(UtiliPoint - Apr....

By Ethan L. Cohen Director, Utility & Energy Technology

As the ongoing shortage of natural gas and high prices for wholesale power continue to impact the nation's energy industry, new windows of opportunity are opening for alternative forms of power such as fuel cells. In fact, companies that develop and market fuel cell technology appear to be in a mad rush to bring their products to market in an attempt to capitalize on the growing fear that traditional forms of power will be inadequate to meet demand.

Whether or not fuel cells will be readily embraced by the public or factor significantly into the nation's fuel mix remains to be seen. Nevertheless, advancements in fuel cell technology march on, and the possibility of fuel cell-powered vehicles in garages and fuel cell-powered homes and buildings looks more and more like reality.

Need and Desirability of Fuel Cell Power Well-Established

The need for development of alternative, reliable sources of power is well-established. Environmental pressures caused by still-increasing greenhouse emissions, the potential of consequences from global warming and the threat of climactic change make fuel cells an extremely desirable technology. This is particularly true if they become a replacement for combustion engines because fuel cells have no moving parts, are highly efficient, produce low or zero emissions, are quiet and are capable of continuous low maintenance operation.

Today, fuel cells are already generating power for hospitals, hotels, airports, universities and military installations, and the time is fast approaching when it will be technologically feasible for fuel cells to provide power for individual homes and businesses. In fact, looking at the entire geopolitical, environmental and economic picture, there are many compelling reasons for a large scale switch to more efficient power generation technologies.

One doesn't have to subscribe to the Malthusian meltdown theory in order to appreciate the power of the fuel cell opportunity. While many critics and pundits have questioned the inevitability of wide-scale fuel cell adoption, the ultimate justification for fuel cell adoption comes down to the common task of ensuring economic stability, dealing with mounting environmental challenges, and controlling future corporate and governmental resource monopolies while ensuring that fuel cell technology developers, investors and corporate sponsors realize a fair economic return and profit.

New Energy Paradigm Illuminates How Fuel Cell Adoption Will Likely Take Shape

Until recently, there has been a common belief that fuel cell applications for industrial, commercial, residential and transportation would be completely different and would obey the demands of separate markets. While this is true in the application sense—i.e., inasmuch that the scale and engineering of particular solutions will be different—there is actually a clear new paradigm of energy production and consumption emerging. Typically, the paradigm shift has been described as one of a move away from centralized energy generation and production to a model of decentralized or distributed generation. Though this geographic description of disintermediation does describe one of the fundamental shifts occurring in the market, in light of the commercialization of fuel cell power generation technologies and fuel cell vehicles, a larger shift is really occurring.

It's no longer about production vs. consumption. It's now about the localization of both and the distribution of both. The reality of the future energy market is that there will be an integration of production and consumption of energy and that the mode or the way in which an energy technology is used will be entirely separable from its application. In other words, a fuel cell powering an automobile might very feasibly be an alternative mode of power or backup power for a residence, just as much as a hydrogen production facility might also serve the function of a peaking facility.

Clearly, this integrated view of energy production and consumption is limited not only by technological reality and practicality but also by the paced—and even slower than expected—development of market demand for fuel cell technologies. Over the long term, there is a technology victory scenario in which fuel cell technology will achieve cost and performance levels that make these technologies broadly competitive with conventional powertrain technologies in the automotive scenario, small scale generation in the residential scenario, and large scale generation in the commercial power scenario. Coupled with the evolution of utility regulations, automated metering and net metering, and electricity generation monitoring and control systems, market demand for cleaner, cost-effective fuel cell technologies will drive the market forward.

There are real world models for integrated energy production and consumption on a mass scale. One example of such a model exists in Milan, Italy, and is illustrated below.

Automotive Fuel Cells Clearing the Air - At Least Conceptually

For years, individuals and organizations have proselytized the advantages of one fuel cell technology over the other. While it is critical for both markets and enterprise to understand the advantages and disadvantages of different fuel cell technologies, it is unlikely that the success or failure of any single technology will preclude the successful development of other fuel cell technologies. The potential market is simply too big and the range of applications too many to foresee that any single technology will be the “ultimate.” Despite this, in specific markets, there are technologies that appear dominant, and it is likely that these dominant technologies will shape the future. Nowhere in the fuel cell market is this clearer than in the automotive fuel cell market.

The Proton Exchange Membrane (PEM) fuel cell is one of the most promising fuel cell technologies for automotive applications because of its construction, engineering and performance characteristics. The Polymer Electrolyte Membrane Fuel Cell (PEMFC), a specific type of PEM fuel cell, is favored for automobile propulsion because it has a relatively high power density, operates at low temperatures, permits adjustable power output, and can be started relatively rapidly. These positive attributes outweigh its disadvantages when compared with other fuel cells of lower efficiency levels and it also has a low tolerance for carbon monoxide contamination. Almost all fuel cell demonstration vehicles currently under development by the world's major automotive manufacturers use PEMFC stacks. PEMFCs use hydrogen as a fuel, which can be stored as pure hydrogen on-board or produced on-board from other fuels using a fuel processor or reformer.

Another special type of PEMFC called the Direct Methanol-Air Fuel Cell (DMFC), which utilizes methanol combined with water directly as a fuel, and ambient air for oxygen, also holds promise in automotive and distributed generation markets. The DMFC (also known as a DAFC) could be a less expensive, more convenient technology because it enables use of a liquid fuel without the need for an on-board reformer, while still providing a zero-emissions system. However, as current research has demonstrated, the power density of a DMFC is lower than other PEMFCs, requiring a significant research effort to remove this serious drawback of DMFC.

Planar Solid Oxide Fuel Cells (SOFCs) have just as much potential as PEMFCs or DAFC but pose challenges for use in transportation. SOFCs operate at relatively high temperatures of between 500 and 800 degrees C, can use carbon monoxide and hydrogen fuel, have a good tolerance to fuel impurities, and use ceramic as an electrolyte. Transportation applications of this type of fuel cell will be limited to heavy-duty vehicle propulsion or auxiliary power unit service due to size and warm-up requirements. However, SOFCs may yet prove to be the most effective distributed electric power generation fuel cell technology.

Will Opportunities Emerge

For individuals and organizations following the fuel cell market, there have been successive periods of unfettered optimism followed by equally deep periods of skepticism about the potential for fuel cells. More and more however, academic reports, government studies and indeed market developments indicate that there is real traction.

Pointing to recent reports which suggest that fuel cells have emerged as one of the most promising technologies for meeting growing worldwide energy needs, investors, particularly in Europe, have begun reinvesting in fuel cell companies. But while there is general agreement that the next decade will present tremendous opportunities for automotive fuel cells, distributed generation, and grid power alternative suppliers, there are questions that remain to be answered. How quickly and to what extent will these opportunities emerge? And will fuel cells be viewed as a valid and cost-effective alternative to more traditional forms of power? And will they continue to run on very expensive natural gas?

When considering how cost-effective fuel cells can be, most of the emphasis is on the installed cost of fuel cells but the single biggest cost deterrent in automotive fuel cell commercialization is the cost of labor. Today, in the U.S. automotive market, 36 percent to 42 percent, depending on the manufacturer, of the labor cost is "non-value added." This means that the labor charged has absolutely nothing to do with the actual design, engineering, and manufacture of a vehicle. This figure includes "consulting fees" paid to other companies, sales incentives, management costs, sick days, cost subsidized benefits, and finance costs. The same kinds of overhead costs also impinge on the development of fuel cell applications for distributed generation and add complexity to an already multifaceted cost and infrastructure market development challenge.

The utility industry faces the task of increasing electric reliability while at the same time managing costs and improving customer service. But these costs are nothing compared to the cost of lost opportunity if we don't begin building tomorrow's energy sources today.

©2004, UtiliPoint International, Inc. All rights reserved. This article is protected by United States copyright and other intellectual property laws and may not be reproduced, rewritten, distributed, redisseminated, transmitted, displayed, published or broadcast, directly or indirectly, in any medium without the prior written permission of UtiliPoint International, Inc.