A Short History of Fuel Cells

For the past century, the main sources of electricity were central power plants that used hydropower, coal, oil, nuclear and natural gas. The past decade has seen increasing recognition and market expansion of something called "distributed generation," or that the electricity being generated is being used where it is being produced. The technologies employed to do this were traditionally steam boilers, small hydro facilities and, more recently, small gas turbines. The units provide enough power to run, for example, factories, government facilities, hospitals and college campuses.

Technological progress never ends, but it does tend to make things smaller, more efficient, higher performing and more economically compelling - now occurring with devices called "fuel cells," which were invented in 1839 by Sir William Robert Grove, a Welsh judge, inventor and physicist. His invention didn't produce enough electricity to be useful, and so it languished for over a century until the United States began to seriously pursue the development of manned spaceflight. The best available technology, which needed considerable development to satisfy the power demands of spacecraft, was the fuel cell.

What is a Fuel Cell?

A fuel cell is a device that directly converts the electrochemical energy stored in fuel into electricity without combustion. It does this by exposing a fuel such as hydrogen or a pure metal to a catalyst that strips away the electrons from the atoms in the fuel. The electrons are given a conductive path to travel in and are collected to form a current that can do useful work. The electron-starved atoms are exposed to an air feed, which lets them "oxidize," thus forming a new, stable waste product.

Since single electrons don't do much, enough fuel must be oxidized to provide whatever power levels are needed. The amount of electrons released is proportional to the surface area of the catalyst. As a result, the catalysts are arranged in layers in proportion to the desired output. By putting layer upon layer, tightly bound and sealed, a fuel cell "stack" is formed.

A wide variety of fuel cell technologies has been developed and more are being invented. The most widely used technologies are proton exchange membrane (PEM), solid oxide fuel cell (SOFC) and molten carbonate fuel cell (MCFC). There are other technologies, but none have the traction that these technologies have in the early marketplace.

PEM technologies are favored for smaller outputs for cars, houses (mainly in Japan), portable power supplies, and backup power systems of a few to a few tens of kilowatts. MCFC fuel cells are suitable for businesses, hotels, wastewater treatment plants, institutions and other buildings, as well as shipboard power supplies. SOFC units, which like MCFC can use propane and natural gas directly, are getting attention for residential combined heat and power systems, and auxiliary power units on big trucks, businesses and factories.

Competitive Factors Favoring Fuel Cells

There is a "magic" number for on-site power production machinery. For economic viability, the buyer wishes to pay about $1,000 per kilowatt for the installed system and all of its associated "balance of plant" equipment, including fuel cleaners, compressors, heat recovery system, exhaust and control electronics. The number is approximate, because even the lowest-cost on-site system, reciprocating engines (modified versions of systems used in road vehicles) will cost over $1,200 per kilowatt capacity installed. A 100 kW unit, suitable for powering an apartment building, small office park building or a car wash, will cost approximately $120,000 (plus maintenance contract).

After installation, fuel prices and consumption rates come into play. There also may be a problem with emissions, particularly nitrogen oxide and carbon monoxide. Various air quality regulations may prohibit regular operation of reciprocating engines in some areas, or limit the number of hours they can operate annually. These factors are precisely why fuel cells have caused so much excitement.

Fuel cells have carbon emissions that are up to 80 percent lower than combustion technologies, plus there are virtually no nitrogen oxides, a principal cause of smog in the exhaust. Fuel cells can be used in areas where other onsite power supplies are simply not permitted.

Efficiency is where fuel cells are far superior. Both MCFC and SOFC systems are 50+ percent efficient in extracting electricity from fuel. Reciprocating engines and gas turbines have native efficiencies that are just under 30 percent at best. A current new- technology darling, the microturbine, operates with low emissions, but is so inefficient at producing electricity by burning fuel that it sometimes called a heat generator that produces electricity as a byproduct.

A final attractive feature is reliability. Proven fuel cells routinely operate nearly unattended for 95 percent to 99 percent of the time, so maintenance costs are very low. Reciprocating engines and gas turbines, on the other hand, have a good year with uptimes that reach 85 percent. oil changes, worn parts and component failures are much more common. When they are down for maintenance or repair, the owner must pay peak power rates to utility for backup power, which can significantly erode any economic gain from having an on-site power supply.

The Economics of Fuel Cells

First price is where fuel cells suffer compared to other power generation technologies. The best price for proven products (there aren't that many on the market) is $3,000 per kW. That is not attractive, even with soaring fuel prices.

Consider, though, that fuel cells costs averaged around $20,000 per kilowatt in 1999, so prices are definitely headed in the right direction. In the right situation, they are even competitive. For example, sewage running through municipal wastewater treatment plants emit large amounts of methane, which is a valuable fuel (it is the major constituent of natural gas). In cities designated as "severe nonattainment zones" by the Environmental Protection Agency because of air quality issues, fuel cells and microturbines are the only option for capturing the energy in that waste gas.

The federal government, and many state governments and municipalities, have established grant funds for clean energy projects. Fuel cells are ranked with wind turbines, photovoltaics and small hydro as favored "Tier 1" renewables. Technically, fuel cells don't belong there unless they are using pure hydrogen electrolyzed from water using electricity from a renewable power generator, such as a wind turbine, a run of the river small hydro plant or solar cells. They also can use methane at wastewater treatment plants, landfills or anaerobically digested animal waste at concentrated animal feed lots.

There is plenty of money available to buy down the initial cost of fuel cells. The Energy Policy Act of 2005 authorizes several billion dollars of tax credits for fuel cell purchases. Some state governments with "clean energy funds," whose monies come from a small surcharge on electricity consumed in the state, make grants available that essentially halve the price of a fuel cell. Such grants are usually offered in states that are trying to encourage the growth of a fuel cell industry within the state.

The Department of Defense (DOD) also runs an ongoing program that buys fuel cells and sets performance parameters that move the technology forward. The equipment, purchased, and development projects funded, cover a wide range of military applications, including stationary and portable power supplies; micro fuel cells to replace batteries that soldiers would otherwise have to carry; ship engines; aircraft auxiliary units; and land, sea and aircraft propulsion systems. The military was the main funding source of fuel cell development through the 1990s, after which investors and venture capital became the prime mover of technological progress.

Fuel Cell Markets

Fuel cell markets are generally divided into stationary, vehicular, portable and micro fuel cells.

Stationary fuel cells are essentially on-site power plants that provide electricity and often hot air or water, while vehicular fuel cells provide motive power. Every car company on the planet now has a fuel cell program, or is partnering with other car companies to share the costs of development. A new trend is that many vehicle manufacturers are jointly attempting to define standards to reduce costs by encouraging commonality and mass production of components.

Virtually all development efforts for vehicles are focusing on PEM fuel cells, which use hydrogen as a fuel. Corresponding programs are being carried out internationally, encouraged and coordinated by the International Energy Agency, to develop worldwide agreement on technological goals for supplying, storing and delivering hydrogen, particularly for vehicles.

It is probably worthwhile to note that hydrogen fuel cellpowered cars became competitive with gasoline-fueled cars when the price of gasoline reached $2.00 per gallon in the United States. Even with this eco\nomic milestone having been passed, PEM fuel cells are regarded as being only half as reliable as they need to be to fully replace gasolinefueled internal combustion engines.

In the stationary market, only a small handful of companies are marketing fuel cells commercially. The largest fuel cells available are the MCFC from FuelCell Energy, which produces modular fuel cells that are used to build power plants with capacities ranging from 300 kW to more than a megawatt (a megawatt is enough electricity to power several hundred homes). The only competitor is United Technologies, which has several hundred 200 kW phosphoric acid fuel cells operating around the world.

The company recently won a contract to build a 10 megawatt fuel cell power plant for the Long Island Power Authority. It will be the largest fuel cell installation on earth. FuelCell Energy, which was the only other bidder for the power plant, has established a business supplying fuel cells to wastewater treatment plants and hotels (the Starwood chain, for example). Both companies depend on grants or direct military or utility purchases for their sales, which have climbed to be about a quarter of what they need to be for the price of the products to be directly competitive with other distributed power generation technologies.

Micro fuel cells that power electronics such as laptops, cell phones and MP3 players are regarded as the most promising for commercialization by 2007 or 2008. These small devices supply essentially endless power by allowing refueling from small hydrogen or methanol cartridges. The methanol option is receiving the most attention. International standards were recently defined for transporting methanol cartridges on board aircraft.

Portable fuel cells that deliver tens to hundreds of watts are being sold commercially into markets where price is not a concern, for example, in military applications and as power supplies on yachts.

Other markets that are emerging are telecommunications backup power at remote cell towers where batteries developed a reputation for costly unreliability. A busy cell tower can lose tens of thousands of dollars for its owner when its power supply fails. Fuel cells in this application have proven to have operating life costs that are lower than those of batteries.

Another early market is a packaging concept that allows fuel cells to be inserted into industrial lift trucks (fork lifts) as a direct replacement for batteries. Hydrogen-fueled PEM replacements can be refueled in as little as eight minutes, compared to six hours of recharging for battery-powered forklifts. Wal-Mart is moving to a beta test of a few such fuel cell fork lifts, which is encouraging for the industry since Wal-Mart alone operates a fleet of 14,000 fork lifts.

Conclusions

The fuel cell industry is slowly reaching commercial status as companies place products in places unseen by the general public, such as forklifts and remote sites. These are directly competitive with existing technologies on a lifetime cost basis and, considering the environmental impacts, an overall superior choice for the purchasers. Having established a preferred status in such large market niches, the industry will soon begin to look to develop other markets where similar commercial advantages can be discovered.

Such successful installations depend on being able to control all salient aspects of the application. Stationary power supplies for buildings will, for several years more, continue to rely on grants and other buydowns. The federal tax credits will help accelerate the sales rates so that companies will be able to ramp production to reduce the cost per component.

The buydowns, grants and subsidies do make proven products competitive now; companies that consume more than a few hundred kilowatts of electrical demand and also have use of waste heat have fuel cell options that are economically justified. The challenge faced by the few companies that produce viable products, such as those that can be warrantied for more than a decade, is to find markets where a few subsidized projects will lead to repeated sales of increasing quantities.

At stake is an industry whose technologies can double and triple the efficiencies at which fuels are consumed and whose emissions are generally cleaner than the ambient air. What is emerging is a next generation industry that generates tens of thousands of jobs over the next decade - a cornerstone of a technological age that may lead to the end of fire as a central tool of civilization.

Michael Kujawa is a associate analyst with BCC Research (www.bccresearch.com). He has authored book-length market research analyses on markets for various clean energy technologies, including stationary fuel cells, large wind turbines, photovoltaics, small hydro, biogas, cogeneration, geothermal and ocean energy conversion devices. Mr. Kujawa has a background in distributed energy resources, aerospace and marine operations research, and systems software.