Fuel cell technology may not have matched the early market promise predicted but, based on lessons learned from the microelecronics industry, now appears to be the time to grow demand for a maturing and versatile product.
Scott Hulett, Plug Power Apeldoorn Office, USA
Figure 1. 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
The technology holds vast promise, but the hype has far outstripped the reality. Mass-market viability will not occur until costs come down and product life goes up. Early adopter numbers are in the dozens instead of the thousands. Research has moved in divergent directions. Does this sound familiar? It was true of microelectronics three decades ago and it is true of fuel cells today.
Ironically, this parallel holds good news for the future of fuel cells as a supplement to the current power generation infrastructure. For out of the hype and uncertainty of the 1970s emerged an adoption curve that made commercialization of microelectronics practical while advancing innovation. An analogous curve is now emerging for fuel cells and with the help of certain drivers, it can point the way to fuel cells as a widespread, viable cogeneration option in the future.
The state of the fuel cell
It seems almost a requirement of today’s new industries that they begin with grand projections. Microelectronics and fuel cells were no exception. Even as recently as the late 1990s, ‘a fuel cell in every home’ seemed, to some proponents, not only achievable, but achievable in just a few years.
What has replaced that overarching dream is a wide assortment of research paths, many pursued by global industry leaders and many likely to contribute to a solid foundation for future commercialization. Plug Power and Vaillant, a £2 billion ($3.6 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 that also provide heat and electricity to the home.
Figure 2. Fuel cell adoption curve
Supporting such efforts are a range of initiatives in fuel cells and their optimal fuel, hydrogen, from governments in industrialized regions. The groundbreaking European Hydrogen and Fuel Cell Technology Platform, launched by EC President Romano Prodi earlier this year, aims to draft a blueprint for the transition to a hydrogen economy. A government-backed Japanese programme is demonstrating methods that can reduce the nation’s heavy dependence on imported energy. In the United States, President Bush has introduced a $1.2 billion hydrogen fuel cell initiative to reverse a similar dependence.
Major players have thrown their considerable resources behind fuel cell development and the infrastructure behind it. They will need those resources to overcome, among other things, a daunting cost challenge.
Figure 3. Backing up a Verizon (telecom) substation at the Albany International Airport, N.Y.
The challenge in question involves 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 many customers cannot invest in fuel cells because of high unit costs.
The same was once true of microelectronics. Mainframes worked well for large organizations but would hardly suit the consumer market. Over the last few decades, however, the industry transformed the vicious cycle into one of dizzying innovation, lower costs, smaller size and massive market acceptance. Can fuel cells find their way to a similar path?
An adoption curve emerges
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. In the United States, for instance, 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 sites. Portable fuel cells for mobile electronics, including communication devices and wireless scanners, are finding their way into military and industrial applications with leading companies like Motorola and Samsung working hard to develop the technology.
Backup power: Recently an urgent need in telecoms has pushed fuel cells to the next point on the curve. Skyrocketing consumer demand for new 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 plant infrastructure, including backup power, amid severe competitive cost constraints.
It is in this backup power market that fuel cells are beginning to find a niche. Their lightweight, 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. Already the case can be made for fuel cells as economical in price and life-cycle cost, vis-à-vis the other options in this market, such as lithium-ion batteries.
This point on the curve can accommodate other industries as well. Fuel cells’ advantages in backup power will find ready application in broadband and uninterruptible power supply. Also around this stage, certain mobile vehicles such as rider trucks and forklifts will find the predictable runtime, high state of charge and affordable cost of fuel cells valuable.
While adoption in backup power started in the United States, Europe is just beginning to see the benefits. Telecom Orange, for instance, has seen very positive results from its first-ever backup fuel cell, installed in March of this year near a remote cell tower in Scotland.
Stationary fuel cells: As these markets reach maturity, with performance feedback from the field informing further innovation and driving costs and prices down, stationary applications will begin to take hold on a wider basis. As with backup power, the first use of this will come in the area of greatest need; remote residential customers and others who, for one reason or another, 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 maybe 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 CHP option for commercial, industrial and eventually residential customers. Even with home users, however, fuel cells will complement, not replace, the grid.
Automotive applications: Along with 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 refueling 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 only 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 product that generates hydrogen for industrial uses.
The path from here to there
In a perfect market, the evolution of fuel cells would happen seamlessly, 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, early-stage development (that is, now) and transitions between stages. Several players on the energy stage are well positioned to provide those drivers.
Government’s role: Government funded research has shown that over the past 200 years, industrial economies have progressively favoured hydrogen over carbon as technology moves to cleaner fuels and more efficient systems. ‘Decarbonization’ represents a key trend in our energy systems, vital to both continued economic growth and reduction of industrial pollution. The structure of government energy incentives must now come to favour hydrogen and fuel cell technologies as a major element to continued economic growth, while enabling manufacturers to meet European environmental commitments, such as the Kyoto Protocol for greenhouse gas emissions.
European government incentives (such as beneficial tariffs, grants, and tax advantages) have framed favourable conditions for the adoption of high efficiency cogeneration products. In both Denmark and the Netherlands, well-structured incentive programmes have delivered remarkable results, raising the proportion of efficient cogeneration systems in total energy production. Although such examples frame favourable conditions for the adoption of fuel cells, governments have not yet constructed strong economic incentives that will deliver next generation improvements through adoption of hydrogen and fuel cell technologies. As the fuel cell industry moves past the technology demonstration phase, such as the European Union Virtual Power Plant programme of Plug Power and Vaillant GmbH, market adoption requires substantive financial incentives. Governments must act now by installing effective tax advantages, initial grants and advantageous gas tariffs for hydrogen and fuel cell product adoption aligned with European cogeneration initiatives.
Creating a roadmap: The EU Directorates General for Research and Technology Development (RTD) and Transportation and Energy (TREN) have recognized the need to coordinate European research and development efforts. Furthermore, outgoing President Romano Prodi worked to establish the International Partnership for the Hydrogen Economy (IPHE). Earlier in this decade, the EU joined with industry leaders to form a coherent technology roadmap, to guide our international research agenda. This technology roadmap benefits all hydrogen and fuel cell initiatives, yet seemingly failed to recognise the importance of distributed cogeneration fuel cell systems. Fortunately, capable industry organizations such as Fuel Cell Europe (part of the World Fuel Cell Council) identified the key role for distributed fuel cell systems and have helped the new Hydrogen and Fuel Cell Advisory Panel move towards a more comprehensive vision of our energy future. The vision embodied in our European roadmap helps guide critical funding resources to overcome technology barriers to the clean, efficient fuel cell products that are vital to our environmental and economic prosperity.
Figure 4. GenCore UK is a 5 kW back-up system for an Orange cell tower on a mountain in Scotland
Consortia and conferences: Another self-help strategy for fuel cells takes yet another page from the microelectronics handbook. By forming consortia like International Sematech to conduct the pre-competitive research, the semiconductor industry has been able to drive innovation while allowing the consortia members to direct resources toward 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.
Going global: The industry can take steps now to mark out the geography for the future. If fuel cells can play a significant role in industrialized nations, how much more can they contribute in developing countries, now or in the forseeable future, where no grid is available? The industry can begin preparing for what will eventually grow into a global market: by creating international organizations to enhance cooperation, engaging in international advocacy, working to help other nations adopt a worldwide standard and by helping open markets to drive industry growth and competition.
The first steps toward the global market have recently been taken. In November 2003, the world’s leading fuel cell organizations – the World Fuel Cell Council as well as councils from the US, Japan, Canada and Europe – signed an agenda that will initiate collaboration on a variety of fronts. Among other activities, the organizations agreed to stage a second Fuel Cell Summit of vehicle demonstration Programmes, share information over the internet, exchange information on test protocols and explore other avenues of cooperation.
Taking the long view
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 advocated before government for research funding and purchase programmes. It has (tumultuously) expanded into a global market.
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 per cent commercialization and even that is exceptionally fast by the standards of many inventions. The lesson here is for fuel cell enthusiasts to maintain focus without expecting too much too fast.
The historic trends of microelectronics contain a number of specific lessons for fuel cell development, but whether the industry will pay attention is another proposition entirely. The question of if and when they do heed the trends and experience of products past, may, more than any other factor, determine the success of fuel cells, perhaps even the direction of the entire energy landscape, decades into the future.