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Fuel Cells Picking Up Steam, Offer Power to the People
Technology is like a fish.
IBM executive Andrew Heller once said, “Technology is like a fish. The longer it stays on the shelf the less desirable it becomes.” So as we face the ever growing energy crises and environmental concerns raised over the burning of fossil fuels we turn to a technology first advanced in 1839 by British scientist Sir William Robert Grove (5/2/2001)
Grove introduced what he called his “gas chain,” an array of platinum electrodes dipped in hydrogen and oxygen in sulphuric acid that generated about one volt of electric potential. However, as often happens with new technologies, development was beset by technical problems from the outset primarily because of the instability of the materials used.
The technology was put on the shelf for over a hundred years until NASA, searching for a way to provide onboard power and d drinking water for the Apollo missions came along and let the genie out of the bottle.
Fuel Cells: The Virtual Power Plant
As we enter embark on the 21st century, a new age of worldwide environmental concerns, power outages, rolling blackouts in some areas, increasing pressure to reduce greenhouse gas emissions and rising natural gas prices all point to the need for alternative forms of energy.
Robin Batchelor, manager of Merrill Lynch Investment Manager’s new energy technology fund pointed to the growth in new technologies, solar power, wind, fuel cells and microturbines, as evidence of a renewed interest in alternative energy. He observed, "The California power crisis has raised awareness of some of these technologies and, at the same time, has allowed manufacturers to demonstrate that they work. On top of this, many countries around the world are offering fiscal incentives to build green power plants and improvements in the technology are bringing the costs more into line with conventional power generation."
With summer coming on and temperatures rising, fuel cells that extract electrical power from fuel without burning it are changing the rules of the power game. Fuel cell power plants will run smoother and cheaper in the future because they are solid state: rather than burning hydrocarbons they employ steam and catalysts to release the fuel’s hydrogen atoms and strip away its electrons.
Borrowing from the auto industry, fuel cells under development at Ballard Power Systems in British Columbia and Plug Power at Latham, N.Y., employ a process known as proton exchange membrane, to produce smaller, more affordable units for stationary power production. The goal is to introduce 1 to 15 kilowatt power plants, giving consumers the ability to declare independence from the power grid while producing larger units in the range of 60 to 250 kilowatts for businesses.
The VCs are circling
Skyrocketing power and natural gas prices, rolling blackouts and bankrupt utility companies are proving to be a source of inspiration for venture capitalists seeking their fortune in the wake of a utility infrastructure in constant need of upgrading. With many utilities searching harder than ever for alternative methods of power generation, private equity and leveraged buyout firms are showing up in increasing numbers with open checkbooks.
According to Nth Power, technologies energy related VC investment in 2000 topped $1 billion representing an increase of 165% over 1999. As global energy regulation increases so do VC investments in the sector.
Maurice Gunderson, an Nth Power managing director, said, ``The market opportunity is significant, and U.S.-based companies are responding with large numbers of innovative products and service solutions that will ultimately transform the power and energy industry. We see exciting and practical work being done in three general areas -- megawatts, negawatts, and software. For example, in power generation, Nth Power funds microturbines, and zinc-air and hydrogen fuel cell companies to meet specific distributed generation and power storage applications.''
Flush with cash as a result of high prices and a regulated cash flow, it’s the utilities themselves that are driving many venture projects. Cinergy Ventures an arm of Cincinnati-based Cinergy and Exelon Capital Partners, the Philadelphia based venture capital arm of Exelon Corp, are both pumping cash into venture funds as well as directly into energy technology startups.
Deregulation leads the way
Fuel cell developers like Ballard, Plug Power along with developers of microturbines and other energy alternatives are catching the wave of deregulation hoping to transform millions of power consumers into power producers. Deregulation is sweeping away the monopoly protections that have historically kept new power producers out of the market. "Under the monopoly environment it didn't matter if you had these wonderful technologies to self-generate because you were obligated to buy your power from the utility," says Wayne Gardner, manager of business development and strategy at Exelon Capital Partners.
With an eye forever on the prize, Enron is busy forging alliances in the beckoning fuel cell industry. Last fall, Enron pumped $5 million into FuelCell Energy , a Danbury, CT, startup and took options on another 1.3 million shares of stock if the company sells more than 55 megawatts' worth of its molten-carbonate fuel cells (enough to light up 10,000 homes). Jeremy Blachman, chief operating officer for Enron Energy Services, is bullish on micropower. "When the market price of power pops all over the place and gets to some of the levels that we've seen during peak summer demand, then distributed generation with fuel cells becomes much more economic." (Even at today's sky-high prices, natural gas would cost less than $100 per megawatt-hour to fire up a microturbine and less than $75 per megawatt-hour to run a fuel cell.)
For all their allure, fuel cells have a long way to go to reach economic parity: the first fuel cells will cost an estimated $2,500 to $5,000 per kilowatt. But the industry has a secret weapon at work in the marketplace. Automakers are expected to begin flooding the market with fuel cell cars by 2003 and 2004 and the industry is banking on leveraging the efficiencies accompanying this mass production to bring the cost of fuel cell power to around $100 to $300 per kilowatt.
The future in now
In a strange twist of fate, the auto industry is rapidly becoming the darlings of environmentalist as they link arms to support tax credits to promote cleaner vehicles and reduce fuel consumption.
Honda, Chrysler and Ford have prototype fuel cell-powered cars. All major car manufacturers expect to introduce full-scale production of the cars in a few years. Currently, several cities from New York to Bombay to Perth have bus fleets using hydrogen cells.
Recently more than 260 engineers from companies such as Bell Aerospace, Eveready, Hewlett-Packard and Duracell gathered at the Knowledge Foundation’s International Symposium on Small Fuel Cells and Battery Technology to tout the advantages of fuel cells over conventional batteries. The upstart technology may not be ready for prime time yet but the day is fast approaching when it will be used to power everything from laptop computers and cell phones to personal digital assistants.
"You'll see laptops powered by fuel cells no later than next year," promised Charles Call, president and chief executive officer of MesoSystems Technology Inc. (Albuquerque, N.M.). "And once you've scaled the fuel cell for one product, it will be easy to scale it for others."
Analysis
If you give them nothing more than a cursory glance, fuel cells sound like a science fiction fantasy. When first proposed by Sir William Robert Grove more than one hundred and sixty years ago, the world was not ready to listen. It has taken that long for the concept of an efficient, nonpolluting power source that produces no noise and has no moving parts to catch on.
The dawn of the space age brought them back into the eye of the scientific community and they are now developing applications to fulfill such down to earth needs as electricity generation plants, a power source for nearly exhaust free automobiles and a source of power for your cell phone.
Each new day brings news of fuel cell adaptations that tend to fuel the imagination. In the recent past Toyota has demonstrated their fuel cell vehicle, the FCHV-3, powered by a 90kw fuel cell stack, DamilerChrysler has sold fuel cell buses to several European cities featuring the Ballard Mark 900 fuel cell, and H Power is in the process of developing fuel cell systems for the Japanese residential market.
Fuel cell technology is so appealing that it will have an enormous impact across all energy markets. They are likely to be found anywhere energy is used. The U.S. President’s Committee of Advisors on Science and Technology recently concluded, "Successful application of fuel cell technologies in automobiles will improve energy security and provide significant environmental benefits. A 10-percent market penetration could reduce US oil imports by 130 million barrels per year. Fuel cell vehicles will reduce urban air pollution and mitigate climate change. They will be 70-90 percent cleaner than conventional gasoline powered vehicles on a fuel cycle basis, and will produce 70 percent less carbon dioxide emissions."
Perhaps Jeroen van der Veer, Managing Director of Royal Dutch/Shell, said it best speaking on the revolution taking place in the global energy sector and their challenge to meet needs of technology, at the World Petroleum Congress, last year “The Stone Age didn't end because they ran out of stones -- but as a result of competition from the bronze tools, which better met people's needs. I feel there's something in the air -- people are ready to say that this is something we should do." |
