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NISTIR
7161
The Role of the U.S. National Innovation System
in the Development of the PEM Stationary Fuel
Cell
Executive Summary
The authors of this report
were asked to participate in a Conference on Innovation in Energy Technologies
sponsored jointly by the Organization for Economic Cooperation and Development
(OECD), International Energy Agency , U.S. National Academies, and the
U.S. Department of Energy (DOE). The objective of the conference was
to examine the national innovation systems in various OECD countries,
with a particular emphasis on understanding the organization of energy
innovation systems so that appropriate links can be established between
the public and private sectors, and effective public policy developed
and implemented. While the conference theme was not limited to fuel cells,
this technology was a prime focus, since it is a key initiative in many
national energy innovation programs. The studies prepared for the conference
focused on the following issues:
- The respective roles
of market forces and government policies in establishing objectives
for energy innovation and directions for research.
- The relative contributions
and degree of collaboration among industry, universities, and government
in financing and performing research and development (R&D).
- Obstacles impeding
the commercialization of new energy technologies.
The focus of this project
was to study the role and impact of the U.S. national innovation system
in the technological and commercial development of the stationary fuel
cell (for example, to provide energy for a residence) as opposed to an
automotive fuel cell, which would be used to power a car. The authors
chose to limit the study's scope to the development of the Proton Exchange
Membrane (PEM) fuel cell for residential use.
The study methodology entailed
a review of both the fuel cell industry as a whole, including its history,
drivers of knowledge innovation, and patterns of knowledge creation;
and an examination of a single company, Plug Power, that has played a
central role in the development of stationary fuel cell systems for powering
residences and businesses independent of the power grid. The researchers
drew upon personal experience in the fuel cell area as scientists or
project managers with the Advanced Technology Program (ATP). Additionally,
extensive interviews were conducted with executives from Plug Power;
the research also encompassed a literature review.
The study's key findings
in terms of the three OECD objectives are presented below.
Respective Roles of Market Forces
and U.S. Government Policies in Establishing Objectives for Energy Innovation
and Directions for Research
- Because the technology
entails limited emissions and no moving parts, fuel cells are a relatively
attractive energy source. This attractiveness notwithstanding, commercial
development of fuel cell technology, which is a fairly old technology,
has been progressing at a glacial pace. To date, market forces have
been unable to pull fuel cell technology into the commercial marketplace.
- The Federal Government
played a role in the early development of fuel cells through sponsorship
of private research by large mission-oriented agencies involved in
space and defense. These arrangements worked well, because cost was
not an issue, only performance. Technical advances were thus enabled
without researchers being held back by the economics of commercialization.
- As fuel cell technology
has moved closer to commercialization, U.S. national innovation policy
has shifted toward leveraging the assets of the public sector with
those of the private to ensure the technology's marketplace competitiveness
with regard to cost and reliability.
- The DOE Hydrogen Roadmap
provides a means of establishing objectives and directions for future
fuel cell research. The Roadmap calls for a 2015 commercialization
decision by industry based on the success of government and private
research. There are no arbitrary sales quotas or scheduled deployment
targets. Only after consumer requirements can be met and a business
case justified will market introduction begin. A report by the National
Research Council (2004) reviews many of the technical goals laid
out by the Hydrogen Roadmap and provides suggestions for improvement.
One of the report's primary recommendations to DOE is to regularly
update the report to reflect progress. It suggests that the best
way to achieve this objective is for DOE to develop and deploy a
systems analysis approach to understanding full costs, defining options,
evaluating research results, and helping balance its hydrogen program
for the short, medium, and long term. 1
Relative Contributions and Degree
of Collaboration among Industry, Universities, and Government in Financing
and Performing R&D
- President Bush continues
to push for higher hydrogen/fuel cell funding. His FY 2005 budget
request exceeds the FY 2004 appropriation by 23 % and is almost
double the FY 2003 level. 2
- DOE has been the
primary government-funding source for fuel cell research since 1978.
While the actual contribution of the private sector is unknown, a
reasonable estimate of the costs of 10 to 20 years of fuel cell research
by the "Big 3" automakers would probably exceed the government figure
by a substantial amount. 3 However,
given the lack of commercial success by private companies in this
arena, the government will probably need to play a vital role in
facilitating the commercialization of this technology.
- Universities spent
over $4 billion in research funds for all of 1999 in disciplines
related to fuel cell research, although the exact figure devoted
to fuel cells is unknown. It is most likely a small fraction of that
figure. 4
- The amount of patenting
in the fuel cell area has increased substantially from the mid-1990s.
Most recent patents are assigned to private corporations rather than
to government or academic organizations. This is at least a partial
result of revisions to the Federal Acquisition Regulations in 2003,
which permitted advance patent waivers to be granted to small businesses
for technology development programs that are cost shared by industry. 5
- Collaborations between
the government and private sector in civilian fuel cell research
applications are generally of two types: those funded by DOE, the
largest federal monetary contributor to fuel cell research, and those
supported by ATP. DOE collaborations lead to work done by either
private companies or universities, but research outcomes are dependent
on the scope specified by the agency request. ATP, on the other hand,
creates open competitions wherein the companies suggest projects
involving high-risk R&D project ideas they believe will have
high commercial possibilities and a large potential for broad-based
economic benefits to the national economy.
- The Department of
Defense (DOD) conducts significant fuel cell research for various
mission-oriented applications. In FY 2004, DOD was authorized to
spend approximately $70 million in fuel cell R&D. 6
- Collaborations within
the private sector reveal an interesting phenomenon. Despite a relatively
paltry record of commercialization success, the fuel cell industry
is already global in nature. For example, a small firm such as Plug
Power has already partnered with a Japanese company, Honda, to create
a reformer that allows hydrogen to be produced at a residence for
automobiles, as well as electricity and heat. Plug also has partnerships
with two German companies, Celanese and Vaillant. Celanese develops
high-temperature membranes for Plug. Vaillant is helping Plug demonstrate
fuel cells that capture the heat produced in a fuel cell and use
it to create hot water for a residence.
- Many automotive and
energy companies have partnered with various smaller and independent
fuel cell makers, choosing to take equity positions instead of acquisitions.
They continue to invest money in internal R&D programs, but it
is difficult for an outsider to judge whether these programs are
creating significant advances that may be revealed in a few years
or whether they are a means for these firms to remain technically
competent in case some other company delivers significant technology
breakthroughs.
- Overall, the PEM fuel
cell industry consists of a core group of companies-e.g., Ballard
( Canada ), Plug Power (U.S.), and UTC Fuel Cells (U.S.)-engaged
in commercializing the technology. Each company has large partners
on both the demand side (automotive and utility companies) and the
supply side (chemicals and specialty materials companies).
Obstacles Impeding Commercialization
of PEM Stationary Fuel Cells
- There remains a large
gap between today's costs of fuel cell technology versus comparable
existing energy technologies. For PEM stationary fuel cells to be
commercially viable, installed costs must be reduced by a substantial
factor. The exact number is difficult to quantify because production
efficiencies cannot be estimated until large-scale production begins.
A 2001 study by the Energy Information Agency assumed that fuel cell
capital costs then equaled approximately $3 625 (1998$) per kilowatt
(kW) of electricity with 40 % efficiency versus gas turbine
capital costs of $900 per kilowatt of electricity with 29 %
efficiency. 7 The agency's model
assumes a price drop to $3 000 per kilowatt by 2009, to $2 450 per
kilowatt by 2014, and to $1 750 per kilowatt by 2019. These numbers
may be somewhat optimistic regarding the current cost of producing
a residential fuel cell, but the trajectory of cost reductions needed
for commercialization to become a reality are the same regardless
of today's cost.
- The near-term commercial
potential of fuel cells is limited to portable applications and niche
markets such as, for example, uninterruptible power supply. Larger
markets may take a very long time to deliver the returns needed to
justify the large investments being made now and over the next several
years. Although fuel cell companies are attempting to develop products
designed for those larger, more potentially lucrative, markets, these
companies may not be able to support themselves before these markets
develop. Given the times needed to develop these technologies and
the financial positions of most small fuel cell companies, it is
likely that some type of consolidation will occur; otherwise, companies
will need to find more commercially salable products now-perhaps
at the expense of developing truly revolutionary technologies.
- Safety and standards
issues must be addressed. DOE recently awarded several new projects
in this area, and the National Institute of Standards and Technology
is developing standards using a residential fuel cell supplied by
Plug Power. More DOE funds are being allocated to safety and testing
as well as to public education.
____________________
1.p. 4.
2U.S.
DOE (2004), p. 13.
3The
U.S. automakers do not disclose R&D figures in their annual reports.
Daimler-Chrysler, a German automaker, spent approximately $7 billion
on R&D in 2003. Daimler-Chrysler has been working on automotive fuel
cell technology for 10 years now. If it even spent 1 % of its R&D
budget on fuel cell technology, the figure would be $70 million. Therefore,
one could extrapolate a similar amount to the two remaining U.S. automakers
since they are similar in size to Daimler-Chrysler.
4Stoup
(2001).
5www.epa.gov/fedrgstr/EPA-IMPACT/2003/August/Day-21/i21172.htm.
6U.S.
Fuel Cell Council Federal Fuel Cell Funding Chart.
7Boedecker,
Cymbalsy, and Wade (2001).
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Date created: March 29,
2005
Last updated:
August 3, 2005
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