why you need a portfolio of programs, because this is a big challenge and more solutions are needed. That's what we try to do in research is come up with solutions to identify where we're confident they'll work and then make the right decisions as appropriate to deploy the technologies. Thank you. Thank you. Our next question comes from Michael Giuliano of Republican American. Your line is open. Thank you. Okay, so my first question is, how do you explain how this carbon capture works to somebody on the street who doesn't know anything about this? What is the process? Mike, I'll sorry. Chip, to get into the nitty gritty of the fuel cell, I'll try to keep it to something high level across the industry and try to maybe differentiate why we think this technology is in fact special and why our scientists thought that this could provide a very unique approach to solving a very challenging problem. Jeff's already talked about the fact that CO2 off of a turbine, regardless of what the source of the turbine is, is going to be a dilute stream, meaning it's a very low amount of CO2. And what you have to do to be able to further sequester or further use the CO2 is you have to get into a high concentration. And most processes require a lot of energy to compensate and separate and then concentrate the CO2. This unique fuel cell can accept CO2 as a feed. So you bring the CO2 in and it actually becomes part of the integrated power production in the fuel cell. So what you're doing is while concentrating the CO2, which is a necessary element for carbon capture, you are net producing power, electricity. And that's what makes this unique. And that's why we looked at this technology and again, in the quest for solutions for carbon capture, our scientists looked at this and said, if you configure this to take the CO2 off of a turbine and utilize the capabilities of this special carbonate fuel cell, you will be able to you may be able to concentrate the CO2 and produce power. The feasibility tests that we've done in the lab over the last several years with Chip's organization and FuelCell Energy have demonstrated that this is feasible. And now in the next stage of research to build on the fundamentals, we're announcing this agreement so that the scientists from both parties can really get into understanding the fundamentals and begin thinking about larger scale testing. So Mark, this is Chip. Sorry. Go ahead, Mike. Yes. What will FuelCell and Exxon's particular roles be in all this research and why have they decided to get together on this? I'll update that, Michael. So this latest agreement actually is the latest agreement, meaning that we had prior agreements with Exxon on this very topic that we've been working on for several years, Michael. And so as you know from our business was really to be in the power plant business. We build very efficient, very clean power plants around the world. And as we were building these things and we're getting more and more hours on these things, as Vijay said, there's been a problem out there or an opportunity to reduce emissions levels from energy for a long time. And when you find opportunities to do that, you try to say how can we make this an affordable solution because what everybody might like, they also want to make sure it's affordable. So as we got into this, we said, wow, this device in its everyday use has this chemical reaction in it that allows us to do this capturing of the CO2. And so we as a company, we're working on that. Exxon as a company was working on that. And we just got together and said, look, wouldn't it be best if we put all the resources or the adequate resources of both parties together because frankly there are certain skills that we at SteelSeries don't have that Exxon has and vice versa. So I think it was just one of these it's a good mission And if we just kind of put our cards in the table, work together, we'll get there quicker. So that's kind of the short answer. Yes. Let me just add to that. I mean, Chip, that's a great answer. But I'll say from our perspective, we've been working at this in terms of carbon capture for years. We have extensive experience in many of the components necessary to make carbon capture affordable, scalable, reliable and globally applicable. What we do is we look for 3rd parties, we look for partners to do research in, who bring complementary skills. So this is going to take a wide range of skills. It's going to take chemists, physicists, electric chemists, modelers. We have a lot of the best scientists in those fields. Fuel cell energy understands the composition of the fuel cell, understands the electrochemistry across the carbonate fuel cell. So in the quest for solutions, you have to get the best skills together, and that's what this program is allowing us to do. And that's why we're excited about it because we're very proud of our scientific capabilities. But we also know that we have to selectively get experts in the field to help us. And that's part of leverage research. That's what we're doing here. Both parties bring unique skills, and we're very much looking forward to getting this program fully launched so we can get the scientists from both companies working to further advance this technology. And then my last question is, will this just be at first just for getting carbon cashier off of natural gas power plants, fired power plants? Michael, the program here as we've laid out is for both natural gas and coal. So basically you're covering the vast majority of the power generation industry. Okay, great. Thank you. Thank you. Thank you. Our next question comes from David Koenig of the Associated Press. Your line is open. Great. Thank you for doing this call. So when exactly, Vijay, did Exxon decide to pursue this particular program? And how much is Exxon going to invest in this? So let me do that. Thank you for the question. So as I said earlier, this we are constantly looking for solutions. And part of that is we're lucky to have scientists that are constantly thinking. And this came about with 1 of our scientists literally on a weekend. Which weekend? Sorry, about 5 years ago. I'm sorry, about 5 years. Okay. Okay. Sorry, I apologize. It was a very special weekend, about 5 years. And he came up with this idea, he saw this fuel cell and he said, wow, it looks like CO2 could be used as an input. And I wonder if it could be CO2 off of a turbine. And that led to our approaching fuel cell energy and led to some initial experiments that we've said. And those experiments have proven the feasibility, which is the first stage of experimentation. And it's gotten us to the point after discussions with fuel cell energy that we decided the best way to do this is to do this through a joint agreement, a joint research agreement, which is what we are announcing today. In terms of the finances, that's when Europe is fundamental research phase, that's quite frankly not the most important question. What we want to do is we want to ensure that both companies are putting their best scientists and the needed scientists to progress the fundamentals of this program. And that's what we're both committed to doing. So we have integrated scientists from the various disciplines that I've talked about working with fuel cell energy scientists to get the fundamentals. But quite frankly, we just don't we don't discuss cost at this time of the research program. Can you say put a number on how many scientists are going to be from the Exxon side are going to be working full time on this then? Yes. So that's actually the question in itself is part of the answer. So it's going to be parts of many, many sizes because you're going to need some physicists, some chemists, some electric chemists, some modelers, all of those people. And you need to get you need to feel the team and you've got to have the right skills on the team. And so we are committed to putting the resources needed to fully understand the fundamentals on this program. But again, it's the right number it's the right skill, sorry, it's the right skills. And then as they get in, we'll have a better feel for what percentage of their time this is going to take, quite frankly. But initially, we want to make sure we have the right array of skills addressing this technology. David, this is Chip. Bob, just to add to what Vijay said, this is really not an event. This is a mission we have. It's a big goal for any one country or company. But I think we decided to work together here and go as fast as we can. And we're committed to this. Vijay and the Exxon team are committed to this and we're going to put the brightest that we can on this and support it as necessary to go as fast as we can. I understand that, but I'm just numbers help assure people that this is really something otherwise it just sounds kind of squishy and it's hard to judge whether you're really committed to this if you don't put numbers out there, either dollars or numbers of scientists that are going to be worth noting. Sure. So I'll do our engine do it then. So we're probably thinking sort of in the range of 10 to 15 PhDs working on this program from the Exxon Mobil side, again ranging in disciplines from chemistry to physics to materials to modeling, things like that. So these are extremely smart people, and we're putting our best PhDs behind this fundamental program. But if you want an order of magnitude, I'd probably put it in the 10 to 15 types of individuals that will be working towards this initial phase of the program. And David, on our side, fuel synergy side, we've probably got 15 or 20 folks. Now we're also talking about building pilot plants and things like that. There's other investments that's going into that. So this is a pretty sizable commitment, I would say, and particularly meaningful on the fuel cell. This is an ongoing program. This is we've already done a lot of other investments, so is Exxon. And so this is not just like I said an event. So it's pretty sizable effort. Okay. Thank you. Thank you. Our next question comes from R. P. Siegel of McKinney Magazine. Your line is open. Yes. Hi. This is Mechanical Engineering. My question is for Chip. Chip, you guys recently announced a project in California where you're producing capturing carbon and also producing hydrogen as a byproduct. Is this the same technology that you're using here? Yes, great question. What's pretty interesting about this is that when we just have we build power plants, right? It's the same process. We just are doing something different with CO2 in that case. But yes, the hydrogen, what you're talking about is how we're doing, in that case, renewable hydrogen production. And it's exactly the same thing. We take methane, We internally reform it to hydrogen. And then through this electromechanical process, D. J. Laid out, we're using the hydrogen. In some cases, we can take some of it off, which is in the case of that application, and then the CO2 gets captured as well. So yes, just a little different, we call it different application on the same cycle. Okay. But will you be using Azure's in here or that will get powered back in? So for this particular test, we're using the hydrogen that we internally reform in the process itself. There are like I said, the application is slightly different. I won't bore you with the technical details. It's kind of how you pipe things and recycle different gas streams and things inside the device. But in the future, there's opportunities, yes, to focus on hydrogen because the initial initiative right now is to try to find out how you can reduce the CO2 emissions to the highest percentage reduction that you can, right? That's the one effort here. But the beauty of this is when you look at the product itself or the device itself, it has multiple applications. So in the case of hydrogen, we focus on the hydrogen production efficiency. In the case of carbon capture, we're going to focus on reducing carbon at the most affordable price we can. Got it. Thank you. Thank you. We do have a follow-up from Barbara Schuch of Energy Intelligence Group. Your line is open. Yes. What do you intend to do with the captured CO2? Do you have a disposal program for it? Yes. So that's out of the scope of this particular program, okay. Obviously, we are very ExxonMobil is very knowledgeable in sequestration. We've been at it for decades. We have demonstrated it large scale. But this particular program is focusing on the carbon concentration. You are right, that we'll be processing needed downstream of the carbon capture. And if it's cheap restoration, then that's certainly within our suite of technologies and capabilities that we have. But you are correct, this is one part of a multiple parts challenge. And this particular program we're talking about today is really focusing on that front end, which is the carbon capture. But as ExxonMobil is focusing on the yogurt. Absolutely. At ExxonMobil, we're doing research across the entire piece. And in fact, as many of you may know, in 2015, we captured nearly 7,000,000 metric tons of carbon dioxide for sequestration. So we are well versed in the sequestration piece of it. This particular program, working with fuel cell energy is focusing on the carbon capture. And Barbara, this is Chip. Just to add to that, I mean that was also the attractiveness of teaming up together because that was something we as field certainty was not focused on. And so Exxon was focusing on the whole chain, if you will, of both the capture and the sequestration. So how do we accelerate the CO2 pieces is the focus here, but there's a lot of work going on by them that we couldn't otherwise have done going on in parallel. A follow-up to that. Exxon is a major power producer on its own for its own facilities around the world. Will this be applied to any ExxonMobil facilities? So I think to be determined, quite frankly, it certainly has the potential, because as you said and as Chip has said and Asaf said, right, this is a piece that can fit into power generation to help capture the CO2, concentrate the CO2 and then sequester it. You are right, we have interest in over 5,000 megawatts of cogen capacity and more than 100 individual installations in more than 30 locations around the world. So we're very, very knowledgeable in this space. And that's what makes this technology exciting. We do think this is a robust this technology has potential for robust deployment at scale, at global deployment. And that's a bit before we get too far down that road, we are at the fundamental phase. We must make sure that this is fundamentally sound. We're going to take it one step at a time. That's the key to research. One step at a time, challenge ourselves, make sure our scientists are very comfortable and then we take the next step. It's very exciting that we have the lab work going while we're contemplating the pilot plant. That's a very efficient way to take the research forward because we have 2 steps happening concurrently. But the deployment of this will be determined and we'll be working better as we learn more about the capabilities of this carbonate fuel cell. Thank you. Thank you. Thank you. Thank you. Our next question comes from Peter Folger of Congressional Research Service. Your line is open. Thanks and thanks for doing the call, gentlemen. I guess I don't mind being bored with some of the technical details, if you'd indulge me. I'm still kind of curious about how this really works. Maybe the overall question is when you're adding CO2 to your input stream, does that create an energy penalty? Or do you create electricity from that in your fuel cell? And secondarily, one big part of the energy penalty from the sort of conventional techniques is the compression part to get it into that dense fluid form. What part of your process here does that? Is that done in the fuel cell or is that a separate step? Yes. So some of the answers were better than your questions. So what is unique about the fuel cell and what our scientists thought about when they saw and read about the fuel cell, as we've said about 5 years ago on a weekend, is that it can take CO2 as an input. The chemistry that occurs is as the electricity is being generated through the methane on one end of the fuel cell and the CO2 being put into the other end, the other part of the fuel cell, is you generate power while you're concentrating CO2. So you in your question, this is this has the potential and we expect it to be a net power, net electricity generator while you're concentrating CO2 versus other conventional technologies that require power or require electricity to concentrate the CO2. There are several steps to the entire carbon capturing sequestration chain, and you mentioned some of those in your question as well from the carbon capture, the CO2 concentration to the compression to the injection. This particular program is looking at just the piece of the concentration. And what is unique about this fuel cell, and this is the fuel cell that can accept CO2 as feed. That's what makes this fuel cell so unique. And that's what our guys saw when they looked at this. They said this is a very interesting chemistry that's taking place because the carbonate can take a CO2. That's the piece we're focusing around. For that piece alone, relative to other options to concentrate CO2, this is a net generator of power. And that's why we're excited. The overall power balances and the overall use of energy, we'll have to determine that as we integrate this within with other parts of the CCS chain. But for now, we're focusing on the carbon capture and chip can get a little more details on the chemistry of the fuel cell. But simply put, that's what we're trying to do. CO2 is a feed across the fuel cell, concentration of CO2, net generate power versus used power. Got it. That's very helpful. Just a quick follow-up. So you mentioned that the technology is useful for both natural gas and for coal fired plants that have slipstreams. Obviously, the coal has a higher CO2 concentration in the slipstream coming out and is also generating more CO2 that the country produces. So I guess I'm wondering sort of related to the first question, is your fuel cell more efficient with a higher CO2 concentration in this slipstream? Otherwise, it would be more amenable to a coal fired power plant versus gas? Or how does that work? So there's trade offs. There's trade offs in terms of the purity of the CO2. There's trade offs in terms of the temperature of the CO2 coming off of the turbine, etcetera. All those things are to be determined. Look, we at ExxonMobil's natural gas has had a huge impact on emissions reduction, but it doesn't go all the way. And the carbon capture with natural gas is a needed next step in the overall reduction of emissions from power plants. You're right. And there are many, many trade offs when you're comparing coal versus natural gas. And of course, that's what the combination of the lab work plus the pilot work will help us understand. But in both cases, you have CO2 coming off of the turbine. And in both cases, you're using that CO2 to drive the fuel cell to both concentrate the CO2 while you're generating power. Peter, just to add to what Vijay said exactly right. I mean, we want to reduce the emissions levels as much as we can clearly, right? But there's also another thing that we've said here a couple of times. This is a global opportunity. It has to be affordable. And what that means basically is that we need to make this where people want to put this in. In other words, get a pull rather than push. And through this further development of this application and the research and the pilots and things we'll build at different levels, we're going to keep in mind all the time that it has to be an affordable solution. So while there are some technical challenges differences between not technical challenges, but the differences between coal and natural gas speeds are obviously dilution. You might have 15% CO2 and carbon or coal, you might have 5% of natural gas. And so what are you trying to really do there? Are you trying to get the percentage up or are you trying to get the aggregate of the CO2 down or something? So we have a lot of parameters we can play within a project. But at the end of the day, it needs to work technically and it needs to work economically and that's what we're focused on. Great. Thanks very much. Thank you. Thank you. I'm not showing any further questions in queue at this time. I'd like to turn the call back over to Vijay and Chip for closing comments. Okay. Well, thank you very much for taking time out of your very busy schedule to join us. As I said at the beginning, we're very, very excited about today, about announcing this agreement with FuelCell Energy. As we have a we are a dedicated research organization. We conduct research in a wide range of areas related to energy. Carbon Capture is one of those. We are constantly looking for solutions. We're constantly looking for folks that can help us advance the technology. This came about with one of our scientists doing exactly that, understanding that this carbonate fuel cell is special. It can use CO2. It can concentrate the CO2. And carbon capture is just a big, big part of the overall reduction emissions reduction from large scale emitters like power plants, which is necessary to mitigate the risk of climate change. So we are very pleased with today. We're very excited about the work that was important to getting into the lab and getting into the work with some of our best scientists working with some of Fuel Cell Energy's best scientists. And I'll make one other comment, which is there is more information about this on our website, which is exxonmobile.com. So you're free to go to that website and get some additional information. But again, I just wanted to thank everybody for taking time out of their busy schedules to let us talk about this program. I'll turn it over to Chip. Yes. Thank you, P. J. And just in closing, I think one of the questions was what does this mean to the person on the street? I think the way I would answer that in summary is that the world needs energy, the world would like cleaner energy. We're working on that. This is a global opportunity and there's different dynamics going across the globe. But the good news is we got some of the brightest people and the most experienced people in the world and in Exxon, the biggest one of the biggest companies in the world helping us to try to make this a reality. And this is not a science. It is science for sure, but it's about economics. This has to work so that it doesn't put the solution on the back of people who don't want the solution on their back. So we're very conscious of finding an economical affordable solution that scales well on a global basis. So again, thank you very much for your questions and information on our website as well as fuelsynergy.com. Thank you. Have a great day everybody. Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may now disconnect. Everyone have a wonderful day.