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Fuel cells spark energy optimism

One of the key hurdles in green energy is dependability. When the sun doesn’t shine and the wind doesn’t blow, air conditioners and coffee makers don’t run. But that’s not the case with fuel cells. — By CNBC’s Melissa Francis
/ Source: CNBC

One of the key hurdles in green energy is dependability. When the sun doesn’t shine and the wind doesn’t blow, air conditioners and coffee makers don’t run. But that’s not the case with fuel cells. That’s one reason they’re gaining attention from power-crunched utilities to your local phone company.

A FUEL CELL uses a catalyst to convert hydrogen and oxygen into water, producing electricity and heat in the process. Now this technology is expanding so rapidly that could be soon be powering your home. Some utilities across the U.S. have already adapted the technology into their power grids. And some telecom companies plan to replace their old battery backup systems with fuel cell power. But despite its reliability — fuel cell power is still very expensive to generate.


It may look like any ordinary McDonald’s, but green energy supporters say a fast-food location on Long Island is the wave of the future — a restaurant powered by fuel cell technology.

“I certainly foresee the time in the not too distant future when you will see thousands of them across Long Island,” said Richard Kessel, CEO of the Long Island Power Authority.

Right now, Long Island’s fuel cells provide less than one percent of the utility’s overall output. But as the area runs out of land for new power plants, LIPA needs to explore new options.

“There are tremendous price spikes in the cost of fossil fuels like natural gas and oil and we want a clean environment here in Long Island,” said Kessel.

It takes millions of taxpayer dollars to run LIPA’s fuel cell program. And it’s these incentives that are driving the market for fuel cells. Analysts predict it will grow to more than $1 billion by 2007, rising to $18 billion by 2018

“You have to have patient capital,” said Plug Power CEO Roger Saillant. “You have to be patient for the amount of time it will take for your company to grow.”

Saillant says a lot of his company’s revenues these days come from the government. But that’s about to change. Plug Power is launching a commercially competitive new product later this year. This hydrogen-based fuel cell will provide backup power for the telecom industry.

“It has the right reliability, it has the right cost to compete in the market,” said Saillant. “It’s a value proposition not only to the market but it’s value proposition to us because as the volume increases we will be able to make margin.”

Saillant says this new product could make Plug Power profitable by 2006. Analysts agree the outlook is promising, but not without its kinks.

“One of the biggest hurdles for widespread adoption is the lack of availability of hydrogen for use of fueling,” said industry analyst David Kurzman at H.C. Wainwright.

Medis Technology doesn’t have that hurdle. Its fuel cell battery pack runs on ethanol.

“This little product, which fits in the palm of my hand, weighs 200 grams and is capable of charging the phone and running the phone at the same time,” said Robert Lifton, CEO of Medis Technologies. “And with each refill cartridge is nine hours of talk time.”

The roughly $20 price tag makes it pricey for most. So Medis is teaming up with General Dynamics to market the pack to the military.

Fuel cells are even being tested in automobiles. Ballard Power already has prototypes on the road. But researchers say fuel cell cars are at least a decade away from commercial readiness.

For those investing in the technology right now, the wait is besides the point, said Kessler.

“I think of people who say: ‘What is a fuel cell? What the big deal here? It’s providing some of the electricity at one McDonalds,’ ” he said. ” Those are the same people who said what’s the big deal about sending up our first satellite — which led to man on the moon.”