Fuel Cells Will Be Viable As Adoption Curve Emerges
Dec 12 - Power Engineering
By Mark A. Sperry, Chief Marketing Officer, Plug Power
The technology may one day transform the industry, but so far hype has
outpaced reality. Costs must decrease and product life increase to achieve
market adoption on a mass scale. Early adopters are few and far between.
Research is mounting in different directions.
Such a report would have accurately assessed the state of the
microelectronics industry at the time. It also sounds like a current assessment
of fuel cells. In other words, such a 30-year-old news clip bodes well for the
future of fuel cells, because from the hype and uncertainty of the 1970s emerged
an adoption curve that made mass marketing of microelectronics practical while
advancing innovation. That same type of curve is now emerging for fuel cells -
and with the presence of certain drivers, it can point the way to a more stable
blend of grid and distributed generation in the years ahead.
The Home. Energy Station is a joint effort with Honda and Plug Power that
provides heat and hot water for the home and hydrogen for the fuel cell car.
Many new industries begin with grand projections, and fuel cells are no
exception. Even six or seven years ago, "a fuel cell in every home"
seemed, to some proponents, achievable in a few short years.
That overarching dream has been replaced by a wide assortment of research
paths - many pursued by global industry leaders, and many likely to contribute
to a solid foundation for future commercialization. To cite a few examples: Plug
Power and Vaillant, a $2.5 billion manufacturer of wall-hung boilers for Europe,
have begun developing fuel cells that provide combined heat and power (CHP) to
commercial and residential customers. Major automakers are actively researching
the viability of fuel cell vehicles. Honda and Plug Power are working on home
refueling systems for these vehicles- systems that also provide heat and
electricity to the home.
Supporting such efforts is the U.S. Government, which has stimulated
innovation through research funding, tax credits and other initiatives. Most
visibly, President Bush has instituted a $1.2 billion hydrogen fuel cell
initiative to reverse the U.S. dependence on foreign oil. Washington has also
announced its FreedomCAR program, a partnership with automakers and others to
fund key research in automotive fuel cell technology.
All these resources have contributed to the progress of fuel cells. And all
will be necessary to overcome, among other things, the daunting challenge posed
by a vicious cycle of cost and market viability. To make fuel cells commercially
viable, manufacturers must lower unit costs. One path to lower unit costs is
higher manufacturing volume, which creates economies of production. Higher
volume, in turn, can only occur with demand from a critical mass of customers.
Yet only a few customers can invest in fuel cells because of high unit costs.
Microelectronics faced the same dynamic. Large mainframe computers worked well
for large enterprises but hardly fit the consumer market. Yet we saw the
industry transform the vicious cycle into one of dizzying innovation, lower
costs, smaller size and massive market acceptance. How can fuel cells follow
suit?
EARLY ADOPTERS
In the last few years, a viable curve has begun to take shape. Early adopters
of fuel cell technology have already emerged in a variety of applications.
Portable fuel cells for mobile electronics are finding their way into military
and industrial applications. A number of companies, including giants like
Motorola and Samsung, are working to develop the technology. On the stationary
front, the Long Island Power Authority has invested heavily in fuel cells to
supplement its grid during peak load times, while also installing them on a
limited basis in residential and small commercial sites.
BACKUP POWER
An urgent need in several industries has brought the next point on the curve
into view. Burgeoning consumer demand for new telecom products, such as DSL and
wireless broadband, is placing ever- higher demands on networks, while
reliability and quality requirements remain deep into the nines. These trends
have telecom network planners scrambling to upgrade and optimize plant
infrastructure - including backup power - amid severe competitive cost
constraints.
In this backup power market, fuel cells are beginning to find a niche. Their
light weight, quiet operation, zero emissions (when operating on hydrogen) and
peak performance in a broad temperature range have made them an excellent fit
for backup power applications in the outside plant, where traditional backup
power solutions have fallen short. Already the case can be made for fuel cells
being economical - in price, life-cycle cost or both - compared with other
options in this market, such as lithium-ion batteries.
These advantages in backup power will find ready application in other
industries too, most notably broadband and uninterruptible power supply. Also
around this stage, certain mobile vehicles - rider trucks, for example, and
forklifts - will find that the predictable runtime, high state of charge and
affordable cost of fuel cells are valuable qualities.
STATIONARY FUEL CELLS
Only as these markets mature - as performance feedback from the field informs
further innovation, which in turn drives costs and prices down - will stationary
applications begin to take hold on a wider basis. As with backup power, the
first uses will come in the areas of greatest need: remote residential customers
and others who are off-grid. By this point in the adoption curve, fuel cells can
replace incumbent technologies that have proven either too unreliable or too
expensive for consistent operation. This application will enable fuel cell
manufacturers to begin field- testing other uses of fuel cells: for CHP,
perhaps, or as a hydrogen home refueling station.
From remote areas, the adoption curve takes us inward. Further innovations
and accompanying price reductions will make stationary fuel cells a power option
for commercial, industrial and eventually residential customers. Even with home
users, however, fuel cells will almost undoubtedly serve to complement the grid.
AUTOMOTIVE APPLICATIONS
Alongside the emergence of stationary applications, we should see the first
generation of automotive fuel cells begin to achieve market acceptance. Hand in
hand with this will be the increasing use of residential fuel cells as home
relueling stations, providing heat and power to the home while generating
hydrogen fuel for the family vehicle. Such refueling stations may help to
explain why transportation applications, which receive so much current
attention, might be so late to market - not because of the pace of current
research, but because we currently lack the hydrogen infrastructure to make fuel
cell vehicles practical on a wide scale.
Refueling stations, of course, mean on-site hydrogen generation - an
application that is already in development. Plug Power, for instance, has just
begun to market an on-site fuel cell that generates hydrogen for industrial
uses.
It would be lovely to think that fuel cells will evolve effortlessly, driven
by a positive cycle of innovation, lower unit cost, higher sales and more
funding for more innovation. In reality, fuel cell development will require
certain drivers, especially at sensitive points on the curve, and transitions
between stages. Several players on the energy stage are well positioned to
provide those drivers.
OF GOVERNMENT AND INDUSTRY
Federal and state governments are significant players. Already an early
adopter, Washington could further mitigate the vicious cycle by powering more of
its operations through fuel cells. The Renewable Portfolio Standards enacted in
some states include fuel cells as a renewable resource, providing yet another
early-adopter market.
On another critical front, government could work to remove competitive
barriers, especially in interconnection standards. Lengthy application processes
and high fees have made it cost- prohibitive for fuel cells to operate in many
areas. To optimize fairness in the energy market, several states have developed
interconnection standards that protect utilities while facilitating the use of
fuel cells. The creation of a national standard - perhaps along the lines of
IEEE 1547 -could promote cross-border commerce for iuel cells and instill
confidence that the grid is being preserved.
Many drivers can also come from within the fuel cell industry. The active
presence of Fortune 100 companies in research provides a powerful force for
moving fuel cells toward commercialization. Now the challenge is to coordinate
their efforts, and those of others, in a way that accelerates development.
A roadmap generated by a respected source would serve the same function, and
provide the same benefits, as a corporate strategic plan. Fortunately, such
sources exist. Established industry organizations, like the U.S. Fuel Cell
Council, command sufficient respect to initiate a wide-ranging roadmap that
would draw the attention of most involved with fuel cells. Such a roadmap could
recommend a timeline and action steps for completing various applications. With
this in hand, industry players could direct their research and production
energies to the applications with highest near-term potential, with the thought
that such e\arly success would drive the industry on to longer-term
accomplishments.
Another self-help strategy for fuel cells takes yet another page from the
microelectronics handbook. By forming consortia like International Sematech to
conduct pre-competitive research, the semiconductor industry has driven
innovation while allowing the consortia members to direct resources toward more
bottom-line concerns. The same could easily happen with fuel cells, especially
given the number of companies in the field and the collective research
capability they represent.
If fuel cells can play a significant role in industrialized nations as a
supplement to the grid, how much more can they contribute in developing
countries where no grid is available-now or in the foreseeable future. The
industry can begin preparing now for what will eventually grow into a global
market: creating international organizations to enhance cooperation, engaging in
international advocacy, working to help other nations develop viable standards,
helping open markets to drive industry growth and competition.
The first steps toward the global market have just recently been taken. Last
year, the world's leading fuel cell organizations signed an agenda that will
initiate collaboration on a variety offrants. Among other activities, the
organizations agreed to stage a second Fuel Cell Summit of Vehicle Demonstration
Programs, share information over the Internet, exchange information on test
protocols and explore other avenues of cooperation.
THE VALUE OF PATIENCE
As we have seen, fuel cell companies need not play this out in a vacuum.
Instead, they can look to their counterparts in microelectronics for a template.
Microelectronics has, for instance, had to develop standards to drive volume and
ensure market readiness. It has lobbied before government for research funding
and purchase programs. It has expanded into a global market on a tumultuous
scale.
It has also taught the value of patience. Even in an industry that most
equate with speed, personal computers took 15 years just to reach 25%
commercialization - and even that is an exceptionally last adoption rate by the
standards of many inventions. The lesson here is for fuel cell enthusiasts to
maintain focus without expecting too much too fast.
Will these lessons from microelectronics play a role in the unfolding
adoption curve for fuel cells? It depends on the extent to which the industry
pays attention to them. If fuel cell manufacturers, research concerns and other
supporters apply the microelectronics paradigm, the future of fuel cells - and
the future of power generation - may fare well for many years to come.
EARLY ADOPTERS OF FUEL CELL TECHNOLOGY HAVE ALREADY EMERGED IN A VARIETY OF
APPLICATIONS.
STEVE BLANKINSHIP, ASSOCIATE EDITOR
Copyright PennWell Publishing Company Nov 2004