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DAM-L "The Fuel-Cell Sell": The New Yorker/LS (fwd)
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Date: Mon, 6 Nov 2000 15:16:57 -0800
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From: lori@irn.org (Lori Pottinger)
Subject: "The Fuel-Cell Sell": The New Yorker/LS
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Fuel cells can also power buildings without needing a grid.
The Financial Page
The Fuel-Cell Sell
James Surowiecki, The New Yorker, November 6, 2000, p42
On the fourth floor of the new office building at 4 Times Square--which
happens to be the home of this magazine-sit two steel boxes, each the size
of a Ryder truck. The boxes emit a hum quieter than your normal speaking
voice. Inside each box are two hundred and fifty-six stacked graphite plates
containing phosphoric acid and a device that can extract hydrogen from
natural gas. By causing a chemical reaction between the hydrogen and the
oxygen in the air, the boxes generate four hundred kilowatts of electricity,
enough to bathe bleary-eyed editors in silvery fluorescent light.
The boxes are called fuel cells, and they're far cleaner and more efficient
than car engines, diesel generators or conventional power plants. Fuel cells
promise to change everything from the cars we drive to the electricity we
waste. But even though the rudiments of fuel-cell technology have been
around for a century and a half, we've taken only halting steps toward
turning the fuel cell into a mass-market device.Here we are, in the midst of
the greatest economy in the country's history, more convinced than ever of
the virtues of technological innovation, and yet fuel cells are still
struggling to get out of the lab. What gives?
The simplest answer is that fuel cells have been trapped in a
chicken-and-egg predicament. Like most technologies in their early stages,
they are very expensive, and will continue to be for some time. You have to
build factories from scratch, and it takes a while for economies of scale to
kick in. (That's why VCRs, when they first came out, cost thousands of
dollars.) The initial market for fuel cells will be small, both because
they're expensive and because they're up against well-established--although
inferior--products like, oh, the internal-combustion engine. Fuel cells will
get cheaper as manufacturers make more of them. But manufacturers won't make
more as long as the market remains small.
Typically there are two ways out of this predicament: "technology push" or
"market pull." In the first case, you create a cool new technology and try
to persuade people that they need it. This is not always easy. Market pull
tends to work better. A problem arises, and companies race to invest in a
profitable solution. Fuel cells have been trapped in "technology push" hell
for most of their history. Now that's changing. The triumph of the free
market? Not exactly. If fuel cells come to rule, it will be the result of a
curious hybrid of government regulation and consumer demand.
This is how it's going to work. Fuel cells will first reach a mass market as
replacements for traditional automobile engines. DaimlerChrysler and Ford
have invested heavity in fuel-cell technology, while smaller companies, like
Ballard Power Systems and International Fuel Cells, have solved many of the
technological riddles that have kept fuel-cell cars off the road. By the
middle of this decade, people driving fuel-cell cars will be sitting in
traffic with the rest of us. In turn, cars will serve as a springboard for
all the other uses of fuel cells, because, as more of them are made, prices
will fall and the technology will improve. But the car market would not
exist without new pollution regulation, especially California's requirement
that by 2003 ten per cent of all automobiles sold be "zero-emission." Here
the government is effectively jump-starting the fuel-cell market.
That jump start wouldn't be enough on its own, but there's another, even
bigger market for fuel cells on the horizon: demand for reliable electric
power, which has skyrocketed, thanks to the Internet and the broadband
revolution. The most significant fuel cells, then, are those that will
transform the way we generate power. Fuel cells are much cleaner than
existing power sources. (Even today, most electricity in the United States
is produced from coal.) More important, they promise to provide a reliable,
"off the grid" power source, right in your own building. This matters
because the U.S. power system is buckling under the demands that are
currently being placed upon it. In a perpetually wired economy, even a
one-second hiccup in the power supply can wreak havoc on your business. So
demand for high-grade, hiccup-free juice is rising at the rate of
approximately fifty billion dollars a year. Right now, that demand is being
met by gas- and diesel-powered generators, but within a decade quiet,
efficient, affordable fuel cells could be lighting up factories and offices
from Syracuse to San Jose.
Electricity is the fuel cell's real killer app. But fuel-cell companies will
flourish in the electricity market only as a result of the benefits they
reap from being in the car market. So, unfashionable as it may sound,
government--with is anti-pollution requirements--isn't hindering
technological development. It's helping it. This is not unprecedented. The
state played a central role in the construction of th railroads and in the
creation of the national power grid that fuel cells may help supplant. Not
to mention semiconductor technology, the Internet, and Tang.
You don't want the government picking which businesses will succeed and
which will fail. But the fuel-cell saga sugggests that you can negotiate a
path between the extremes of industrial policy on one side and a completely
unfettered market on the other. In the long run, the market will determine
the fate of fuel cells. But sometimes radical innovations need a nudge.
Consider this a little push so that the market can finally pull.
::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
Lori Pottinger, Director, Southern Africa Program,
and Editor, World Rivers Review
International Rivers Network
1847 Berkeley Way, Berkeley, California 94703, USA
Tel. (510) 848 1155 Fax (510) 848 1008
http://www.irn.org
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