Are Electric Utilities Obsolete
Wayne A. English
With the advent of worldwide terrorism, oil independence is a matter of domestic security. A side effect may be the end of electric utilities as we know them. For the United States and other oil-dependent economies to migrate to hydrogen-fueled automobiles will require wide-scale hydrogen production and distribution capability. That is so obvious that it almost sounds silly, yet it is that very production and distribution capability that may have far-reaching effects on utilities and their customers. Hydrogen technologies can power a cell phone, automobile, truck, railroad locomotive, house, commercial building, or factory. Further, unlike current electrical systems, hydrogen need not be used in real time. This means that hydrogen can be produced and accumulated for later use.
Hydrogen technologies will provide oil independence for our vehicles in the next twenty or thirty years. The U.S. government is facilitating the transition to hydrogen through such programs as the 21st Century Truck Partnership, the FreedomCAR (Cooperative Automotive Research) and Fuel Partnership, and others programs under the Department of Defense and the Department of Energy. Many auto makers are currently operating experimental fuel cell-powered cars. Also, existing internal combustion engines can be fueled by hydrogen with an increase in efficiency of roughly 25% over gasoline and a reduction of tailpipe emissions.
As we migrate to hydrogen, these vehicles and the hydrogen supply will support each other hand in glove, creating each other's market. The production and distribution capability of hydrogen on a massive scale will fuel a national distributed generation electrical system, in which electricity consumers, who are generating their own electricity using hydrogen, send their surplus electrical power back into the power grid.
Fuel cells and microturbines are capable of providing electrical power to far more than cars alone. In fact, anything that is now powered by electricity can be powered by hydrogen-electric technology. Power is power. Among the projects now under way include the U.S. Defense Department's installation of a one-megawatt (1341 horsepower) fuel cell into a 102 metric ton railroad locomotive. Caterpillar and FuelCell Energy are developing ultra-low emission electric generating products for industrial and commercial use. And Toshiba is developing a fuel cell to power laptop computers. Hydrogen-electric technology and the era of self-powered machines are dawning.
Today's centralized electricity generation-transmission-distribution system was designed by Edison in the nineteenth century and is antiquated. There is no better demonstration of this than the blackout of August 2003 that plunged parts of the northeastern United States and Canada into darkness. The experts agree that one of the contributing factors was the age of the system. The energy industry has called for spending as much as $450 billion on infrastructure improvements. The money will be spent--that is not an issue. The question is whether we spend it on an antiquated nineteenth-century system or on twenty-first-century hydrogen technologies.
Fuel cells for residential markets will generate electricity at a cost competitive with power purchased from the electric grid in regions with high electric rates. The high cost of electricity in the northeast will likely make fuel cells a cost-competitive option for on-site power production. This, of course, will depend on the retail cost of hydrogen. But there, too, is danger, for to charge too high a price for hydrogen will only drive people and corporations to produce their own. Therefore, it is likely that fuel cells will be a widely available option for commercial applications in the next several years.
We think of electricity as a single source entity. Almost all customers have a single connection to the utility. Interrupt that connection and the customer is out of power. In the world of hydrogen, that will change. Consider a small office building of three floors, each floor 100kW of electric power for a total of 300kW. You would think that a single 300kW fuel cell is the way to go, or perhaps one 100kW fuel cell on each floor, but let's not do that. Rather, let's install a 150kW fuel cell on each floor, for a total capacity of 450kW. Why? What this provides is a system in which any one of our three fuel cells can be out of service, because of trouble or maintenance, and the entire energy needs of the building can still be met. No lost productivity. No downtime. No phone calls to the local utility asking when the power will be restored. Business and industry will be very interested in a system that offers uninterrupted power. And when you throw in protection from thunderstorms, downed trees, and the myriad other causes of outages, business and industry will be very interested.
Extend this situation to a factory where the machines are powered by a single-redundancy system, as in our office building example. We know from industrial customers that even a short interruption of several seconds can play havoc with computer-controlled machines, resulting in the loss of thousands of hard, bottom-line dollars. In today's high-technology manufacturing world, electrical outages are not taken lightly. In fact, electric utilities are considering offering Probabilistic Risk Assessment (PRA) studies in an effort to predict when outages are likely to occur. Offering PRA and other services will help electric utilities compete with hydrogen technologies as fuel cells threaten to take their customers. It is likely that commercial and industrial users will be the first to embrace hydrogen. To predict penetration of the residential market is problematic because of differences in what people are willing to spend for electric generation at home. Fuel cells will most likely get their start in this market in new home construction, just as wall-to-wall carpeting did: by rolling the cost into the purchase price of the home and amortizing it over the life of the mortgage. When this begins, electric utilities will be faced with the loss of their residential customers.
All is not bleak for utilities. They can and will use hydrogen technology for producing additional capacity in substations and other locations close to customer needs. And customers may not want to provide their own emergency and maintenance services and so will farm this service out to utilities or private contractors. Either way, this will be a game in which electric utilities can compete. This competition will not be against other utilities but against new technology. The ability for any utility to retain customers will be up for grabs. Until now, if one company lost a customer, another utility picked that customer up. That may no longer be the case. New world, new rules.
Where the hydrogen will come from to power a country the size of the United States is a valid question. There are two sources for hydrogen: