Once relegated to the realm of science projects, hydrogen fuel cells are starting to displace fossil fuels as a means of powering cars, homes and businesses.
On Tuesday, in the latest addition to mainstream fuel-cell use, Hyundai will begin deliveries of a consumer SUV in Southern California. The technology is already producing electricity for the grid in Connecticut. AT&T is using hydrogen fuel cells to power server farms and Wal-Mart Stores uses hydrogen-powered forklifts. Later this, summer FedEx will begin using hydrogen cargo tractors at its Memphis air hub.
"This is the most exciting time for fuel cells in my career," said Daniel Dedrick, head of hydrogen and combustion technologies at Sandia National Laboratories in Livermore, Calif. The hydrogen market "is starting to accelerate."
Fuel cells produce electricity from hydrogen in a process that dates back to the 1830s, yet high costs have historically made the technology better suited for uses such as Apollo space missions and Soviet submarines. In recent years, the technology has made big strides and prices are falling. And because the process produces little or no greenhouse gases, hydrogen power stands to get a boost in the wake of President Barack Obama's recent call for tighter controls on carbon emissions.
It's still early days for hydrogen power. Prominent skeptics, including former Energy Secretary Steven Chu and Tesla Motors Chief Executive Officer Elon Musk, have questioned whether the technology will ever catch on.
Hydrogen currently provides less than 1 percent of power worldwide while coal and gas produced 67 percent of U.S. electricity in 2012, according to the Energy Information Administration. Chu, who was appointed by Obama, called for a 44 percent reduction in funding for hydrogen research.
"People have been working to improve fuel cells for over 150 years, and it's still not commercially viable," said Joseph Romm, a senior fellow at the Center for American Progress, a Washington, D.C.-based think tank.
Only about 1,000 cars and buses using hydrogen technology operate today worldwide. There are nine hydrogen filling stations in California, with 48 more under development. California promises to boost that number to about 100 over the next several years. By comparison, there are 160,000 traditional filling stations across the country.
Advocates argue the hydrogen landscape could quickly evolve as corporations' use of hydrogen spreads. Across the United States, there are now tanks of hydrogen and fueling systems for fleet vehicles and forklifts. As more companies adopt hydrogen power, the needed equipment will come, said Andy Marsh, CEOof Plug Power Inc. in Latham, N.Y.
Yet even industry leaders say that without a national pipeline network, it will be a long time before the nascent industry will enjoy widespread development.
"You have to get critical mass to build a business case," said Ed Kiczek, global business director for hydrogen at Air Products and Chemicals in Allentown, Pa., the world's largest supplier of hydrogen. "That could be 30 years away."
For now, local pockets of hydrogen use are flourishing. Plug Power supplies fuel-cell powered forklifts for customers including Wal-Mart, the grocery chain Kroger and Bayerische Motoren Werke. Plug also provides hydrogen-fueling systems. Once a company has a flock of its forklifts at a warehouse, it's a short leap to installing larger fuel cells that can produce both hydrogen on site and electricity for the entire building, Marsh said.
The company is supplying the systems for FedEx's airport tractors in Memphis, another location where stationary fuel cells might eventually become either a primary or back-up source of electricity.
AT&T is the largest nonutility fuel cell customer in the United States, with 17.1 megawatts of fuel cells operating at 28 sites in California and Connecticut. The systems offer cleaner power that's more consistent than electricity supplied by the grid, said John Schinter, the company's assistant vice president of energy and smart buildings.
Proponents of hydrogen say all this activity will soon spill over to the auto market, and it's already happening in Southern California. Hyundai is beginning deliveries of its fuel-cell Tucson SUV. Honda already offers one there, and Toyota will follow next year.
"The shift to hydrogen is inevitable, and it's happening faster than we expected," said Amory Lovins, founder of the Rocky Mountain Institute, a nonprofit clean energy research organization based in Snowmass, Colo.
Not everyone agrees. Elon Musk, a longtime critic of fuel cell technology, particularly in automobiles that compete with Tesla's Model S, revisited his opposition to the power-generating devices last week.
"I'm not the biggest fan of fuel cells," Musk said June 3 at the company's annual meeting in Mountain View, Calif. "I usually call them 'fool cells.'"
Even so, California is participating in an eight-state effort to get 3.3 million zero-emission cars on the road by 2025, powered by either fuel cells or batteries. Also participating are Connecticut, Maryland, Massachusetts, New York, Oregon, Rhode Island and Vermont, which together account for 25 percent of all U.S. auto sales.
Some analysts are predicting steady if modest growth. Automakers may be selling 1.76 million fuel-cell vehicles per year worldwide by 2025, according to Deloitte Tohmastsu Consulting. Cars that run on hydrogen can typically go more than 250 miles on a tank of the gas.
After decades of losses, fuel cell makers finally are closing in on profits. Ballard Power Systems Inc. expects to report break-even earnings before interest, taxes, depreciation and amortization for 2014, after posting one profitable year since 1992. The Vancouver-based company supplies power systems used in buses and Plug's forklifts.
FuelCell Energy, a supplier of large stationary systems that run buildings and factories, said Wednesday it expects to break-even by the end of this year. The company's systems are running the world's biggest fuel-cell power plant, a 59-megawatt facility in South Korea, and the first U.S. utility-scale plant in Bridgeport, Conn.
Investors are taking note. Plug Power is up more than 1,000 percent in the past year, the best performer on the Nasdaq Composite Index. Ballard has doubled and FuelCell has gained 49 percent, compared with a 23 percent gain for the broader market index.
Information for this story was contributed by Alan Ohnsman and Mary Schlangenstein of Bloomberg News.
Business on 06/09/2014