Tuesday, February 23, 2010

Fuel-cell less Pittsburgh

I know it may seem boring, but the news article about a payment from Siemens to the state to compensate for not building a promised fuel cell plant here is pretty important.  It's a good write-up, but still does not really give credit to how big a deal this was in our pre-G20 mentality when we were desperate for big 'wins' like this.  This is the site now used by US Steel for some R&D operations at the far end of the Waterfront development.   You have probably driven by it. I had thought it was a great symbol that it was right across the river from the Carrie Furnace site.  Alas.

The site selection free for all over the Siemen's plant was big news at the time.  The competition for the site was huge.  Ross Perot in Texas put really big $$ on the table to attract the plant to Texas.   There are a lot of lessons to be learned from the decision of Siemens to keep the plant here despite what was clearly a far superior set of financial incentives to locate the plant in Texas.  At the end of the day just trying to 'buy' the jobs didn't work for Texas.  and even if it did, what would it have bought them given that it didnt materialize?  I  suspect that Ross would have ponied up the money, but would have driven a tight bargain in the contracting.  Something that might have resulted in Siemens owing back a much bigger number than they are being hit with here.

This was also a big story for regional cooperation.   The decision to locate in Pittsburgh was one thing, but where in the region was another.  There was a plan to locate this all out in Armstrong County, but at the end of the day they chose the Allegheny County Waterfront site.  There was a lot of gnashing about that locally some may recall.   I think it was so bad it actually spurred the local powers that be to actually work toghether better in the future to avoid the same level of consternaton again.  But it gets to all this talk of regionalism and our ever increasing number of regional projects. 

Why did they choose to build locally?   That right there is a big question that ought to be studied in the economic development literature.  The short answer is that it was a workforce decision.  They had a core of talent focused on this fuel cell technology and there must have been a decision that that workforce would not relocated to places in Texas or Florida that were actively competing for the new plant to be built.  It might be more of an extreme case given what was likely a very senior workforce in place here.  The Siemens unit locally was another one of the remnants of big Westinghouse that was spun off in the CBS implosion.  So it really is another datapoint in the whole 6 degrees of Westinghouse dynamic in the local tech economy. 

Why did they not build in the end?  They said market conditions changed which isn't really the answer.  Remember this was back 2002ish and in subsequent years energy costs went bezerk.   The basic reason was the technology could not be made cheap enough to produce commercially.  They had thought that at scale they could produce the medium sized fuel cell plants cheaply enough to sell commercially. That didn't work out it turned out.  These were mostly going to be Natural gas powered stationary plants that could really have formed the backbone of a more distributed electricity production grid in the nation. 

There was a pure market component as well.  Remember there was once a big need for that type of generation that could be used as spot production in peak energy cost periods.  Remember the Midwest Electricity cost spike that was pretty calamious, or the California energy debacle and things like the energy cascade failure emanating from Ohio a few years after that. Those were clearly on a lot of people's mind at one point.  Has not been any high profile failures like that in some time, but let's hope it has not lead to complacency.  When they happen, these things are bad for everyone. 

The thing is that while Natural gas prices had their own bubble experience a few years ago, the price for natural gas has been plummeting.   You have to wonder if this idea will come back.  Whether it's here or not who knows.   But this was a big piece of my thinking back when I wrote Energy Burgh some years ago.


Blogger Unknown said...

If they put in the money they could've made it work:

now they'll probably buy the technology instead and it'll stay in Cali

Tuesday, February 23, 2010 7:53:00 PM  

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