Meet the Street: Fuel Cells as an Alternative to Oil

With oil prices sitting at two-year lows and rolling blackouts in California a distant memory, calls for an alternative energy supply have been subdued this year. But recent acts of terrorism on U.S. soil and conflict in Afghanistan and the Middle East have once again thrust the spotlight onto America's dependency on foreign oil.

Jerry Leitman, CEO, FuelCell Energy

Recent Meet the Streets

Lipper's Jeff Tjornehoj

Deutsche Bank Alex. Brown's Douglas D. Mitchelson

Columbia University's Bruce Greenwald

Yorkton Securities' Jacques Kavafian

The U.S. currently gets about 57% of its oil from outside the country, with Persian Gulf countries accounting for 25% of U.S. oil imports.

One company that is dedicated to reducing this dependency and improving energy efficiency in the U.S. is FuelCell Energy(FCEL Quote), which develops and manufactures electric power generators for use in schools, hospitals and other industries.

FuelCell President and CEO Jerry Leitman talked to TheStreet.com about the firm's technology and the impact recent terrorist attacks have had on the alternative energy business. Although off its recent highs as oil prices have begun to fall, FuelCell's stock is still up about 28% from where it stood Sept. 10.

TSC: First of all, could you please explain for our readers what exactly a "fuel cell" is?

Leitman: A fuel cell generates electricity similar to a battery, that is, it generates it through an electrochemical reaction. Rather than burning something that generates heat and in turn spins something, fuel cells generate electricity with no moving parts.

The difference between a fuel cell and battery is that the battery keeps its fuel on board, or inside the battery, and when it runs out you either throw the battery away or you recharge it by plugging it in the wall. In the case of a fuel cell, as long as you continue to feed it fuel, which typically for power plants is natural gas and air, it will continuously generate electricity. When you stop the fuel and air flow, it will stop.

TSC: So it's much more efficient?

Leitman: It has efficiency advantages over traditional generation with engines and turbines. It has virtually zero emissions because you're not burning anything. The excitement with fuel cells is that for the first time in history we're getting electricity from a fossil fuel, say natural gas, without burning it, and because you're not burning it, it's extremely clean.

In our case, we're focusing on only one market segment, which is stationary power generation -- that is the electricity that feeds our businesses and industry -- without looking at fuel cells for automobiles or for portable power or for individual homes. ...