Chevron to use fuel cell for power in Bay Area first - Going off the grid assures reliability, but price is steep

Source: Michael Pena, in San Francisco Chronicle
Friday, September 28, 2001

http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/09/28/BU122253.DTL

Next month in San Ramon, Chevron Corp. will hook up to its data center a high-tech power generator that's about as big as a moving truck -- but runs
much cleaner and quieter.

The device, called a fuel cell, will generate 200 kilowatts of electricity by mixing natural gas with oxygen from the air in a confined chemical bath. As
one of three main power sources, the fuel cell will emit little more than a faint hum and some heat.

It will be the first commercially operating fuel cell in the Bay Area -- giving the technology a toehold in a major metropolitan area at a time when the
demand for reliable, off-the-grid energy is high.

Fuel cell advocates, who include government regulators and environmentalists, said they hope businesses and agencies with big energy needs will judge
the generator on its merits and see past its $850,000 price tag.

"The goal here is to demonstrate that this technology is indeed viable," said Diane Sable, spokeswoman for Chevron Energy Solutions, a branch of the
oil giant that develops electricity-use plans for businesses and other organizations.

In addition to powering the data center, the fuel cell will give Chevron Energy Solutions a unique exhibit in the Bay Area that showcases the new-wave
generator to potential client companies.

Only 240 of these 200-kilowatt fuel cells are installed worldwide, many to serve as a primary power source in a practice called "base loading," where
the grid serves as the supplemental source of electricity.

About 30 fuel cells have been placed in military sites around the country. One powers a police station in New York's Central Park, and five serve a
major mail-sorting center in Alaska.

But as with most new technologies, fuel cells are trapped in a chicken- and-egg quandary: There is currently little demand for fuel cells because they are
expensive. The price of fuel cells will drop as manufacturers make more of them and establish economies of scale. But more won't be made until
demand increases, which won't happen until the price of fuel cells drops.

"We are at that transition from research and development to commercialization and deployment in the market," said Scott Samuelsen, director of the
National Fuel Cell Research Center at the University of California at Irvine.

At about $850,000, a 200-kilowatt fuel cell costs $4,250 per kilowatt. The rate for conventional gas-turbine generators is about $1,000 per kilowatt.

Although energy prices are currently low, the power crisis could crop up at any moment, and experts say fuel cells are the key to cleaner, constant
energy. Because of emissions, traditional backup generators are permitted to run for only a limited number of hours per year.

Indeed, more consumers are considering fuel cells because of the threat of higher electricity rates and public funding being offered by the state for
self-generation projects. In some cases, public utility agencies have used state grant money to help big energy users buy and run a unit.

Here's how a fuel cell works: Hydrogen-rich natural gas enters one side, air enters another. A chemical bath separates electrons from the hydrogen,
creating electricity, and oxygen from the air bonds to the leftover hydrogen molecules to form the fuel cell's most abundant emission: water.

Invented in 1839, fuel cell technology didn't catch on until the National Aeronautics and Space Administration started using more modern, 12-kilowatt
units in the 1960s to power spacecraft -- and provide drinking water for the astronauts on board.

International Fuel Cells, based in South Windsor, Conn., rolled out the first 200-kilowatt units in 1991. And for years, researchers have worked on
ways to put fuel cells in cars.

Several prototypes already have been showcased, and major automakers such as Ford Motor Co., General Motors Corp. and BMW are
experimenting with different designs and natural-gas fuels.

In fact, fuel cell manufacturers say they have teamed up with busmakers to build zero-emission buses that will hit the road in the United States and
Europe by the end of the year.

During the next 10 years, more businesses, homes and cars will begin using smaller fuel cells, manufacturers say. And several decades beyond that, fuel
cells could power cellular phones and laptops.

"There are a lot of other companies looking into fuel cell technology," said International Fuel Cells spokesman Peter Dalpe. "The initial niche is for
off-the-grid power."

But while fuel cells may never be more than a backup power source, in a few cases they play a much bigger role. Five 200-kilowatt fuel cells -- totaling
one megawatt of generation capacity -- power a post office in Anchorage, Alaska.

The facility sorts most of the mail going between Asia and the United States, and with Alaska's weather constantly causing blackouts, the fuel cells
provide uninterrupted power for the equipment.

But if more businesses in California were to generate their own power instead of relying on the grid, the state, in theory, could have fewer energy
consumers to charge for the electricity bought through long-term contracts.

"It would probably result in higher costs to remaining ratepayers as more and more customers leave the system," said Robert Kinosian, technical
adviser to state Public Utilities Commission President Loretta Lynch.

For now, however, state Energy Commission officials said they aren't worried. They say the number of energy users becoming self-sufficient through
alternative sources -- including wind, solar and fuel cells -- will remain relatively small for some time.

"In fact, we are encouraging it," said commission spokeswoman Susanne Garfield. "Alternative (energy technology) was never intended to be a be-all,
end-all generation system."

Because a fuel cell produces almost no emissions, regulatory agencies like the Bay Area Air Quality Management District waive most of the
requirements during the application process. In Southern California, permits and inspections have been eliminated completely.

The New York Power Authority installed a 200-kilowatt fuel cell at the Central Park police precinct, which is housed in a 19th century building with
decrepit utility lines underneath that could no longer deliver enough electricity for the station's growing needs.

That fuel cell, which debuted in 1999, powers everything in the station and even recharges its electric cars.

"We are helping to pioneer a new technology that we feel has a great deal of potential," said Michael Saltzman, a power authority spokesman. "The
wonderful thing is that it's in the center of this beautiful park, and you don't have to worry about fossil fuel emissions."

E-mail Michael Pena at mpena@sfchronicle.com.