by Ken Silverstein
Fuel cell production may be about to accelerate. Two industrial heavyweights are advancing their pilot program to generate electricity from fuel cells that can be cleaner and more efficient than centrally located power plants.
The Dow Chemical Co. and General Motors Corp. will integrate earlier fuel cell research and apply it to Dow's Texas operations in Freeport at its chemical and plastics production facility. The effort will now use multiple fuel cells and produce as much as 1 megawatt of electricity. In a potential third stage that would occur in 2007, Dow would pursue large-scale commercialization and make up to 400 fuel cells for use at its own plants that would generate 35 megawatts of power, or enough to power 2 percent of Dow's Texas operations.
That's the type of arrangement that the Bush administration hoped would form to help enable the so-called hydrogen economy?something that the president has heavily promoted. With two giants committed to the technology, economies of scale could develop that would improve quality and bring costs down. New applications will eventually emerge to help meet industrial and commercial needs, as well as those of the automotive sector.
The benefits to Dow and GM are potentially huge. If this second phase of the agreement works out and Dow proceeds to buy more fuel cells, it has said it could become the largest user of fuel cell-powered electricity globally. It's particularly important as Dow is an energy-intensive business and is looking for ways to power its plants more efficiently. Likewise, GM now has an opportunity to leverage its fuel cell research beyond the automotive sector and into the electricity segment, and potentially other areas.
"In the first phase of this project (in February 2004), we collectively learned a lot about generating power from byproduct hydrogen via fuel cell technology, and now we're ready to build on what we've learned," said Gordon Slack, Dow's global business director for Energy and Climate Change. "Dow is excited to contribute to this important project. It represents another step in the search for cost-effective fuel alternatives, with the potential to help reduce greenhouse gas emissions."
Before committing to any further development, the two say that they want to improve and optimize reliability of power from the fuel cells. They furthermore want to investigate fuel cell waste heat recovery opportunities and understand hydrogen purity requirements.
Indeed, the purity of Dow's hydrogen that will come as a byproduct of its chlorine manufacturing processes is one of the big questions. If it is contaminated, then it could potentially damage the fuel cell. GM is providing Dow with fuel cell conversion equipment. Dow is supplying the hydrogen, which uses the fuel cell technology to convert it into electricity. It is then resent to Dow's facilities for heating and electricity.
"The biggest benefit for GM is learning to work with real world hydrogen that has some impurities in it, and not the pure hydrogen you get in a lab setting," explains Timothy Vail, GM's director of business development for fuel cell activities. "Not only can we test the effects of hydrogen purity, we can also test different generations of fuel cells, all in a controlled setting. We learn about durability and reliability."
The Economies
Though Texas is the first place where Dow and GM will test this technology, the two companies are already discussing the use of fuel cells to convert hydrogen to electricity in other Dow locations in the United States and Europe. That won't be easy. The delay with unveiling fuel cells on a massive scale is both technological and economical. Right now, hydrogen is produced mainly from natural gas using steam reformation. That method does nothing to limit reliance on fossil fuels or the infrastructure that must carry them.
Running electricity through water can also create hydrogen. But this requires burning more natural gas or coal?an inefficient process that not only pollutes but also may not make enough hydrogen to justify the added fuel consumption. Other renewable sources could create the electricity to produce hydrogen but may not be as reliable or cost effective. Proponents of nuclear say that it could be an ideal power form to create the hydrogen needed for large-scale implementation of fuel cells.
The supply problem coupled with a general malaise in the economy and in the energy sector in particular has taken a toll. Fuel cells were the toast of the venture capital world in the late 1990s. But investors soured on them after taking huge losses. The stock prices in that sector nosedived by 2001 and fuel cell makers have struggled to find the needed financing to grow. Production schedules, for some fuel cell companies, have slowed as a result.
"No one has yet demonstrated that 'economies of scale' can in themselves guarantee that fuel cells will get cheap enough to have a significant impact on any business," says David Redstone, editor and publisher of a fuel cell newsletter. "What is really needed before fuel cells can become economic and begin to have a significant impact is basic innovation in fuel cell materials and chemistry. In my view there is nothing 'inevitable' about the prospects for success for the fuel cell industry."
But, the Bush administration and others are committed to the idea. They recognize that new innovations are necessary to battle the supply issues caused by the life expectancy of fossil fuels as well as to combat global warming and other clean air issues. Fuel cells, along with other modern innovations, represent that future. The president has called for $1.7 billion over five years to research and develop fuel cell technology.
The Evolution
That type of support coupled with a stronger economy and stock market, may prompt investors to take notice once again. Last year, fuel cell manufacturers raised $25 million?a threefold jump from 2001, says VentureWire. Even though the level of investment is relatively small, many core technologies in fuel cells are beginning to blossom.
That could have the effect of growing the market. In fact, the market for stationary fuel cells used in the production of electricity is expected to grow from $21.4 million to $1.3 billion by 2009, says Frost & Sullivan, although the firm is concerned about fragmentation in the industry that could delay mass commercialization efforts. The transaction between Dow and GM is just a start but it can expedite that evolution.
Definitely, Dow aims to reduce its emissions and to cut its energy overhead. If it is successful, not only will it have the confidence to implement the technology at its other facilities located around the world but other industrials might just want to do the same. That's precisely the spark needed to fuel the hydrogen economy.
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