Article on Plug Power in the Detroit News today, DCHT
Chairman David Haberman quoted!,
detnews.com
Device will be mini power
plant for home
By Peronet Despeignes / The Detroit
News
It's a reliable, stand-alone
generator about the size of a large
stove, emits little or no pollution and
generates enough electricity to light
up your home, a small office or even
a hospital.
That, in a nutshell, is the promise
of stationary fuel cells and of a
fledgling maker of the devices called
Plug Power, a joint venture led by
Detroit's DTE Energy.
Until recently, the possible uses of
fuel cells for cars and trucks had
largely overshadowed their potential
as an energy source for homes and
businesses.
Plug Power's stationary fuel cells
won't hit the mass market for at least two years, and they'll be
costly. They're not expected to make major inroads for a
decade or more, but they eventually could revolutionize
utilities, transportation and consumer electronics.
"Hydrogen fuel cells could have as big an impact as the
computer chip had in the field of information technology," said
David Haberman, head of DCH Inc., a California fuel
cell-components maker.
Investors will put a price tag on that vision of the future
today when Plug Power puts 6 million shares up for sale in an
initial public offering.
Plug Power's fuel-cell unit can be placed in the basement, or
in your back yard. A fuel cell takes in oxygen from the air and
hydrogen into an chemical reaction that creates power and
gives off water vapor and heat.
The devices, used first to provide on-board power on early
space missions, have the potential to free users from today's
electric power grid and its ups and downs -- the service
interruptions from downed power lines, power surges and
summer brownouts.
Fuel cells are more efficient and cleaner than traditional
power-generating processes. When using pure hydrogen, there
are no harmful emissions. If natural gas or some other
hydrogen-based fossil fuel is used, the emissions are low.
On the bandwagon
Plug Power, based in Latham, N.Y., was formed in 1997 as
a $9-million joint venture between DTE, Detroit Edison's
parent company, and Mechanical Technology Inc. General
Electric and Southern California Gas Co. signed up this year as
major shareholders. They also agreed to market and support
Plug Power fuel cells.
Arthur D. Little, a consulting firm, expects annual fuel cell
sales to hit $3 billion within the next two years.
The possibilities have seduced heavyweights Dutch Shell,
British Petroleum, Honda Motor Co., Toyota Motor Corp.,
Ford Motor Co., DaimlerChrysler AG and General Motors
Corp. They've offered new plans in recent months to adopt and
support the product. Fuel cells face serious marketing hurdles, said Peter
Tertzakian, an energy analyst for Goepel McDermid, an
investment firm based outside Vancouver, British Columbia.
Their future, he said, rests on three questions: Do they work?
Can they make money? And will they get people to switch
"from a system that's been in place for more than 100 years?"
"Question 1 has been proven," Tertzakian said. "Questions 2
and 3 have not."
Cost is hurdle
Despite big cost reductions over the past few years, fuel
cells remain expensive. Plug Power expects to sell its
residential units for $7,500 to $10,000, but hopes to get the
price below $3,750 by 2003 as it refines its production
process and reaps economies of scale.
Some say the company will need to get the price even lower
to penetrate the housing market.
The earliest residential units will use natural gas to generate
hydrogen for the fuel cells. Hydrogen's storage and distribution
raises safety concerns.
After years of research and development, Plug Power
opened its first factory just this past summer. It's developing
fuel cells to replace the internal combustion engine. GM, Ford
and others promise to sell a small fleet of fuel-cell vehicles
within four years, but auto fuel cells are still 10 times more
expensive than conventional engines.
The main consumers of fuel cells -- the military, the space
program, hospitals and advanced manufacturers -- are large
buyers who put a big premium on reliability, portability and
low emissions.
"To get beyond that market, prices will have to fall,"
Tertzakian said.
The earliest household units will run off readily available
natural gas lines, but they'll need a device to convert natural
gas to hydrogen, which generates some emissions.
DTE stakes a claim
Why is DTE, with its huge stake in the old power grid,
involved?
Executives close to Plug Power were not able to comment
because of a "quiet period" imposed by the Securities and
Exchange Commission ahead of all initial public offerings.
Tertzakian said DTE has to stay ahead of the pack.
"Fuel cells are a risk to centralized power," he said. "DTE
has to be flexible and lead the transition or others will."
Anthony Earley, president of DTE Energy, said that support
for Plug Power was one of the reasons the utility moved earlier
this month to acquire MCN Energy, parent company of Metro
Detroit's natural gas provider Michigan Consolidated Gas Co.
Fuel cell technology also provides an appealing option as
deregulation forces utilities to become more efficient. Fuel
cells can be a cheaper way of supplying power to customers in
remote areas than power lines. In fact, it opens up a huge
opportunity to electrify large swaths of underdeveloped regions
abroad.
Experts don't expect the grid to vanish any time soon. Early
fuel cell adopters are expected to keep their connection to the
power grid as a backup.
What lies ahead
The future of fuel cells depends on a number of factors,
experts say: the price of natural gas, other energy sources and
competing technologies, including batteries, microturbines,
wind and solar power.
Other fuel cell developers with deeper pockets in the United
States, Canada, Japan and Europe -- including industry leader
Ballard Power Systems, as well as Siemens, ONSI,
AlliedSignal and Mitsubishi -- share Plug Power's ambitions.
Analysts say billions of dollars are being committed by
dozens of other companies, research institutions and
government agencies to develop fuel cells.
In its initial filing with the Securities & Exchange
Commission, Plug Power admits it "may face intense
competition" down the road.
The company hopes to bring fuel cells to market in 2001 and
sell 100,000 systems by 2003.
Plug Power already has spent $30.3 million more than it has
made so far and expects continued losses well into 2003. The
company hopes to raise more than $117 million from the IPO,
underwritten by investment bank Goldman Sachs. The 6 million
shares are priced to start selling at $13 to $15 a share today
under the ticker symbol PLUG on the Nasdaq.
Plug Power shows promise, but its future is unknown.
"The race is on," Tertzakian said. "but it's not a forgone
conclusion who, or what, will cross the finish line." |
