When does the fuel cell come?

Friedrich-Schiller-University Jena, Department of Political Science
9th semester, Summer-term 2005
HS Managing Innovation

When does the fuel cell come?

by: Oliver Heiden

Table of contents

1. Introduction  3

2. Methodology  4

3. The fuel cell technology and its applications  5

4. Motivations of radical change  6

4.1 The potentials of the fuel cell technology, technical push and market pull  8

5. The innovation process 10

5.1 The stage of the innovation process  11
5.2 Remaining challenges in the technological development  12
5.3 The case of the fuel and its environmental and technical impacts  14
5.4 Progress made by the automotive business  17

6. Conclusion 18

7. References  20

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 fuelcell 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.

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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)