Year 2000 could be the year of the fuel cell on Wall Street asnext year is expected to see first commercialization of thetechnology on Main Street. While most consumers have yet to hear ofthe big gas-powered backyard batteries, investors certainly areaware.

KeySpan Technologies Inc., a subsidiary of KeySpan Energy, justsigned an agreement with GE MicroGen, a subsidiary of GE PowerSystems, to buy and test 30 residential natural gas-powered fuelcells, manufactured by Plug Power, at selected locations in NewYork City and Long Island. The testing is seen as the first step infuture marketing and product-service ventures. KeySpan has theopportunity to become the utility with exclusive rights to marketand maintain fuel cell units in New York City and Long Island. GEMicroGen already has an exclusive agreement for New JerseyResources to market its fuel cell product in its home state. FlintEnergies is signed up to market the fuel cells in central andsouthern Georgia.

“We look at this as a benefit of our markets opening tocompetition,” said New Jersey Resources Corp. CEO Laurence M.Downes. “We look at it as a new technology that will allow us as alocal distribution company to use our physical infrastructure ofassets more efficiently while at the same time potentially givingus the opportunity to provide customers with an electric commodityservice. We think that there’s a limitation to the amount ofsavings that will be derived from the simple unbundling andrebundling of the existing model, and we’re in that process rightnow. And we think that… people will realize to really getlong-term, sustainable savings, there has to be new technology, newproducts out there. And we think fuel cells fit that bill.”

Another thing that fuel cells fit, according to Downes, is theload profile of New Jersey Natural Gas. Because the utility is awinter peaker, it has been particularly successful in off-systemsales capacity release markets, raising total throughput from about50 Bcf in the early 1990s to more than 340 Bcf in the past year.”With that backdrop, what we believe the fuel cells give uspotentially the opportunity to do is to take that same basicstrategy but to achieve it behind our citygate,” Downes said. “Wethink that the fact that we are currently positioned as awinter-peaking utility primarily gives us a perfect opportunity tobe prepared for an improvement in the load profile without asubstantial amount of new capital needed to support that behind thecitygate.”

Later this year, New Jersey Resources expects to have about 20fuel cell units out in the marketplace as testers. Next year thetarget is to have between 400 and 800 units up and running. Theprice of fuel cell units is a moving target, Downes said, but thefirst residential units should be priced between $10,000 to$12,000. That’s not cheap, but prices are expected to come down asproduction ramps up.

That’s a small start, but the market for home fuel cell powergeneration could be pretty large indeed. According to Plug Power,about half of all homes in the United States use natural gas forheating/cooking, and there are currently more than 70 million U.S.homes connected to or at least near a natural gas line. Plug Powerrevenues for the third quarter of last year were $3 million,compared to $2.4 million for the third quarter of 1998. Last yearPlug Power built a new manufacturing facility in Latham, NY. Thecompany, which started with 22 people, now employs about 300.

It doesn’t appear fuel cell companies will have troubleattracting any capital they might need. Avista Corp., based inSpokane, WA, got on board the technology stock express recently asWashington state neighbor, Bill Gates took a 5% stake in thecompany and Avista’s stock price just about doubled. Gates’interest was spurred in part by Avista’s involvement in the fuelcell market, according to analysts.

Wall Street has taken a liking to fuel cells, principally in theform of stock in Plug Power, a three-year old venture co-founded byDetroit Edison parent DTE Energy and Mechanical Technology. PlugPower went public in November at about $20 share. The stock eruptedlast week and ran as high as the $130s before closing at $83.Sempra Energy’s SoCal Gas also has invested in Plug Power.

Another utility, GPU Inc., headquartered in Morristown, NJ, andthe parent of Jersey Central Power & Light Co., MetropolitanEdison Co. and Pennsylvania Electric Co., has an investment inBallard Generation Systems (BGS) with Ballard Power Systems ofVancouver, BC. GPU and Ballard formed BGS in December 1996 and havebeen working to develop and commercialize a range of fuel cellproducts or homes and businesses.

BGS products range from a 250-milowatt unit for commercialbuildings to a 1- to 10 kW unit for homes. They will be deliveredand tested in field trial programs during the next few years. A 250kW BGS fuel cell power plant is operating at the Crane Naval AirStation in Indiana, and others are to be installed soon in Europeand Japan. GPU said it expects to make its final $4 millionmilestone payment within the next few months to complete its $23.25million investment in BGS. GPU will own about 13% of BGS with theremainder owned by partners Ballard Power Systems, Alstom SA ofFrance and Ebara of Japan. Ebara and Alstom provide manufacturingcapabilities and access to the European and Japanese markets.

“We have always believed that the fuel cell will play animportant role in the future supply of power to residential andsmall commercial users,” said Fred D. Hafer, GPU CEO. “As fuel celltechnology progresses, GPU anticipates providing the differentkinds of utility service our customers will require in the future.We expect that BGS will ultimately be able to offer a full line offuel cell power supply products to residential and commercial usersof all sizes.”

GE MicroGen is a subsidiary of GE Power Systems, a leadingsuppliers of power generation technology, energy services andenergy management systems. In February GE MicroGen and Plug Power,a leading developer of proton exchange membrane (PEM) fuel cells,formed a joint venture to distribute, install and service PlugPower-manufactured stationary fuel cell systems worldwide. Theventure with Plug Power is the latest in a series of actions by GEPower Systems to broaden its participation in the small powergeneration market.

Joe Fisher, Houston

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