DOE's Steven Chu maintains conservative stance on fuel cells

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By Jacob E. Grose

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The U.S. Department of Energy (DOE) recently announced that it "is accepting applications for a total of up to $74 million to support the research and development of clean, reliable fuel cells for stationary and transportation applications." This relatively small number is not much of a surprise, since the head of the DOE, Steven Chu, has previously made clear that he does not feel that the "hydrogen economy" is the future of transportation and has slashed budgets accordingly.

Chu has slashed the DOE's budget for fuel-cell-vehicle development, including hydrogen-storage technologies, infrastructure, and various demonstration projects, from what used to average hundreds of millions a year under the Bush Administration â€“ it was about $250 million annually in FY 2008 and FY 2009, and totaled $1.3 billion in the last 10 years – to about $70 million in FY 2010.

However, the fact that the recently announced grants are for both "stationary and transportation applications" is significant because Chu â€“ and Lux Research – believe that stationary applications for fuel cells are much more promising in the near term than fuel-cell vehicles. In a 2009 interview with MIT's Technology Review, Chu said, "I think that hydrogen could be effectively a 'battery' in the sense that suppose you had a way of using excess electricity – let's say a nuclear plant at night, or solar or wind excess capacity, and there was an efficient electrolysis way of turning that into hydrogen, and then we have stationary fuel cells. It could effectively be a battery of sorts."

Lux Research believes that the best near-term opportunity for stationary fuel cells lies not as an enabler for hydrogen storage, but to provide combined heat and power (CHP) in distributed applications. While there are still numerous hurdles to overcome for fuel cell makers like Bloom Energy, Plug Power, and Nordic Power Systems that are seeking to sell into the embryonic CHP market â€“ high cost being first among them – CHP is still a better bet for significant adoption of fuel cells by 2015 than the ones Honda and Toyota are making.

Jacob E. Grose is an analyst for Lux Research. Please visit Lux Research for more details and to register for the upcoming webinar: Lux Research's Beyond the Meter: How IT and Telecommunication Companies Will Benefit from the Expanding Smart Grid.

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