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Conn. Fuel Cell Industry Struggles For Foothold

HARTFORD, Conn. (AP) - As oil prices rise with turmoil in the Middle East, the fledgling fuel cell industry is hoping for a boost from a renewed push for alternative sources of energy.

Connecticut has two of the largest companies - UTC Power in Windsor and Fuel Cell Energy Inc. in Danbury - and the state has spent about $1.4 million over the past five years to promote the technology, which produces electricity through a chemical reaction involving hydrogen and oxygen.

But consumers facing gas prices climbing toward $4 a gallon won't get relief from fuel cells anytime soon. Industry leaders say the technology has great potential, but so far the market has not developed enough for it to compete with other alternative energy sources such as solar and wind power.

"It's not a cost-effective solution," said Greg Hayes, the chief financial officer of United Technologies Corp.

The Hartford conglomerate has invested nearly $1 billion in fuel cells over 20 years and has owned UTC Power for nearly half a century, starting with fuel cell production for NASA's Apollo project. But Hayes said he's more impressed with a wind turbine manufacturer the company bought last year because wind power is a $60-billion-a-year global business, compared with less than $1 billion for fuel cells.

Fuel cells produce electricity in a chemical reaction, converting hydrogen and oxygen and leaving a nonpolluting byproduct of water. Fuel cells are used for buses and recreational vehicles, heating and cooling systems for buildings and backup power for telecommunications such as cell phone towers.

The technology's backers tout that fuel cells do not produce pollution or noise.

Connecticut is a dominant player in an industry that does not have much of a foothold in other states beyond California.

Joel Rinebold, director of energy initiatives at the Connecticut Center for Advanced Technology, a nonprofit organization helping boost competitiveness, said fuel cell businesses in the state employ more than 1,100 workers. He said that grows to 2,500 when counting jobs making components, compressors and other equipment.

"I would characterize growth as slow but steady," he said.

Lisa Jerram, a senior analyst at Pike Research, a market research company, said rapidly rising oil prices "might just accelerate something that's been happening" in fuel cell development. She said investors are taking more interest in fuel cells lately as the industry sorts itself out with buyouts and some companies exit the business.

Other analysts said industries such as wind power are more successful simply because they have operated commercially longer than fuel cells.

Chip Bottone, chief executive of Fuel Cell Energy, said wind and solar power are easier for people to understand, and the business is hurt by the complicated science behind the product. Still, he said the market potential in the next five years could be tens of billions of dollars.

Alex Morris, an analyst at Raymond James, isn't as bullish. He said the price of coal and natural gas, which are commonly used for heating in the United States, is not rising as rapidly as oil, keeping a lid on potential interest in fuel cells as an alternative.

For now, broad-based use still eludes the technology.

Kerry-Ann Adamson, research director at Pike Research, said applications of the technology have not expanded much beyond video games and military uses. But she is optimistic that will change.

"At 10 years, it's not going to be tiny," Adamson said.

(Copyright 2011 by The Associated Press. All Rights Reserved.)

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