Powering Up

The fuel cell used to power appliances in the caravan lasts for weeks, is automatically recharged, makes very little noise, weighs 7.5kg and has CO₂ emissions equivalent to those of a child’s breath. Retailing at €1,999, the company says it competes easily with the diesel generators more conventionally used on campsites.

SFC has tuned into an attractive proposition: the creation of a highly energy-efficient, long-lasting, very low-carbon technology, emancipation from the electric grid, and the chance to do away with the tiresome and costly need to recharge or refuel at short intervals. Above all, companies need no longer guard against energy shortages caused by peak demand or unreliable systems. “People are prepared to pay a premium to avoid loss of power,” explains Alistair Bishop, an investment analyst at Dresdner Kleinwort Wasserstein.

This is a principle well grasped by SFC. The company launches an IPO this summer to raise €105m and is currently selling fuel cells on a small scale for use in portable and stationary appliances in the leisure and defence sectors, such as security cameras and the aforementioned mobile home power systems. Corporate managers reckon the unique selling proposition of fuel cells – that is, uninterrupted power – in these sectors gives the product an excellent chance of rapidly becoming commercially viable.

If so, it will have been a hard, long and costly slog to get the idea onto the market in the first place. Unlike wind, solar and most other clean energy technologies, fuel cells were invented in the 19th century and have been the subject of speculation for decades. A fuel cell is a static device that converts chemical energy into electricity and hot water through an electrochemical process, typically with natural gas or pure hydrogen as the feedstock.

Now at a very early stage of their commercial life, fuel cells are already available in a bewildering array of forms – yet they are a long way from seeing profits. The US government pledged $3.28bn (€2.4bn) for research into a hydrogen economy in 2005, and this year the German government put forward €500m for fuel cell development over the next decade. Japan, a nation highly dependent on energy imports, is investing large amounts in cogeneration for households, meaning fuel cell installations that provide both heat and power.

Many private investors’ attitudes towards this technology have cooled off, however. “We do not currently have active stock coverage for fuel cells – more a watching brief,” says Bishop. Bruce Jenkyn-Jones of clean energy investment firm Impax Asset Management – which does own shares in two fuel cell companies – remarks: “People are definitely disappointed. Wind and solar have met expectations over the last seven or eight years, whereas fuel cells have taken longer and are still waiting to emerge.”

While shares in Danish wind turbine producer Vestas have risen by 78% in the last year, the stock price of Ballard Power – a Canadian fuel cell maker with a big interest in the automotive sector – has declined by 66%. Most fuel cell companies are still at the research and development stage. “The sector as a whole has been drifting sideways,” says Bishop.

The battery went flat after years of persistent but premature chat about a hydrogen revolution and a serious challenge to the internal combustion engine in motor vehicles. Neither is likely until 2030 at the earliest, however. “I don’t understand the meaning of the term ‘hydrogen economy’,” comments Giorgio Simbolotti, fuel cell expert at the International Energy Agency (IEA).

Simbolotti’s views are not rosy. To compete with the internal combustion engine, he says, the cost of a fuel cell system in an average car needs to fall to €37/kw. At the moment, costs hover around €1,480/kw in demonstration projects, and the IEA estimates that pushing the cost below even €74/kw will be extremely tough. “You have to reduce the cost of the fuel cell and also cut the cost of hydrogen production by a factor of three,” says Simbolotti. “You also have to have cheap distribution.”

Biofuels, hybrid, compressed natural gas and other low-carbon technologies suffer from fewer of these problems – “Fuel cells require more cost cutting than the other options,” says Simbolotti – and the environmental benefits alone may not be sufficient to speed up the development of fuel cells in this market. Given the well-established nature of the world’s petrol supply chain, the benefits of constant power from fuel cells are less enticing – until oil becomes scarce, of course.

The promise of fuel cells for cars is, at the moment, a distraction. Ballard managers say they will be able to produce a commercial product (meaning sales of thousands of units) by the middle of the next decade. There are, however, stirrings of new life right now in other areas that could act as a “door opener for the fuel cell industry as a whole”, according to Ulrike Schramm of SFC.

Electronics companies like Toshiba and Hitachi plan to produce fuel cell-powered laptops within months, because batteries in laptops have a much shorter life. Ceres Power, a UK-based fuel cell manufacturer, says it will start full production of fuel cells in 2009 for the housing sector, among others, replacing conventional gas boilers with micro combined heat and power (CHP) units. “We’re starting to see all these false dawns being swept away by practical applications,” argues Bob Flint, the company’s commercial director.

Ceres’ product is called a solid oxide fuel cell, and it can run on any hydrogen-rich fuel. It is an awkward fact that the new equipment will depend on natural gas, and that the company will have to work with a potential rival – gas supplier Centrica – but Flint and others developing this type of fuel are aware that use of the current infrastructure is a big advantage in helping to lower costs.

According to Ceres’ estimates, fuel cell micro-CHP units are a cheap and efficient alternative – cutting both carbon emissions and householders’ energy bills by 25% – with a shorter payback period than many competing applications. “Our product will save people money – that’s where there’s a mass market opportunity,” says Flint.

Punters predicting a hydrogen monoculture may be using 20th-century thinking. Even at this early stage, the fuel cell sector is very complex and fragmented. Unlike the oil business 100 years ago, fuel cells are operating in a sector already abundant with an array of competing technologies and niche applications. Hydrogen guru Jeremy Rifkin says fuel cells could be the key to solving intermittency problems for renewable energy and could therefore act as a stepping stone to a low-carbon economy. Utilities are already consulting with fuel cell companies on this application.