When does the fuel cell come?

Hausarbeit (Hauptseminar) , 2005 , 22 Seiten , Note: 2,0

BWL - Unternehmensführung, Management, Organisation

“The fuel cell is a higher civilisation performance than the steam engine and will soon banish the Siemens generator into the museum.” predicted Wilhelm Ostwald, Nobel price winner for chemistry at the second meeting of the German Electro-technical Society in 1884 in Leipzig. But during more then hundred years passed by in the meantime, the discovery did not turn out to be the ‘engine of the future’. This fact raises at least two separate questions in mind. Firstly, why fuel cells did not enter yet the market, and secondly, when do they really supposed to do so? In other terms, when does this hundred years old invention finally become an innovation?

Table of contents

1. Introduction

2. Methodology

3. The fuel cell technology and its applications

4. Motivations of radical change
4.1. The potentials of the fuel cell technology, technical push and market pull

5. The innovation process
5.1. The stage of the innovation process
5.2. Remaining challenges in the technological development
5.3. The case of the fuel and its environmental and technical impacts
5.4. Progress made by the automotive business

6. Conclusion

7. References

1. Introduction

“The fuel cell is a higher civilisation performance than the steam engine and will soon banish the Siemens generator into the museum.” predicted Wilhelm Ostwald, Nobel price winner for chemistry at the second meeting of the German Electro-technical Society in 1884 in Leipzig.^[1] But during more then hundred years passed by in the meantime, the discovery did not turn out to be the ‘engine of the future’. This fact raises at least two separate questions in mind. Firstly, why fuel cells did not enter yet the market, and secondly, when do they really supposed to do so? In other terms, when does this hundred years old invention finally become an innovation?

The questions are of particular interest due to two facts. First of all, because of the wide range of its applications, the fuel cell has a high potential to bring a complete change over our highly energy dependent civilisation. Secondly, the fuel cell has experienced particularly in the last decade an enormous development towards commercialisation, following an unusual long incubation period. Among others, an indicator for development was that four ranges of application of the fuel cell technology have taken clear shape; that is, for portable electronics, for vehicles, for residential power generators and for electric generating power plants.^[2] Although all of these applications can have radical influences on their respective market, this paper will solely deal with the replacement of internal combustion engines by fuel cells to be carried out by the automotive industry. This is reasoned by three specifics allowing us to focus on the developments in the automotive business. Firstly, this innovation has the objective to serve the market with the biggest turnover among these four scopes of appliance. Secondly, the automotive industry faces almost all difficulties which arise by the other applications as well. Thirdly, there are substantial dilemmas that appear exclusively in the automotive business but not with the others.^[3]

Consequently, the purpose of this paper is to find an answer to the above questions in the automotive business. Since the questions are posed generally, in order to response the questions, the analysis will focus on industrial level. This is based on the consideration, that although the innovation is to be carried out by individual companies or alliances, it does not matter which automaker will first succeed. As a result, the paper does not lay claim to describe or propose an adequate managing strategy on firm-level designed for succeeding in this competition but rather analyse the technical change in a well established industry.

However, according to press releases and R&D-spending of the big automotive firms, such as General Motors, DaimlerChrysler and Ford Motors as well as on the basis of the number of patents-application in the field of fuel cell development it becomes clear that the car industry considers the fuel cell technology as a marketable concept.^[4] So we can work on the crucial assumption that at least one firm will choose the right strategy in commercialising the fuel-cell car as soon as possible.

2. Methodology

Below, the questions of the paper should be answered by applying in practice the cyclical model of technological changes and the theory of the dominant design.^[5] The cyclical model of technical changes should serve hereby as framework for the analysis of the innovation. The applied theory presumes that

“technological cycles are composed of technological discontinuities [also called variation] that trigger periods of technological and competitive ferment. During eras of ferment, rival technologies compete with each other and with the existing technological regime [that is, the dominant design]. These turbulent innovation periods close with the emergence of (…) [a new] industry standard or dominant design. (…) The emergence of a dominant design ushers in a period of incremental (…) change, a period that is broken at some point by the next substitute product.”^[6]

By trying to respond to the questions of the paper we will put emphasis on two different stages of the theory according to the questions. These will be the stage of the emergence of the technological discontinuity and the stage of ferment.

In the first part of the paper, devoted to the question why fuel cell cars did not emerged already on the market, the motivation of the technical discontinuity will be examined. It will be explained why the era of incremental change of the existing technology may be jeopardised today. Therefore, the driving forces for a replacement of the old technology by the new one will be discussed on the basis of the technological push and market pull concept. Here, it should also be explained why it took so much time until automakers seriously dealt with fuel cell car development.

Subsequently, to facilitate an assessment considering when fuel cell powered cars will be on the market, in the second part, we will focus on the technical discontinuity itself and examining its progress towards the era of fermentation when it will be commercialised and will compete with the old technology on the market. Therefore we will identify the current stage of the innovation process and pointing out main possible obstacles which may occur during the remaining steps towards commercialisation. These challenges have to be analysed for possible solutions. Prior to examining the advantages and challenges of fuel cell technology I will briefly describe the invention and its scopes of application.

3. The fuel cell technology and its applications

The first fuel cell was developed by William Grove in 1839 when he experimented with reversing the electrolysis process. Specifically he concentrated on producing electricity through an electro-chemical reaction between hydrogen and oxygen with the by-product water. The concept is quite simple. In the fuel cell, hydrogen is supplied to the anode where a catalyst divides it to form hydrogen ions (protons) and electrons. The protons are allowed to cross the cell through an electrolyte membrane to the cathode, while the membrane blocks the path for the electrons, which are diverted as electrical power through an external circuit. Oxygen is supplied to the cathode, where the hydrogen ions emerging form the electrolyte absorb the returning electrons and react with the oxygen. The difference between the respective energy levels at the electrodes is the voltage.^[7]

The first practical application of fuel cells occurred in the 1960’s, when they were used to provide electricity for NASA’s Gemini spacecraft. As already mentioned, today we distinguish between four scopes of possible future commercial application of fuel cells. The smallest stacks with the lowest wattage, called micro fuel cells, are supposed to replace batteries in portable electronics ranging from cell phones to laptop computers and other kinds of power demanding handheld devices. They were supposed to run up to five times as long as traditional batteries at the same size. In the order of performance, micro fuel cells are followed by fuel cell applications for vehicles. Among others, automobiles belong to this scope, which is the topic of this paper. Furthermore, the application that will probably first enter the market, is residential heat and power. There are several projects in Europe, the United States, Canada and Japan running home fuel cell units in order to test the fuel cells on the market. Due to the high prices, these projects have still to be greatly subsidised. Finally fuel cells can be even used for generating power at industrial level, namely by so called fuel cell power plants.^[8]

4. Motivations of radical change

Fuel cell technology would without doubt cause a disruptive change in the automotive industry. Today the dominant design for cars is still the internal combustion engine. But according common understanding, this technology, which is over a century and a half old, is reaching its limits of improvement by incremental change.^[9] In addition, the declining number of producing firms in the automotive industry indicates also a mature core technology.^[10] In other words, the technology has arrived at the top of its S-curve, further engineering efforts do not cause significant improvement in performance.^[11] The theory of the dominant design predicts that it is time for the next generation of technology, for a so called ‘variation’. Operate fuel cell technology in cars should be considered as a possibility of a disruptive change not least due to its potentials. Those potentials of the fuel cell technology as outlined below are enormous and can explain very well why automakers invest right today in this technology.

However, just concerning their property, disruptive technologies are not very welcome by businesses using a well-established technology. As Adamson et al. mention, those technologies “require radical, discontinuous change from current technologies and, as such, are less likely to be pursued by companies which are market leaders in the current technology.”^[12] One can say that this counts in particular for the automotive business that – with regard to its propulsion system – may use one of “the most entrenched technologies in existence tooled and retooled, […] manufactured in enormous quantities, and supported by a ubiquitous refuelling and repair infrastructure”.^[13] What is more, the automakers are typical ‘scale-intensive’ firms, which develop their products traditionally on a basis of incremental innovations and where “given the potential economic advantages of increased scale, combined with the complexity of products [and] productions systems, the risks of failure associated with radical (…) change are potentially very costly”.^[14] Therefore, it can be questioned whether the automotive industry is really in favour to move towards fuel cell commercialisation which will destroy core competences on car building or is rather afraid of venturing this radical transformation. In this context, e.g. the Hybrid technology, launched successfully by Toyota, can be identified as an incremental step towards technological change. Stephen Zimmer, director of advanced technology portfolio management at DaimlerChrysler Corp. expressed 2002 along these lines his believes that the company “will continue to work on hybrid-type solutions, not as the best solution, but as a transition strategy […] to move toward fuel cell vehicles”.^[15] So the question arises what the motivations are to move even though forward, toward commercialisation of fuel cell powered cars.

[...]

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^[1] Tillmetz (2005)

^[2] Further below we will discuss also other indicators of recent development.

^[3] Especially the last two statements apply only in economies where the power market has been liberalised.

^[4] cf. General Motors (2005a), DaimlerChrysler (2005) and Pilkington (2004:761-771)

^[5] cf. Tushman/Anderson (2004:4)

^[6] Tushman/Anderson (2004:4)

^[7] cf. Johnston et al. (2005:572), Pilkinton (2004:762)

^[8] For portable electronics see Voss (2001), Jonietz (2004) and Gruenberg (2005); for residential power generation Lok (2004), Markard (2004) and Krewitt (2004) and for power plants Freedman (2002).

^[9] cf. Fairley (2000:54), Freedman (2002:41)

^[10] Betz assumes that “the number of producing firms in an industry rises and the declines as the technology in an industry matures in an industrial life cycle. The number of firms peaks around the time of design standardisation in the industry and declines over time to, finally, just a few firm”. cf. Betz, (2003:166) This is exactly the pattern we see with regard to the world wide automotive industry.

^[11] cf. the concept of technological trajectories by Edosomwan (1989:14)

^[12] Adamson et al. (2000)

^[13] Freedman (2002:41)

^[14] Tidd et al. (2001:113-114)

^[15] Leo (2002)

• Hochschule: Friedrich-Schiller-Universität Jena (Department of Political Science)
• Veranstaltung: Managing Innovation
• Note: 2,0
• Autor: Dipl.-Volkswirt (BA) Oliver Heiden (Autor:in)
• Erscheinungsjahr: 2005
• Seiten: 22
• Katalognummer: V62930
• ISBN (eBook): 9783638560788
• ISBN (Buch): 9783638793070
• Sprache: Englisch
• Schlagworte: When, Managing, Innovation