Monday Morning: Fuel cells aren’t yet heirs to the Internet

The last big idea that spawned an investing frenzy was the Internet.

So what will be the hot concept for this decade? We are now three years into it without a clear winner.

The leading candidate seems to be genetic engineering, but a dark horse is making its move: fuel cells. In fact, I have even begun receiving e-mails touting their benefits.

While there has been a lot of discussion about the potential of genetic engineering during the past six years, the hype surrounding fuel cells has just begun. You will hear more about them in the coming months and years.

There are several reasons for this:

First, the phenomenon of global warming is accepted as fact by just about everyone, though there is still some disagreement about its cause.

Many top scientists maintain that environmental pollution plays a key role in causing global warming, with automobile emissions seen as another major contributor. Fuel-cell-powered autos are seen as a potential alternative to gasoline-powered vehicles that emit environmentally damaging fumes. Fuels cells may also be able to supplement or replace large, oil-burning electricity-generating plants.

Second, the oil workers’ strike in Venezuela and the potential war in Iraq remind us of our dependence on imported oil. Some think fuel-cell-powered autos could reduce this country’s dependence on foreign oil.

Third, U.S. automakers are focusing their research efforts on fuel cell vehicles. Until recently, they have ignored hybrid cars, which combine smaller gasoline engines and battery-powered electric motors.

mounting interest

The interest of the Big Three (Ford Motor Co., General Motors Corp. and DaimlerChrysler AG’s Chrysler Group) in fuel cells appears to be growing stronger, and Japanese car makers are also showing more interest.

But what exactly are fuel cells? In a nutshell, they’re devices that convert a hydrogen-based fuel into electricity without moving parts. Most fuel cells use pure hydrogen in compressed gas or liquid form.

Some, however, use catalysts such as gasoline to produce hydrogen from hydrocarbon fuels. The electricity then can be used for many purposes, including powering autos.

The nice thing about fuel cells is they emit only water vapor, so environmentalists love them.

The idea sounds wonderful, but there are problems that must be solved, especially for auto use, before fuel cells can fulfill their promise. First, fuel cell systems are bulky because of the hydrogen storage tanks they use, and the driving range of the vehicles that use such systems is limited.

More importantly, the hydrogen must come from somewhere. The oil and chemical industries produce much of the hydrogen supply, often as a byproduct.

If we continue to rely on these sources for hydrogen, then fuel cells won’t ease our reliance on foreign oil, nor will they reduce pollution significantly.

Hydrogen can also be produced by electrolysis – passing an electric current through water – but that requires electricity generation, meaning smokestack emissions, which again limits gains against pollution. Hydrogen also can be produced by passing steam through natural gas, but that also produces air pollution.

For fuel cells to reduce oil imports and the pollution that contributes to global warming, a large, air-pollution-free source of power must be developed so we can use electrolysis to produce vast amounts of hydrogen. That’s a big hurdle to clear.

Solar and wind power are unlikely to produce enough electricity for many years, if ever. And some environmentalists want to demolish some of the nation’s hydroelectric power stations, and oppose the building of new ones.

You can find information about fuel cells, including the companies that produce them, at fuelcells.org.

But warn your clients against falling for the hype about fuel cells as an investment opportunity. Fuel cells are coming, and one day there may be a genuine opportunity – but not yet.

Mike Clowes is the editorial director of InvestmentNews and sister publication Pensions & Investments.