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Fuel Cells: White Knight for Natural Gas?

Fortnightly Magazine - March 15 2000

will be in the way the technology is presented to customers. "As we've approached fuel cells our working mantra is 'This will be successful if it is sold and used and perceived as an appliance,'" he notes. "If it's perceived as a generator, we will have missed the boat."

Overseas markets, particularly developing countries, may represent the biggest piece of the pie for fuel cell companies. Says Ross, "There is not a manufacturer of any type of [fuel cell] technology, whether it be power generation or otherwise, that is not looking at China, India and Asia. Africa, you can throw in there, but Africa has a lot of problems that need to be resolved."

In China, India and other parts of Asia and the Middle East, people are eager for the conveniences of the West - all of it dependent on power. "They're just astronomical markets and everybody is after them," according to Ross.

Energy companies investing in fuel cells say the risk involved is far outweighed by the potential payoffs.

"You know, [distributed generation] is not a bet-your-company proposition," says Downes of New Jersey Resources. "This is a sensible extension of our strategy that has worked very well over the last five or so years."

Setting the Rules: A Role for Regulators?

Fuel cells present the same sort of challenges with regard to grid access that most DG technologies face. They include the need to set rates that cover legitimate costs yet don't discourage DG, standardize safe interconnection to the grid, and resolve the complicated matter of net metering. In fact, state commissions in California, Texas and New York have held hearings in recent months for input on the matters. Until they are settled, say advocates of DG, the technology won't stand a chance of success.

"If we have fees that are structured in such a way that kills deals, then that's going to be a very real barrier, much more of a barrier than any other cost," says Sarah McKinley, executive director of the Distributed Power Coalition of America.

"Clearly there are some people in the distributed resources community who would accuse some utilities of trying to price distributed resources out of the market," says EEI's Linderman. "We certainly don't recommend that. We recognize that there's a technology evolution taking place here and that the way in which you price needs to be thought about.

"But likewise, there are costs that have been incurred by the industry to support various customers. Those costs legitimately incurred under state regulation need to be recovered," maintains Linderman.

McKinley agrees. "How we structure rates to be fair and yet not allow DG to be squashed in the market is very difficult [to] answer." She adds, "The $64,000 question is how do we do that. I don't have a pat answer; I'm not sure that anybody does."

The National Association of Regulatory Utility Commissioners and its committee on energy resources and the environment is examining these issues, according to committee chair Bob Anderson.

"If customers want to install fuel cells, they should be able to