Fuel Cells Power Up: Three Surprising Places Where Hydrogen Energy Is Working

Hydrogen may not be fueling many cars, but it is delivering clean power for warehouses, data centers, and telcom towers.

The concept is tantalizing: Use abundant hydrogen to fuel vehicles and power plants, producing nothing but water and heat as a byproduct. The advent of hydrogen fuel cells would help provide the energy the world needs, while slashing greenhouse gas emissions and curbing our dependence on oil.

If that notion seems too good to be true, that’s because it has been. Despite a flurry of investment in fuel cells over the past two decades, the vision articulated by former President George W. Bush of an America leading the world in producing “pollution-free” vehicles that run on hydrogen has seemingly evaporated into thin air. But the fuel cell is far from dead—indeed, it is gaining a commercial foothold in some niches, evidenced most recently by news that megaretailer Walmart is expanding its use of fuel cells to power forklifts at its stores.

Such implementations of fuel cells, which use hydrogen and oxygen to produce energy via an electrochemical reaction, are small but growing exponentially. According to a U.S. Department of Energy (DOE) report released last October, annual global shipments of fuel cell systems increased sixfold between 2008 and 2012. And at least one major analyst forecasts that the market for some fuel cells will grow from $1.4 billion to $40 billion by 2022.

Still, industry players speak with an awareness of the gap between the lofty hopes that have been pinned to fuel cells and the market reality. “Fuel cells can’t do everything for everyone,” said Chip Bottone, president and CEO of the Connecticut-based power company FuelCell Energy, “but we are getting to a point where we could play a very significant role.”

Lower Emissions, but Higher Costs

Fuel cells come in a wide variety of types and applications, from stationary cells that produce energy for both primary and backup power to systems used in vehicles like cars and forklifts. But so far, the cost of producing fuel cell technologies remains a barrier to widespread adoption, as does a lack of fueling infrastructure for hydrogen cars.

And hydrogen, despite being abundant and clean when employed in a fuel cell, must be harvested. Nearly all the hydrogen produced in the United States comes from natural gas in a process called steam reforming. Other potential feedstocks include coal or biomass. It is also possible to use emissions-free nuclear or renewable power to harvest hydrogen by electrolysis—running an electric current through water to break the bond between hydrogen and oxygen.

Even when fossil fuel is used as a feedstock to produce hydrogen, fuel cells can offer significant emissions benefits. Research by the the U.S. Department of Energy’s National Renewable Energy Laboratory (NREL) suggests that in a “well to wheels” analysis, hydrogen cars fed by natural gas can cut greenhouse gas emissions by more than a third compared to conventional gasoline cars, and by more than half if the hydrogen is produced from biomass. Emissions are zero once the fuel cell is operating.

Here are three areas where fuel cells are making inroads, plus another one that shows promise:


In February, Plug Power announced a deal to supply 1,738 hydrogen-powered forklifts and associated infrastructure to Walmart. Although Plug had been around since 1997 and had never seen a profit—explaining why its shares sank from nearly $1,500 in 2000 to 15 cents in 2013—over the course of the next two weeks, the company’s stock nearly tripled in value.

Short-selling was a factor in the run-up, but there was no denying that 1,738 was a big number, one that confirmed a real and growing market for materials-handling equipment (MHE) powered by fuel cells. NREL research suggests the switch from lead-acid batteries makes sense: In a test of 490 units that operated for a total of 1.5 million hours, the lab found them to be reliable and capable of saving about 10 percent in costs.

“If you have a big distribution center and have several dozen forklifts running, you’ll see productivity gains using fuel cells,” said Keith Wipke, who manages fuel cell research programs for NREL. A fuel cell forklift can be refueled in a minute or two, a small fraction of the time it can take to swap out a battery. Fuel cell forklifts offer another edge, too: While the battery-powered forklifts degrade in performance as their charge winds down, fuel cell forklifts run at full power until empty.

A big chunk of the deployment over the past five years was driven by 2009 stimulus-related funds, as well as incentives that won’t last forever. NREL says that continued, long-term growth of fuel cells in the MHE sector could hinge on whether the systems that are put into use prove to be as durable as promised.

Electricity for Homes and Businesses

The world’s largest fuel cell plant, a 59-megawatt facility in South Korea that opened earlier this year, provides both power and heat to homes in Hwasung. Another fuel cell “park” is set to be built in Seoul. Those cities join several municipalities and companies that are using fuel cell power plants to provide baseload electricity for homes, data centers, fulfillment centers, and similar applications.

Government subsidies have played a key role in the approval of these projects. In the United States, for example, stationary fuel cells are aided now by incentives in a few states and by a federal tax credit of up to 30 percent that expires in 2017. The relatively low price of natural gas as feedstock for these plants is helping as well.

Fuel cell power plants still are not close to competing with the size and cost-effectiveness of large gas-fired power plants, but when they can overcome their most persistent obstacle—high capital costs—they can deliver significant amounts of relatively clean, continuous-baseload energy that beats grid rates in states where energy costs are high.

Chip Bottone of FuelCell Energy, which provided the systems for the South Korea plant (see the company's video about it here), acknowledges that competing on price will be key for fuel cells. “We can’t be a business that needs a significant incentive,” he said. Bottone said his company could build systems with a capacity of one megawatt or more that could deliver electricity at a cost of 13 to 14 cents per kilowatt-hour. With the current incentives, he said, they can “play in the nine to ten range,” which is about the average retail going rate in the United States.

For companies such as eBay, Apple, and Macy’s, fuel cell installations can help provide power at a stable cost while boosting operational sustainability. Verizon, when it announced the installation of systems from stationary fuel cell maker ClearEdge Power at various Verizon sites in New Jersey, New York, and California, said the use of fuel cells and solar would “reduce our carbon footprint, relieve demand on the electrical grid and enhance the resiliency of our proven service continuity—even during outages.” In the United States, stationary fuel cell customers commonly include universities, hospitals, and data centers.

Apartment complexes are also proving ripe for installations, but that’s about the extent of residential fuel cell use in the United States; at such a small scale, “the economics are tough,” said Dave Anderson, vice president of product management and strategy at ClearEdge. (An appreciable amount of home use is happening in just one place: Japan. With the energy shortage and rising costs following the 2011 nuclear accident at Fukushima Daiichi, consulting firm Navigant says about 70,000 Japanese homes are using fuel cell systems to provide energy and cooling and heating.)

Backup Power for Telecom

Fuel cells are also proving their worth as backup power, a key advantage in a world of more frequent extreme weather. As this Department of Energy post notes, cell phone towers that had backup from fuel cells kept running without issue during Hurricane Sandy, allowing communication to remain open.

While stationary fuel cells do offer protection against grid failures, they actually operate continuously, Anderson notes, “with the grid as backup.” But with the Department of Energy helping spur deployments, fuel cells that can start up quickly in case of emergency have been deployed at thousands of remote telecom network towers, and Sprint recently said it would work with the DOE to put the technology to work at rooftop network sites.

Proponents of fuel cells note that, because they have fewer moving parts than diesel generators, they have lower maintenance costs and lower failure rates. They can also be controlled and monitored remotely, while producing little noise and zero emissions. That makes them the perfect backup power source, not only for telecommunications but for any site that needs uninterrupted power. The fuel cell company Ballard Power Systems argues that, though its hydrogen fuel cell backup generator system costs a few thousand dollars more than a conventional diesel-fueled system, it will pay for itself within three years and ultimately save more than $8,000. (It should be noted, however, that Ballard’s scenario assumes the availability of the 30 percent U.S. federal tax credit.)

Cars and Buses: Gaining Speed

Long after President Bush began a push to bring fuel cell cars to market, several automakers are advancing beyond the demonstration cars they began deploying a decade ago. Hyundai is now marketing a fuel cell version of its Tucson sedan, while Toyota and Honda will follow suit with their own fuel cell models next year. Meanwhile, NREL is evaluating a number of fuel cell bus demonstrations in the United States and Canada. In its most recent analysis, a 20-bus fleet operating in Whistler, Canada, over two years saved 4,400 tons in carbon dioxide emissions; on the downside, maintenance costs for the buses were 58 percent higher than for their diesel counterparts.

A host of factors are inspiring this transition from “the stuff of science fiction to something real,” as Scott Samuelsen, director at the National Fuel Cell Research Center at the University of California Irvine, put it: Carmakers have figured out how to use less of the expensive catalyst platinum in the fuel cells; improved fuel cells can now start up quickly and operate well in cold weather that used to cause freeze-ups; range can easily hit 300 miles, thanks to storage tanks that hold more compressed hydrogen; and a fueling infrastructure is on its way in California, backed by taxpayers.

The last point is particularly important. There are now just nine public hydrogen fueling stations in all of the Golden State (compared to about 10,000 gasoline stations) and a single station—even just an island at an existing gasoline station—can cost upward of $2 million. But with the state now picking up more than half the installation costs, California expects to have 68 strategically placed stations open to the public by 2017. For the several thousand or so fuel cell cars expected to be on the road, “This will offer accessibility,” Samuelsen said. Then, “as more people choose these cars, we move into a phase of expanding capacity.”

Some, like Tesla’s Elon Musk, beg to differ. Last year, he offered a profanity-laced dismissal of fuel cells’ viability. But Samuelsen, citing the greater range and quicker refueling times that fuel cell vehicles offer, said it would be wrong to view the future of cars as a winner-take-all battle between battery electrics and fuel cells. “I see families having one of each,” he said—a small battery electric that can be charged daily at home or work for short-range city driving, and a bigger fuel cell vehicle for longer excursions, fueled periodically at a filling station just like today’s gasoline cars.

Even the most optimistic of fuel cell vehicle advocates will surely concede that, as U.S. Energy Secretary Ernest Moniz said in January, “there is still the need for substantial cost reduction” in order for such cars to truly be viable on the market. Yet there’s also a firm belief that the cars will eventually make it. NREL’s Wipke said, “Even in the depths of the recession, the car companies, by and large, didn’t give up. That showed me that this wasn’t greenwashing. They really see this as the future.”

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