Fuel Cell Hold-up Government’s go-slow approach promises to keep the technology on the shelf

Hal Plotkin, Special to SF Gate
Thursday, June 20, 2002

URL: sfgate.com/cgi-bin/article.cgi?file=/gate/archive/2002/06/20/fuelcel.DTL

The Bush administration’s January announcement of the federal government’s new $150 million annual FreedomCAR initiative to support fuel-cell research sounded like good news to many casual observers. After all, for decades a loose coalition of environmental groups and entrepreneurs have been pushing to develop commercially viable nonpolluting fuel cells so that plentiful supplies of hydrogen can be converted into electricity to power everything from cars to utilities.

Practical fuel cells have the potential to eliminate our need for oil as well as the related pollution and geopolitical problems caused by that dependence. They could also bring power to remote areas where the lack of available energy often leads to intractable poverty.

Unlike internal-combustion engines and conventional power generators, fuel cells use a hydrogen-based chemical reaction to create energy in the form of electricity. Although some types of fuel cells can be made to run on fossil fuels, they don’t require them. In fact, for most fuel-cell backers the ultimate goal is the eventual elimination of problem-plagued fossil fuels as an energy source.

So you’d think the fuel-cell industry would have rallied strongly upon hearing the news of increased financial support from the Feds.

Instead, the exact opposite has occurred.

Rather than rise, the stocks of the leading fuel-cell companies have continued to slide and are now down roughly 90 percent, on average, from the highs they hit before the Bush camp’s intentions toward fuel cells became clear.

So what happened?

Experts say it is a case of too little, too late, and for far too long.

The savviest investors have apparently come to the conclusion that the $150 million dollar annual budget request falls far short of the tens of billions of dollars it would take to actually bring about a rapid conversion to a pollution-free, hydrogen-based energy economy.

What’s more, when investors gave the administration’s financial numbers a second look they discovered that, misleading press releases aside, the only thing new about the FreedomCAR program (other than its elimination of another effort designed to increase average auto mileage over the short term) is its name. In 2000, for example, the federal government spent almost as much — somewhere around $100 million — on fuel cell-related research programs as it plans to spend next year under the new, more highly publicized effort.

Given the promising state of fuel-cell technologies, many people, including more than a few now-tapped out investors, were banking on levels of federal financial support that would enable the conversion to a hydrogen-based energy economy to unfold more quickly, with major progress originally expected within the next five to 10 years. The optimists had hoped that growing concerns about the environment, global warming and the unpredictable actions of some key oil suppliers might lead to an all-out push toward the fuel-cell alternative.

But the Department of Energy says we can ditch those hopes. In related news that didn’t get nearly as much press as the FreedomCAR announcement — but quite obviously did get Wall Street’s attention — DOE officials recently restated their belief that most U.S. consumers won’t be able to obtain hydrogen fuel supplies to power auto fuel cells until at least 2030. That doesn’t mean a hydrogen-fuel-supply infrastructure will be in place by 2030, mind you, just that there is no plan, and thus no likelihood, that it will happen any time sooner. By targeting the program’s goals and budget too narrowly, the Bush administration has put the brakes on a socially beneficial industry that could be growing much faster.

Which is a travesty, particularly given the damage that another 30 years of dependence on oil will create in the form of pollution, not to mention the likely deaths from additional oil-related wars.

Although some stubborn technical issues (mostly related to corrosion) remain to be fully resolved, most experts now say the biggest obstacle to the widespread deployment of fuel cells is the lack of a mass market, which pushes production costs up. The absence of a convenient, national system to deliver hydrogen as a fuel is another big obstacle.

It’s the classic chicken-and-egg dilemma. Production costs for fuel cells won’t come down until demand increases. But demand won’t increase until production costs come down. Likewise, there won’t be a sizable demand for hydrogen as a fuel until there is a ready and available supply. But there won’t be a supply until there is a demand.

Which is why the federal government’s decision to throw what proportionately amounts to nickels and dimes at the problem won’t make much of a difference, at least not for the foreseeable future. The main beneficiaries of this woefully underfunded program, of course, are the big oil companies that have long had a major influence within the Bush family’s political machine.

This missed opportunity is particularly frustrating in light of the long way fuel-cell development has come in recent years.

The first fuel cell was invented way back in 1839 by Sir William Grove, a Welsh judge and scientific tinkerer. The devices became better known when NASA relied on them to provide internal power to spacecraft that couldn’t use fossil fuels (no gas stations in outer space, at least not yet).

Since then fuel-cell scientists have pushed the envelope in a variety of ways. They’ve developed several major varieties of fuel cells. The most efficient are powered by pure hydrogen, while others use an intermediary step, called a reformer, to extract hydrogen on demand from other substances, such as natural gas, gasoline, ethanol and even sodium borohydride, which is similar to Borax, a common and cheap household cleanser. In each case the result is cleaner energy, with the pure hydrogen fuel cells 100 percent clean, producing only water as a by-product. Competing technologies, which extract hydrogen from other fuels, produce different but vastly lower amounts of pollution than current engines or generators.

There is no consensus on which approach will work best. When it comes to automobiles, for example, the pure hydrogen fuel cells are more cost-efficient, in part, because they don’t require the expensive inclusion of the intermediary reformers in each engine. But others argue that it makes more economic sense to leverage existing fuel-distribution systems, such as natural-gas lines or even gas stations, and extract hydrogen from those fuels rather than burn them.

The interest in extracting hydrogen from other fuels, rather than just using tanks of pure hydrogen, is partially related to safety concerns stemming from hydrogen’s explosive nature. For example, a small hydrogen fuel-cell battery powering a cell phone, were it to explode, could take off the heads of everyone in the vicinity. Likewise, an exploding car-size tank of pure hydrogen might level a city block or more.

But focusing on such fears is misleading, counterproductive and just plain wrong, say hydrogen’s most ardent proponents. Recent advances in hydrogen-storage systems, they contend, have made such worries as unfounded as the commonly expressed fears — circulated widely early in the last century — that gasoline-powered cars would soon be exploding on every street corner. (While such explosions can occur, experience has shown that they’re generally not a common part of most people’s driving experiences. Hydrogen fans, on the other hand, say safety will actually be superior to that of gasoline-powered engines because the new systems will have rupture-proof tanks or other similar anti-explosion devices).

DaimlerChrysler, for its part, recently demonstrated a car that runs on the hydrogen-rich Borax-like cleanser, which would need to be replaced periodically. The DaimlerChrysler crowd likes to joke that this technology, developed by New Jersey-based Millennium Cell Inc., is superior because if any of it spills, the only damage would be unusually clean streets.

Meanwhile, the budding fuel-cell industry continues to spin in circles. What’s missing is strong, collaborative leadership at the federal level that would more quickly pull fuel cells off the drawing board and put them more squarely into mainstream marketplaces.

Such an approach might, for example, include rolling out test fleets — not just an experimental car or two here and there — of various fuel-cell technologies in different geographic areas as a way to prime the mass-production pump and work out the remaining kinks. If the federal government was really serious, buyers of fuel cell-powered vehicles might get a tax deduction for the full cost of the vehicle, not just the partial subsidies that have been promised in some cases.

Likewise, the Bush administration, or some administration in the future, will eventually have to figure out how to create a national hydrogen-distribution system if pure hydrogen does in fact turn out to be the fuel of choice, as many automakers and scientists maintain. That could mean, for example, giving gas stations a subsidy to install hydrogen pumps or, perhaps, even fining them if they don’t. The multi-year FreedomCAR effort contains no such incentives, beyond a few limited experiments.

Empanelling a blue-ribbon commission made up of top scientists, environmentalists and even oil-company representatives, rather than just the automakers and government officials that have been included in the FreedomCAR effort, would be another way to demonstrate real leadership in this area. The goal should be finding the most direct path from where we are now to where fuel-cell technologies could take us. Leaving out the oil companies from the discussions, which the administration has done, seems like folly, given the fact that they own the current auto fuel-distribution system.

Our voracious need for oil forces the United States into military alliances with countries that don’t share our values, where free speech and freedom of religion are prohibited, where public beheadings for the slightest offenses are common and where women and girls are treated like possessions.

In the current environment, the administration’s decision to take a go-slow approach to fuel-cell development while it pretends to be doing more is not just another dispute about policy.

It’s really a crime.

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