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Fuel Cells: White Knight for Natural Gas?

Fortnightly Magazine - March 15 2000

an option for better serving customers with special needs, less need to invest in transmission lines for remote service areas, and a way to increase power capacity without investing in additional infrastructure.

Combination gas and electric utilities stand to benefit from increased gas throughput.

"For combination companies, it's a different way to move gas through the electric system and increase the throughput on the distribution business," says Linderman. "For our members that own pipelines, it probably means greater throughput on the pipelines as well."

Fuel cells also offer big opportunities for deregulated, wires-only companies and electric service providers that serve many customers in remote locations.

As Fred D. Hafer, chairman, president and CEO of GPU Inc. explains, the technology is a good fit with a wires-only strategy. "It opens up a potential line of business, which is not here today, and which fits nicely into the strategy that we have carved out for ourselves."

GPU in 1996 joined Ballard Power Systems, a leading developer of fuel cell technology for transportation, to form Ballard Generation Systems. BGS plans to commercialize fuel cells for residential and commercial applications.

As part of GPU's plan to increase delivery and related businesses, Hafer says, "We have recently purchased a construction company, for example, that services regulated utilities as well as commercial installation, does in-plant wiring for new facilities, builds utility lines, etc." That business, he says, "would be a perfect vehicle to pick up the fuel cell industry and either get engaged in the installation, maintenance of fuel cells, or maybe in the fuel cell sale from the outset."

As Bill Miller, president of International Fuel Cells, explains, the energy company has a natural interest in promoting fuel cells because the technology will help it better serve its customers. IFC, like ONSI, is a subsidiary of United Technologies Corp.

"We're providing more reliable power and cleaner technology," says Miller. "The benefit to the utility is that it provides better electricity than they're providing today. It's in everyone's best interest to provide that better reliability and cleaner source of power."

Energy companies tend to lower their resistance to new technology as these benefits become more apparent, according to Miller. "Utilities in the past have felt somewhat threatened by some of these new technologies," he says. "However, and importantly, I think electric utilities are starting to see that these technologies may actually help them, and are starting to work more closely with and in partnership with some of these alternate energy sources."

But the incumbent electric utilities must not be left out in the cold with regard to DG, says Linderman. "One of the key challenges that the incumbent electric generation industry faces are the states that would exclude the incumbent from participating in this market."

The incumbents, he notes, can bring expertise in deploying the new technologies. "The electric industry needs to participate to bring its credibility as a provider of electric service to residential and commercial customers." That, says Linderman, will help the DG market expand.

For Northern States Power, which serves several regulated markets in the