The adoption curve: what can we learn from ... - Fuel Cell Markets

FUEL CELL FOCUS
The adoption curve: what can
we learn from microelectronics?
Like the microelectronics business before it, the fuel cell industry is
confident it is progressing along a viable path to market adoption.
Mark Sperry, Plug Power, Latham, NY, USA
Many other technologies
have confronted the state
of affairs currently being
faced by the fuel cell
industry. Consider the microelectronics
landscape just three decades
ago: the technology held immense promise; the
hype had outpaced the reality; mass commercialisation
could not occur without substantially
reduced costs; research was moving in many
different directions. And look what happened.
This track record raises hopes for the future
of fuel cells. Indeed, as with microelectronics,
an adoption curve has emerged to make
commercialisation practical while advancing
innovation. Already, industry leaders have made
progress along that adoption curve. With the
presence of certain drivers, further progress can
point the way to a more stable blend of grid and
distributed generation in the future.
Fuel cells today
Both industries began with grand projections.
As recently as the late 1990s "a fuel cell in every
home" seemed, to some, achievable in a few
short years. Today, in place of that dream, a
melange of research directions has emerged -
many pursued by global organisations, and
many likely to contribute to a solid foundation
for future commercialisation.
Supporting such efforts is a significant push
from national governments, which have provided
research funding, tax credits and other
initiatives to stimulate innovation. In the USA,
the Energy Policy Act of 2005 featured several
provisions friendly to fuel cells, including a 30%
tax credit (up to $1000 per kilowatt)
for the purchase of fuel cells used in
residential or commercial applications
and $3.7 billion for hydrogen and fuel
cell R&D over 10 years. Japan has set
ambitious commercialisation targets
while pursuing fleet demonstrations
and considering large subsidies for residential
installation. Canada and the
European Union have taken substantial
measures. Clearly, key players have
thrown their considerable resources
behind fuel cell development. Those
resources are critical to overcoming,
among other things, a daunting cost
challenge.
Reversing the cost
cycle
That challenge involves a vicious cycle of cost
and market viability. To make fuel cells commercially
viable, manufacturers must lower unit
costs. One path to lower unit costs is higher
manufacturing volume, which creates
economies of production. Higher volume, in
turn, can only occur with demand from a critical
mass of customers. Yet many customers cannot
invest in fuel cells because of high unit costs.
Again, microelectronics provides a hopeful
parallel. Mainframes worked well for large enterprises
but were completely impractical for
the consumer market. In response, the microelectronics
industry transformed the vicious
cycle into one of constant innovation, lower
costs, smaller size and massive market acceptance.
Can fuel cells follow a similar path?
Fuel cell adoption curve
Plug Power’s GenCore back up power fuel cell unit
The curve takes shape
It appears that they can. Fuel cell developers
are moving steadily down an adoption curve
that has taken shape over the past few years.
The progress, and prognosis, look like this:
• Early adopters. Early adopters of fuel cell
technology have emerged in several areas.
Portable fuel cells have found their way into
industrial applications; companies are
developing uses in laptop computers and
other consumer electronics. On the
stationary front, the Long Island Power
Authority has invested heavily in fuel cells
to supplement its grid during peak load
times. Las Vegas, Chicago and other cities
have deployed buses powered by fuel cells.
• Backup power. Even as early adopters continue
their exploration, an urgent need in
telecommunications has sparked a new
commercial application.
Faced with burgeoning consumer demand
and severe cost constraints, telecom
network planners are scrambling to optimise
plant infrastructure, including backup
power. In this backup power market, fuel
cells are beginning to find a niche. Their light
weight, quiet operation, zero emissions
(when operating on hydrogen) and peak performance
over a broad temperature range
have made them an excellent fit for backup
power applications in the outside plant.
Such a use can easily branch to similar applications,
such as uninterruptible power
supply (UPS).
This trend can be seen in a place observers
may have overlooked: South Africa.
16 Modern Power Systems March 2006 www.modernpowersystems.com

In December 2005, the World Bank's
International Finance Corporation (IFC)
awarded $3 million to IST Holdings and Plug
Power, which will install 400 fuel cells
throughout South Africa over three years. If
successful, this venture could serve as a
model for supplying power needs in developing
countries.
• Stationary fuel cells. As field data from these
applications inform further innovation - driving
costs and prices down - stationary fuel
cells should take hold in the prime-power
market. As with backup power, the first use
will come in remote telecom installations,
and this application will enable fuel cell
manufacturers to begin field-testing other
uses of their systems.
From remote areas, the adoption curve
takes us inward. Further innovations and accompanying
price reductions will make stationary
fuel cells a power option for
commercial, industrial and eventually residential
customers. In most of these cases,
however, fuel cells will undoubtedly serve
to complement the grid.
• Automotive applications. Even today, automotive
fuel cells are finding use in the marketplace:
• Since 2002, three major automakers
(Honda, Toyota and Nissan) have leased
fuel cell vehicles.
• Honda actively uses a fleet of fuel cellpowered
vehicles in California.
• Utility vehicles and forklift trucks are undergoing
trial runs in such places as
Munich airport.
In moving towards true market viability,
automotive applications will draw a great
deal from the lessons learned in stationary
fuel cell development. The core technology
for fuel cells is currently under widespread
testing in stationary field trials; the cost reductions
achieved by manufacturers of stationary
systems will translate to automotive
applications. Even with this support, however,
automotive makers suggest that it will
be early next decade before fuel cell vehicles
are commercially available, and the lack
of hydrogen infrastructure could push that
back further.
Moving forward
Ideally, fuel cells would evolve seamlessly
from a positive cycle of innovation, lower unit
cost, higher sales and more funding for more
DC
transfer
switch
DC buss
(120 volts DC)
innovation. In reality,
fuel cell development
requires certain drivers,
especially at
transitions between
stages. Several players
are well positioned to
provide those drivers.
• The role of government.
National and
state governments
can build on their already
substantial efforts.
As early
adopters, they could
further mitigate the
vicious cycle of cost
and volume by powering
more of their
operations through
fuel cells. The
Renewable Portfolio
Standards of some
US states include
fuel cells as a renewable
resource; other
governments would
help greatly by following
that lead.
Just as important,
GenCore, Oneida installation
governments could work to remove com- director, outlined key components (on his
petitive barriers, especially in interconnec- own initiative) late in 2004. With a roadmap
tion standards. A combination of lengthy in hand, industry players could direct their
application processes and high fees have research and production energies to the
made it cost-prohibitive for fuel cells to op- applications with highest near-term potenerate
in many areas. The creation of an intial, and early success in these ventures
ternational standard – perhaps along the would spur the industry to longer-term
lines of IEEE 1547 – could promote cross- accomplishments.
border commerce and instill confidence • Consortia and collaborations. By forming
that the grid is being preserved.
consortia like International Sematech to
Government aside, many drivers can conduct pre-competitive research, the
come from within the fuel cell industry. The semiconductor industry has driven innova-
research conducted by Fortune 100 comtion while allowing consortia members to
panies provides a powerful force for mov- direct resources toward more bottom-line
ing fuel cells toward commercialisation. concerns. The same could easily happen
Now the challenge is to co-ordinate these with fuel cells, given the number of com-
efforts, and those of others, in a way that acpanies in the field and the collective
celerates development.
research capability they represent.
• The roadmap to success. In this, a roadmap • Going global. The initiatives in South Africa
from a respected source would serve the represent a key step towards a global mar-
same function as a corporate strategic plan. ket. So does the agenda, signed by fuel cell
Established industry organisations, like the promotional bodies from around the world,
US Fuel Cell Council, command sufficient to initiate collaboration on several fronts.
respect to initiate a roadmap; indeed, From here, the industry can create cross-
Robert Rose, the council's executive border organisations to enhance cooperation,
engage in international advocacy, help
other nations develop viable standards and
encourage the opening of markets.
GenCore connection scheme for a telecommunications application
GenCore GenCore
Control wire
PBX
(load)
FUEL CELL FOCUS
APC
Symmetra
(UPS device)
AC
input
(120/208 volts AC)
AC
transfer
switch
The value of patience
Fortunately, all of this has happened before –
with great success. Look again at the microelectronics
industry: it has developed standards
to drive volume and ensure market
readiness, advocated before government for
research funding and purchase programmes,
and expanded into a global market.
It has also taught the value of patience. In an
industry that most equate with speed, personal
computers took 15 years just to reach 25%
commercialisation. The lesson here is to maintain
focus without expecting too much too fast.
All these trends contain specific lessons for
fuel cell development. If industry players take
these lessons to heart, they could do much to
facilitate the success of fuel cells in the
decades to come.
MPS
www.modernpowersystems.com March 2006 Modern Power Systems 17