Research:
Fuel Cell Technology Is Here to Stay

Source:Standard & Poors
Publication date: 09-Jan -2003
Credit Analyst: Bruce Schwartz, CFA, New York (1) 212-438-7809

Fuel cells basically operate like batteries, with the notable exception that they do not require recharging. A fuel cell consists of two electrodes wrapped around an electrolyte. Oxygen passes over one electrode and hydrogen over the other, generating electricity, water, and heat. Hydrogen is fed into one opening (the "anode") of the fuel cell, while oxygen enters the fuel cell through another opening (the "cathode").Through a catalyst, the hydrogen atom splits into a proton and an electron, which take different paths to the cathode. The electrons create a separate current before they return to the cathode, to be reunited with the hydrogen and oxygen in a molecule of water. Since the fuel cell does not use combustion, its
emissions are smaller than those of the cleanest fuel combustion processes (see table). Advocates of fuelcell use champion this as the primary advantage of fuel-cell technology, along with its efficiency. Compared with traditional combustion power plants, fuel cells eliminate 40,000 pounds of acid rain and smog-causing pollutants from the environment per year, and reduce carbon dioxide emissions by more than 3.5 million pounds per year.
 
However, thus far the most widely publicized use for fuel cells is the fuel-cell car, with many a fuel-cell "concept car" showcased to consumers at trade shows. Most of the major auto companies, including Ford, General Motors, DaimlerChrysler, Toyota, Honda, and Volkswagen, have a fuel-cell-powered car in development, and some predict mass production by 2010, which would reduce the car's current, prohibitive cost.
While the most widely publicized use for fuel cells is the automobile, an equally innovative and likely more immediate use for fuel-cell technology is its potential back-up, instantaneous power. If individual homes can generate power on-site and independently, the need for a power grid is reduced. Indeed, a large percentage of electric power is lost during "step-down", when power from the grid is distributed at lower voltage from local substations. Instead, homes could share power between one another, eliminating the step of inefficient distribution. Grid-independent fuel cells convert 40% of available fuel to electricity, compared with 20% conversion for traditional combustion power plants.

On a smaller, more mundane level, fuel cells are already in everyday use, the most widespread being highway road signs, where power-line accessibility is not always feasible. Wastewater treatment plants and landfills are currently using fuel cells to convert the methane gas they produce into electricity. On a more consumer-oriented level, fuel cells have made their way into vending machines, home appliances, and are scheduled for future rollout in personal computers, cellular phones, and ATMs. Currently, more than 200 fuel cell primary or back-up systems have been installed in utility power plants, nursing homes, and airport terminals, and for good reason; fuel cell usage can reduce facility energy service costs by 20%
to 40% over conventional services (see "Fuel Cell Applications," www.fuelcells.org).

What will be the future of fuel-cell use? Clearly, the feasibility and viability of this technology is still unfolding. The U.S. Department of Energy has recently launched a major initiative, the "Solid State Energy Conversion Alliance" to bring about dramatic reductions in fuel cell costs. The goal is to cut operating costs to as low as $400 per kilowatt by the end of this decade, which would make fuel cells competitive for virtually every type of power application. With the growing demand for cleaner, more efficient fuel sources and concerns surrounding the long-term availability of fossil fuels, it is evident that fuel cell use is an energy source whose time has come.

--Janet Sachs
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