Will fuel cells be the favored energy source of the next century?

Will fuel cells be the favored energy source of the next century? Two utility companies, a major energy company, and a major supplier of engine components and automotive products have joined forces to power up a fuel cell demonstration and evaluation project at the Houston Advanced Research Center (HARC). The three-year, $7 million project seeks to test and determine the various conditions under which fuel cells can be put to use as a clean, reliable, and affordable energy source.

The four companies participating in this initial project of HARC`s newly created Center for Fuel Cell Research and Applications are Dana Corporation (NYSE: DCN), Texaco (NYSE: TX), Southern Company (NYSE: SO), and Salt River Project.

Bruce Rauhe, technical director at the Center, emphasized that the project is driven by the participants whose needs and requirements vary as broadly as their respective businesses. "We have clear, focused objectives, but the project remains flexible enough to respond to new concepts and applications as they arise," he said. Fuel cells need hydrogen, which can be obtained from natural gas, gasoline, methanol or ethanol, to create a chemical reaction that produces electricity, heat and water. Because fuel cells use an electrochemical reaction rather than combustion to generate electricity, emissions are minimal, making them an environmentally friendly alternative to conventional power sources. The National Aeronautics & Space Administration (NASA), which is participating in the project in an advisory role, began using fuel cells more than 30 years ago in its space flight development. Only now, however, has the technology progressed to the point of being commercially feasible for broad applications.

“Our objective is to demonstrate the value of stationary, near-zero emission proton exchange membrane (PEM) fuel cell units in both small and large-scale applications," said Patrice Parsons, program director at HARC. "We will look at issues including power quality and reliability, technology transfer and training as well as the development of long-term performance and emissions data. We are particularly interested in seeing how fuel cells can be applied to new incentive programs, such as tradable pollution credits and greenhouse gas reductions."

HARC plans to operate fuel cells from multiple U.S. and foreign-based manufacturers, first looking at a large 250Kw fuel cell system – the size that could provide power for a small neighborhood.

“Salt River Project (SRP) is excited about being a part of a project that is looking to the future,” said Richard Hayslip, SRP`s manager of environmental, land & risk management. "Our customers are interested in low emission, reliable power generation. We want to understand these new technologies and be on the cutting edge of delivering these services to our customers.”

“Southern Company has a long history of technology innovation in electric power generation,” said Charles Goodman, Southern Company vice president for research & environmental affairs. “We view this collaborative approach as a beneficial means to fully test and understand the future of fuel cell power generation technology.”

“Since its founding, Dana has helped to develop technological advancements under the vehicle and under the hood. We are especially excited to be involved in this evaluation of fuel cells, since they represent a clean, reliable, and affordable alternative to internal combustion engines,” said Jack Dawson, director of fuel cell development. Dana Commercial Credit, Dana’s leasing division, has also been actively involved in HARC and developing financing solutions for the technology.

“Texaco is engaged in an ongoing effort to broaden the company’s portfolio of energy opportunities. An important step toward making fuel cells a viable option in the energy mix is through cooperative efforts such as the one at HARC. Lessons learned from this project will leverage Texaco’s expertise in fuels and fuel processing into a wide range of power generation opportunities using fuel cells,” Graham H. Batcheler, president of Texaco Energy Systems Inc., said.

While fuel cells have had worldwide implications, they have been used extensively in Japan and England for the past five years. Uses include hospitals, cars, buses, commercial buildings, and wastewater treatment facilities.

Created in 1982, the Houston Advanced Research Center (HARC) is a nonprofit, university-linked research institution with major research interests in energy, the environment, and policy studies. Dana Corporation is one of the world`s largest independent suppliers to vehicle manufacturers and the aftermarket. Founded in 1904 and based in Toledo, Ohio, the company operates some 330 major facilities in 32 countries and employs more than 86,000 people. The company reported sales of $12.5 billion in 1998. Dana operates a leasing subsidiary, Dana Commercial Credit Corporation, which received the Malcolm Baldrige National Quality Award in 1996.

Salt River Project (SRP) is the third-largest public power utility in the nation serving more than 700,000 customers in the greater Phoenix metropolitan area. In addition, according to J.D. Power and Associates and Navigant Consulting, SRP tied as the highest in customer satisfaction for residential electric service in the Western U.S.

Southern Company (NYSE: SO), based in Atlanta, is an international energy company with more than $35 billion in assets through regional utilities and operations around the world. It is the largest producer of electricity in the United States and one of the world’s leading independent power producers.

Texaco Energy Systems Inc. (TESI) was created to explore opportunities to broaden Texaco’s energy portfolio. Leveraging the strength of a global corporation, TESI is exploring business opportunities in fuel cells, hydrocarbons-to-liquids, and alternative fuels. As a technology- based company, Texaco plans to apply energy expertise and proprietary technologies to make these emerging energy options a reality.

M. Paul Martin of Akin, Gump, Strauss, Hauer & Feld, L.L.P., served as legal counsel and Ken Hedrick of Jackson Securities Incorporated was the financial advisor to HARC for the formation of the Center.