IN THE PIPELINE: Fuel Cells Unplugging The Power Cord

   Of DOW JONES NEWSWIRES

NEW YORK -- If some researchers have their way, the only use for a power cord would be to tie up the bad guy in a movie, or perhaps to use as a makeshift belt.

Several hundred researchers are studying fuel cell technology as an alternative power source to everything from batteries to gasoline. Scientists at small and large private corporations, government agencies, and universities are researching ways to power everything from cell phones to entire cities with fuel cells.

The dollar figures they throw around are startling, projecting fuel cells could be anywhere from a billion-dollar to a trillion-dollar industry. Private and public entities have already spent hundreds of millions of dollars on the research. They say it's a can't-miss opportunity, as much a sure thing as Joe Montana in the Super Bowl.

Industrial conglomerates like Toshiba Corp., NEC Corp. (J.NEC), Hitachi Ltd. (HIT) and General Motors Corp. (GM) are in the hunt, as well as the National Aeronautics and Space Administration and start-ups like PolyFuel and NexTech Materials Ltd. In the past year, Toshiba, NEC, and Casio Computer Co. (J.CAS) have announced plans to introduce products.

"No one wants to miss out," said Jim Balcom, president and chief executive of PolyFuel in Palo Alto, Calif., a start-up which was spun out of the Stanford Research Institute with the help of a cash infusion from Intel Corp. (INTC). "When we talk about fuel cells it's not a question of if, but when."

There are many types of fuel cells, from the solid oxide fuel cell, which is best suited to power large, stationary objects like a home, to the proton exchange membrane, or PEM fuel cell, which is being developed as an alternative to the gas engine in cars and the battery in laptop computers.

While the design and applications differ, all fuel cells work by peeling electrons off hydrogen molecules to produce electricity. A PEM fuel cell gets the hydrogen from methanol, which in part consists of hydrogen, and thus serves as the fuel in the fuel cell. The fuel cell separates the hydrogen from the methanol, then peels off the electrons that are contained in the hydrogen and convert them to electricity. The leftover hydrogen reacts with naturally existing oxygen to form water.

Researchers say the process is several times more efficient than a gas engine and much better for the environment because it doesn't produce noxious fumes. A gas engine uses roughly 30% of its fuel, according to industry estimates. Fuel cell industry estimates put their technology's efficiency at close to 70%.

But there are problems.

Solid oxide fuel cells, for example, generate intense amounts of heat - roughly 2,000 degrees Fahrenheit. The extreme temperatures force researchers to use expensive, exotic materials to construct the cells. These materials can withstand the heat, unlike cheaper, but sturdier, materials like stainless steel.

                 Cost And Size

For PEM fuel cells, cost and size are problems. While there has been much talk of using PEM fuel cells to replace gas engines, researchers agree it will be a long time before that's economically viable. In high volume, the cost per kilowatt of energy generated by a PEM fuel cell is estimated to be at least $300. That figure needs to get down to about $50 per kilowatt before it will be widely adopted by the auto industry.

Cost is also a problem with portable devices. SmartFuelCell of Germany recently introduced one of the first fuel cell docking stations for a laptop computer, for instance, but the docking station costs more than most laptops.

The problem of size is a factor in powering portable devices, like laptops, cell phones, and PDAs. Currently, it takes a fuel cell about the size of a small loaf of bread to power a laptop for a couple of hours.

But researchers say they are close to solving these problems. Earlier this year, the Texas Center of Superconductivity and Applied Materials came up with what many researchers regard as a huge leap in technology. The key was reducing the size of the film in the fuel cell from 100 microns to just one micron - hundredths of the thickness of a single human hair. The thinner film cuts down internal resistance to the electric current, which allows the cell to create more power at about half the temperature, said Alex Ignatiev, the director of the NASA and University of Houston funded Texas Center for Superconductivity.

By generating half the heat, more common materials like stainless steel can be used to build the fuel cells. The thinness also increases the life of the cells. Ignatiev said the innovation should shave millions from the cost of using fuel cells.

Researchers by no means want to eliminate the heat factor, nor do they believe they can.

"A fuel cell generates heat whether you want it or not, so you might as well figure out a good use for it," said Bill Dawson, president and chief executive of NexTech in Ohio.

Scientists envision a future in which a five-kilowatt solid oxide fuel cell, which is about the size of a microwave oven, can power a home while the heat generated by the fuel cell warms the home.

There are also promising innovations being achieved in PEM fuel cell technology. PolyFuel, the company funded by Intel, is working on a new polymer membrane which more efficiently converts methanol into power. Most PEM fuel cells use a version of a membrane originally developed by DuPont Co. (DD) in the 1960s.

"We have found a way to get a third more power at a third less cost," Balcom, the company's CEO, said. PolyFuel was recently awarded a $2 million grant by the National Institute of Standards and Technology. The company has also applied to get a portion of $2 billion in fuel cell research grants being doled out by the federal government through the Department of Energy.

While researchers work on ways to knock down barriers to unleashing this technology on the commercial public, industry insiders are having a hard time agreeing on just when economically viable products will hit the market en masse.

Motorola is conducting research on two types of fuel cells at its labs in Tempe, Ariz. Jerry Hallmark, manager of the energy technologies lab at Motorola Labs, said it will be at least a few years until fuel cells become commercially viable. Motorola has targeted 2005 or 2006 as the years when reasonably priced, high performing devices powered by fuel cells may hit the market.

At a recent conference in California, that question was posed to a group of some of the foremost thinkers in the field, said Kurt Kelty, director of business development for Panasonic's battery and research and development center. No one in attendance put their money on 2004 and 10 or less guessed 2007 through 2010, leaving 22 who selected 2006 as the likely date. "It just shows that no one really knows when it's going to happen," Kelty said, adding Panasonic will likely introduce a fuel cell powered product in 2005. "But it will."

-By Tom Becker, Dow Jones Newswires; 201-938-2020

Updated October 14, 2003 11:00 a.m.