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Fuel Cells: This is an opinion piece, but it mentions some companies if we're going to look at this. N



Clearing the Lines by Steve Heiser: Why Do Power Companies Love Little Fuel
Cells? 
Clearing the Lines by Steve Heiser: Why Do Power Companies Love Little Fuel
Cells?
2/11/00 Because they have all bought gas companies, or will. 
In case you've missed the latest developments involving fuel cells over the
past few months, let me bring you up to speed. Two major developments have
changed the course of the fuel cell market both in terms of technology as
well as in terms of economics. Now these two events are going to elicit a
very unexpected reaction from the major electric companies. That reaction
will be excitement and unbridled support. 
The first major breakthrough came last fall from one of the U.S. national
labs when it announced that fuel cell membranes could soon be made for a lot
less money. The price reduction will lower the cost to produce a square yard
of membrane from approximately $1000 to under $100. This price change will
mean that fuel cell applications will eventually become viable for
everything from consumer electronics to automobile electronics. 
The second major breakthrough was a change in business awareness, at least
from a cultural perspective. You see the second change was that the business
community in the energy industry went from viewing residential fuel cells as
science fiction to seeing them as a sound financial investment. And that
investment is already starting to pay off. 
A few months back a little company called Plug Power got into bed with GE
and did a couple of things that got people thinking about residential fuel
cells as being about as outlandish as cell phones, home computers for
entertainment, and DVDs. First the company announced that it was going to
start offering fuel cells strong enough to power a typical home next year.
Next the company announced that the units would be about the size of
central-air-conditioning unit for a house. Third the company announced that
the price for this unit, which would run off of natural gas, would
eventually come down to around $3,000. Finally, the company was able to say
"I told you so" to it's critics and shareholders when its share went from
$15 to $156 dollars a share in less than six months. 
So when longtime fuel cell developer Ballard systems saw what industry
upstart Plug Power was doing, they did what any red-blooded American company
would do. They cut a deal with a Japanese company to develop residential
fuel cells for the Japanese market. 
OK, so right about now you are saying that is all very interesting Steve,
but what does any of this have to do with the utility companies. Neither
Ballard or Plug Power is affiliated with power companies, remember GE just
sells the parts, they don't sell electricity. Further, the only major fuel
company affiliated with a power company is Avista and you haven't even
mentioned them. 
Well the connection is distributed power. Or more specifically, distributed
generation fueled by natural gas. It won't take long for the major power
companies to jump into this arena now that the business model has been
proven. Assured that they can make a return on their money, the utilities
will jump into residential fuel cells for three reasons. 
1) The utilities own the residential power market and they are not keen on
giving it up.
2) This is a natural expansion for them while at the same time being a new
revenue stream
3) They all own natural gas companies now, or will very soon. 
Think about it. The power companies are not going to care if you are buying
electricity of natural gas, as long as you are buying it from them. They are
not going to get mad if you switch back and forth between grid power and
natural gas to run their home-fuel cell. Look at it this way. Large numbers
of consumers switch from electric power to natural gas when the power prices
get too high. 
This means that the power companies have actually handed off the headache of
load balancing to the consumers. And the consumers are saying thank you to
boot! Now the utility is doing less work, offering better services, and the
consumer thinks that the utility is a hero. This is DSM taken to a never
dreamt of extreme. 
Now don't think that the distribution companies are going to miss the boat
on this one. If these companies are smart they will not only get on board
but also get aggressive as well in offering these residential fuel cells to
some of their customers! 
Now you are thinking, OK, I've got you on this one Steve. T&D companies
don't get paid if no power crosses their wires to homes. So why would they
want to support this movement under any circumstances? Well, for the most
part this is true. They make their money by moving power and they do not own
any natural gas companies. 
Some T&D companies have to support business that is uneconomic. For example,
my friend and Andover News columnist Jack Bryar lives in a very scenic part
of Vermont. Living in this area, Jack is guaranteed of three things: 
* peace and quiet
* fresh air
* a complete loss of his electric power at some point during the winter 
Every winter in his part of Vermont, storms take down lines that sometimes
take days to restore. Given the number of people living in his area and the
costs of replacing these lines, Jack is an uneconomic customer for a T&D
company. They will never be allowed to charge what it would take get that
money back. In addition, their otherwise favorable customer service rating
takes a hit that lowers the average. Would a T&D company make money by
subsidizing Jack's residential fuel cell? No way! Would they cut their
losses substantially every year and make Jack a happy man. You betcha they
would!