In the electric power industry, where only proven innovations are implemented, the adoption of a new technology takes 20 to 30 years. That's beyond the career horizon of most executives in the industry. On the other hand, cost-justifying the status quo is simple, when the calculations assume consistent costs and policies.

The information technology industry proved that widespread adoption drives costs down and R&D up, which changes the economics of an industry. Just as Dell server farms are cost-competitive with IBM mainframes, the scales can tilt to favor even the most costly of renewable sources of power, e.g., photovoltaic.

Public policy, particularly regarding emissions and disposal, are an unknown cost factor for coal and gas. Policy trends will drive up the cost of coal power. Combined with the rising cost of natural gas, these trends will bring alternative technologies to the fore.

Alternatives

One of the alternatives is nuclear power. Like other centralized generation models, nuclear has high up-front costs. In addition, it comes with incontrovertible public and security risks. The shifting of these risks onto the builder, in the form of enormous financial gambles, has stopped some nuclear projects in their tracks.

Geothermal and hydropower plants are very cost-competitive today, and naturally clean. Unfortunately, natural limitations to their siting and scalability put a ceiling on the role they can play.

More realistic is the prospect that large wind power facilities could become an economic alternative to building new coal- or gas-fired generating plants. Wind power today costs about half again as much as power from fossil fuels, but the cost would come down if we could find solutions to a couple of inherent problems. First, wind isn't steady, and on average about three fourths of its generating capacity goes unused. Second, the best wind sites are sometimes far from the point of use, and there is some loss of power during transmission.

Both of these problems with wind could be overcome with some ingenuity. One idea combines hydrogen fuel cells with renewable sources as a way to store power. More on that in a minute.

Today's hydrogen fuel cells suffer from intrinsic inefficiency. It takes energy to reform hydrogen from another substance, typically natural gas. And in the end the natural gas would have produced more electricity than the resulting hydrogen. The total loss of energy is around half. Researchers are working on new fuel cell technologies that promise greater efficiencies.

Combining alternatives

Electricity is the ultimate perishable commodity. Energy storage is a concept for smoothing out the ups and downs of intermittent sources of power, such as wind and solar. Flywheels, batteries, reservoirs, pressurized air and other ingenious ideas have emerged.

One way to store energy is to convert it to hydrogen. Renewable sources could be used to electrolyze hydrogen on location. The hydrogen can be transported without loss, stored, then converted to energy and sold when energy value is at its peak.

Most talk of hydrogen fuel cells has been in the context of automobile design. The economics depend heavily on a hydrogen infrastructure and advancements in fuel cell technologies. Automotive applications are clearly the best potential driver of hydrogen adoption, so we can expect the infrastructure and advancements to happen. Hydrogen as storage capitalizes on this eventuality.

Distributed generation

A similar model could work when using alternative sources for distributed generation. Think of each business having its own power plant. Unfortunately, there aren't many office buildings or factories where 200-foot wind turbines can be installed by the dozens.

However, businesses could use solar power. Even a shopping mall or factory can install solar panels. If they use that energy to produce hydrogen, it can be used to run loads in demand response situations, sold at peak market premiums to the local utility, or used to fuel vehicles.

It's a nice thought, but the economic reality of photovoltaic power is that the costs must come down significantly through technological advancements and mass production. We're more likely to see a hydrogen storage scenario that uses grid power, first. And for now, that means using increasingly costly coal and natural gas.