Navigant Research Blog

A Better Way to Extract Shale Oil

— November 5, 2014

Last month the Colorado Fuel Cell Center (CFCC) at the Colorado School of Mines hosted the first public demonstration of IEP Technology’s Geothermic Fuel Cell (GFC).  This innovative technology uses the waste heat produced by fuel cells to convert the kerogen in oil shale into unconventional hydrocarbons onsite.

Using standard fuel cell technology, the GFC flips the application on its head by taking a heat-first, power-second approach.  The system uses solid-oxide fuel cells, manufactured by Delphi Automotive, in tubular modules that can be linked end-to-end to create a long string of fuel cells encased in a steel cylinder.  The long-term plan is to insert vertical stacks that are up to 1,000 feet long into oil shale formations, spaced 10 to 15 feet apart in a grid pattern.  In this configuration, the fuel cells can generate temperatures of up to 1,200°F, which will be used to heat the formation and drive pyrolysis (thermal decomposition of the oil shale).

Giving Shale Oil a Better Name

Currently, shale oil is most commonly extracted ex situ, or offsite.  The oil shale is mined and taken to an above-ground processing facility where it is crushed, heated to temperatures suitable for pyrolysis (500-1,100°F), and the unconventional hydrocarbons (shale oil and natural gas) are collected, cooled, and refined.  This process is expensive, inefficient, and extremely damaging to the environment, and it has earned shale oil extraction a bad name.

IEP’s technology, on the other hand, performs the processing in situ, or onsite, by applying heat underground and extracting the shale oil and natural gas via wells that sit among the boreholes, leaving the formation intact.  The only byproducts are electricity that can be sold back to the grid, small amounts of clean water, and CO2.  It may seem odd to think of the electricity as a byproduct, but that’s the beauty of IEP’s approach.  If a single 1,000-foot stack contains 100 to 300 of Delphi’s 1.5 kW fuel cells, you’re talking 150 kW to 450 kW of baseload power per stack over a projected 5-year lifespan, which is no small thing when you consider the potential revenue.

IEP estimates that the gross capital and operating costs of a GFC installation will be less than $30 per barrel of shale oil when the revenue from the sale of electricity and surplus gases is taken into consideration.  This would give GFCs a significant cost advantage over the competition.  More significantly, IEP’s technology allegedly has an energy return on energy invested (EROEI) of 22:1, which would be a monumental improvement on the current best-in-class EROEI for oil shale, which is closer to 5:1.  The technology seems easy enough to replicate, but IEP has patented its idea, which should give it some protection from competitors.

The Real Cost

However, a couple of questions come to mind.  First, what will the actual installed cost of the systems be?  It could take thousands of fuel cells to develop a single formation.

Second, you have to run a fuel source out to the site, which is probably fairly remote, in order to run the GFC.  You also have to run transmission lines out to the site and build a substation in order to sell power back to the grid, and the fuel cells will only be running at that site for 5 years, so it’s a temporary installation.  How many utilities would be interested in doing that?  These questions must be addressed, and we won’t know how the economics and EROEI shake out until mid-2015, when the GFC is expected to be field-tested.  But this appears to be a very promising technology.

 

Japan Doubles Down on Fuel Cell Vehicles

— July 13, 2014

Two recent announcements out of Japan have dramatically cut the price that Japanese drivers will pay for a fuel cell car.  Toyota unveiled its completed design for the fuel cell vehicle (FCV) it will put on the market in 2015.  More importantly, the company revealed the price would be around ¥7 million, or $70,000.  This is a big drop from the $100,000 price tag floated, alarmingly, a few years ago.

A day earlier, Japan’s prime minister Shinzo Abe called for subsidies of FCVs beginning next year.  A part of the government’s economic growth strategy, these incentives reflect the hydrogen energy roadmap adopted by Japan’s trade ministry.

As described in my Fuel Cell Vehicles report, I’ve long said that the two impediments to fuel cell cars taking hold in the market are cost and infrastructure.  Automakers like Honda and Daimler have already shown that the technology works, resolving early issues such as cold-start capability.  FCVs will also deliver on the key performance characteristics that make them intriguing, as compared to battery electric vehicles: range and refueling.  The Toyota FCV will have a 420-mile range and refuel in 3 minutes.

The Post-Fukushima Strategy

For longtime fuel cell technology followers, I am stating the obvious.  The potential benefits of fuel cells in transportation have been well-understood for years.  Honda, General Motors (GM), Daimler, Hyundai, and Toyota have all shown they can make cars that meet those performance targets.  Nevertheless, in the U.S. media, the perception persists that fuel cells were made obsolete by the successful introduction of plug-in electric vehicles (PEVs).  In Navigant Research’s recent white paper, The Fuel Cell and Hydrogen Industries: 10 Trends to Watch, I noted that the U.S. media would continue to tie these two technologies together – and would misunderstand the rationale for pursuing them both.  Sure enough, this article asserts that the Japanese government’s goal is to crush Tesla.

Not quite.  The Japanese government’s plan is to promote technologies and fuels that will help ensure the country never has another experience like the Fukushima disaster in 2011.  The Japanese government also wants to grow the economy by supporting domestic industries.

The Market Will Decide

To take a phrase from President Obama, Japan has taken an “all of the above” approach in pursuing these two goals.  Nissan and Toyota have done well in the PEV market.  But fuel cells offer an alternative for consumers who may find that a plug-in car doesn’t meet their driving needs.

Japan has also made a huge commitment to fuel cells that provide residential power.  The country’s residential fuel cell program has supported the deployment of over 42,000 combined heat and power (CHP) fuel cells in Japan.  Manufactured by Toshiba, Panasonic, and Eneos Celltech, these residential units are sold through gas companies like Tokyo Gas.  After Fukushima, when the plant’s backup diesel generators were rendered useless and employees scavenged car batteries to power monitoring equipment, the Japanese government set a requirement that the fuel cells be capable of starting up when the power is off.  While these fuel cells employ a different technology from automotive fuel cells, the CHP program demonstrates both Japan’s commitment to pursuing whatever technology the country believes will support its energy resiliency (utilizing domestic expertise) and its willingness to support that technology in its early market introduction.

Japan has already committed to building 100 hydrogen fueling stations in key metro areas.  The country’s energy companies are partnering in that effort.  Note that the Japanese government is also supporting the automaker deployment of 12,000 charging stations in Japan.  Again, it’s not an either/or prospect for Japan.  The announcement on the FCV subsidies will put the cars at a price point where they might have a chance in the market.  If the infrastructure is in place to make fueling reasonably convenient, then it will be up to consumers to decide whether FCVs will succeed in the market or not.  Success will be measured over many years, not in 18 months.

 

Japan Fuel Cell Project a Big Step for Bloom

— November 27, 2013

Since coming out of stealth mode in 2010, fuel cell manufacturer Bloom Energy has never been far from the headlines.  Generating more press inches than most other fuel cell companies put together, Bloom has played a careful, and strategic, game with the press and the industry.

With rumors building, again, that Bloom will go public, the timing of this week’s press release stating that Bloom Energy is entering the Japanese market is attention-grabbing.  The installation, a 200 kW solid-oxide fuel cell Bloom Box, is located at SoftBank’s M-Tower in Fukuoka, Japan.  There are no details of follow on orders or scale-up in the country, so this announcement has to be taken at face value: a single initial installation in Japan.

With an investment of over $100 million by European utility E.ON earlier this year, the European market was ticketed by some as the likely first baby step out of the United States for the company.  E.ON, however, made a strategic investment, while Softbank earlier this year formed a JV with Bloom Energy, creating a separate company Bloom Energy Japan Limited.

A Hard Nut

To date Japan has proven a notoriously hard market for non-Japanese fuel cell companies to break into, with companies such as Ballard and Ceramic Fuel Cell having tried in the past.  Alongside South Korea, Japan is still ranked as the most open to fuel cell power generation of any country in the world, and Navigant Research, in the forthcoming white paper entitled “The Fuel Cell and Hydrogen Industries: Ten Trends to Watch in 2014 and Beyond,” forecasts that as of 2014 there will be over 70,000 homes in Japan with a residential fuel cell system installed.  Although the country has been actively developing larger systems, only Fuji Electric with its 100 kW phosphoric acid fuel cell system is currently commercially available in the country.

Going forward in 2014, we can expect more small-scale installations in Japan and a number of high profile announcements from the company.  Outside of Japan and with the resignation in July of Girish Paranjpe, the company’s head of its international operations, it’s anyone’s guess where next for Bloom.  Potential markets include Germany, Russia, and South Korea, alongside India – if another JV is in the cards.

Interest in the stationary fuel cell sector is climbing high again, and companies such as Bloom Energy are at the vanguard of establishing this industry. A successful project in Japan will validate both the technology and the business model.

 

Fuel Cell Industry Needs Products, Not Education

— November 21, 2013

For years the nuclear industry has suggested that if only the consumer were better educated then the purported benefits of nuclear would then become obvious and public opposition to new reactors would evaporate.

Worryingly, this claim is now beginning to be raised within the fuel cell sector.  At a recent industry event in Brussels, the fuel cell program director of BMW claimed that the industry needs more public education on the benefits of the technology.  This claim was mirrored a number of times during the day – in essence, reflecting the blame away from an industry that in Europe is significantly underperforming onto its potential customers.  Interestingly, of the panel of high-level European bureaucrats, each espousing of the need for the industry to step up, only one of them had actually bought a fuel cell.

Buy, Play, Break, Improve

To be sure, the consumer is a real area of concern.  Not in terms of needing better education, but in terms of needing more product that is available to buy.  Intelligent Energy, which recently announced the release of the Upp portable fuel cell charger, claims that the unit will not be available in the Europe until sometime in 2014.  This was after it was shown to millions of potential adopters via a television slot on the BBC.   There is, in fact, no commercial fuel cell product widely available across the EU28.  FuelCell Energy, an import from North America, is making large strides to being available but is not there yet.  The Horizon fuel cell recharger can be ordered from their website for most countries – but not all – and there is a long way to go before any type of residential or light commercial system is broadly available.

The theory is that if customers understand the benefits of fuel cells but have nowhere to actually go and buy the product, this will create a large pent-up demand.  But, as I have written before, the product buying cycle cannot be shortcut.  By not getting the products in the hand of early adopters, the industry is pushing out its entry into the the mass market even further.  Education and product availability go hand-in-hand.  Buy, play, show, tell, and yes, break, is all part of this.  Show and tell – and shifting responsibility to the customer – is simply not enough.

 

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