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How Soon is Now?

Looking for Fuel Cell Technology's Future.
Fortnightly Magazine - November 1 2001

niche markets in an effort at making them profitable as soon as possible and carrying them through the near-term and beyond. Like Internet stocks, fuel cell stocks perhaps were artificially inflated at one time; yet, unlike their Internet counterparts, fuel cell companies are looking to start small, seeking out niche needs of the energy industry.

Ironically, though, part of the reason for the deflation of the fuel cell stocks may, in fact, have something to do with the Internet bust, and it's not just because of fuel cells' perception as a technology product. According to Dennis Kramer, manager in the Andersen National Energy Consulting Practice, it was a matter of an entire potential market segment simply evaporating, or, at least, shrinking dramatically. Fuel cells partly rode the wave of the Internet boom because technology companies, the assumption went, had an unprecedented need for clean, reliable power.

"[Fuel cell companies] got wrapped up in [the Internet stock surge] because obviously, fuel cells can be used as a high reliability source of energy for server farms or high tech centers," Kramer points out. "And I think that that carried over a little bit, with the euphoria of the Internet society, how and what would be the next tier of companies that would be used to support that. Well, power is their big critical item. Fuel cells would be a logical place to look."

And don't forget the hoopla created when a big-name company starts touting fuel cells, or when-seemingly light years ago-a certain famous software pioneer made a fuel cell investment. "I think that it was a little euphoric in the past," says Kramer. "You had some big-name companies getting involved putting a lot of money into it [like] the automotives. You also had some of the millionaires putting money into these different systems. With the money Bill Gates puts into Avista Labs, for example, suddenly Avista shoots up because people think that Bill Gates has some special knowledge here.

"There has always been a long-term progression of improvements in fuel cell technology, but the pricing and the value of the shares of the public companies and also the private companies hasn't really tracked. It's been up when there's been new technology, and it's collapsed when they haven't met the goals and the stated achievements that they say they are going to get in two years or five years."

Near-term Niches

The technology sector might have deflated significantly, but hope remains that electricity-sensitive industries will turn to fuel cells for clean, reliable power. The difference between now and 18 months ago, though, is that this "clean power" market is looked upon as something of a special needs, or niche market, as opposed to a gigantic one. (Fuel cell companies may always have looked at it as a niche, but investors apparently did not.)

"[I]n the US ... the niches are going to be those consumers that have a high reliability requirement ... . They're the ones I think that are going to be the key," says Kramer. Never mind the server farms and other