The true Y2K threat this year had very little to do with computers and everything to do with the price of oil. In March the price for a barrel of crude -- $32 -- was three times higher than December 1998. The price of diesel oil doubled over the previous year. For manufacturers dependent on trucks and rail to ship their products, this hike in energy costs is a phenomenon not seen since the 1970s. While transportation fuel costs account for only a portion of a company's total energy bill, this OPEC-generated event hammers home a point that bears repeating: In the coming decades, companies must begin to insulate themselves from outside forces that dramatically impact their energy costs. Because most firms in the U.S. and elsewhere purchase electricity generated from coal and not fuel oil, their costs have not skyrocketed. Still, the threat of price hikes over the long term, combined with other forces such as deregulation and new alternative power technologies, is prompting manufacturers to rethink their energy strategies. Deregulation already allows some companies to shop for cheaper and cleaner energy. In California, for example, all of Toyota Motor Corp.'s production facilities get 100% of their electricity from renewable energy sources. In addition, advances in fuel cells, wind turbines, photovoltaics, and even biomass systems soon will enable manufacturers such as Toyota to become less grid-dependent and less prone to the swings in energy prices that oil-producing countries control. Fuel cells' potential Because grid power can be unreliable during periods of high demand, primarily during the hot summer months, fuel cells have become an accepted source for uninterrupted energy. Viewed as the "electric motor of the 21st century" by Joseph J. Romm, author of Cool Companies (1999, Island Press), fuel cells can be a clean, quiet, and reliable power source. The investment community recognizes their potential. Shares of Latham, N.Y.-based Plug Power Inc., which is developing fuel cells to generate electricity for residential applications, rose from $21 in October 1999 to $118 in mid-March. Shares in Ballard Power Systems Inc., which is a leader in developing fuel cells for automobiles, rose from $25 in November 1999 to $89 in mid-March. Fuel cells are similar to a battery and use an electrochemical process combining fuel and air to directly convert chemical energy into electricity. The chemical energy normally comes from hydrogen contained in natural gas. The hydrogen also can come from sources such as propane, methanol, or ethanol. Publicized most for their potential as an energy source for automobiles, fuel cells also are being developed to help power manufacturing plants and to provide electricity to utility companies. Onsi Corp., South Windsor, Conn., supplies fuel cells for commercial use. The company manufactures the fuel cells developed by International Fuel Cells LLC, its sister company that also is based in South Windsor. Both Onsi and IFC are subsidiaries of Hartford, Conn.-based United Technologies Corp. John Trocciola, marketing manager for Onsi, says fuel cell power is most appropriate for firms that use microprocessor technology, which requires an uninterrupted source of power. "Motors can tolerate interruptions in power," he says. "Computer-based [systems] can't." Trocciola, whose firm currently produces a 200-kw fuel cell that has been installed at more than 160 locations around the world, says fuel-cell power initially costs more than grid power. The cost of producing electricity from fuel cells currently averages $3,000 to $4,000 per kw, compared with about $1,000 for gas-fired combustion turbines. Costs are expected to drop as the technology attracts more investment and as more cells are produced. If one considers the potential downtime on a production line caused by a power outage, however, fuel cells could pay for themselves very quickly. At a Mercedes-Benz plant in Tuscaloosa, Ala., four companies are teaming up to build and install a fuel-cell powerplant. Expected to cost more than $2 million, the 250-kw demonstration project should be operational by the end of the year. Project participants include Southern Co., Atlanta; Alabama Municipal Electric Authority, Montgomery, Ala.; FuelCell Energy Inc., Danbury, Conn.; and Mercedes-Benz U.S. International Inc., Tuscaloosa. The powerplant will utilize FuelCell Energy's direct fuel-cell technology and convert natural gas to AC electricity at an efficiency of about 50%. The plant will feed the Mercedes-Benz production facility power-distribution system. In addition, the entire project will be skid-mounted, allowing it to be transported to different locations for additional demonstrations. The plant will provide only about 1% of the facility's power needs. Kerry Bowers, manager of the customer technology group for Southern Co., says his company's primary interest in the demonstration is to see how the plant will perform in a customer setting. For a utility company like Southern, fuel cells could challenge their domination of the electricity market. At the same time, fuel cells also could provide a new means to generate power for customers. For Mercedes-Benz the project will provide an opportunity to not only test the efficiency of the powerplant, but also to analyze how best to use the heat byproduct that fuel cells generate. With deregulation of the U.S. electricity market opening up competition and creating opportunities to buy "green" power, the potential for fuel-cell power is intriguing. Distributed generation of power is an industry trend. Utility companies may offer a full array of electricity portfolio choices that include power not only from fuel cells but also from other alternative sources. The ideal, says Robert G. Hockaday, president, Energy Related Devices Inc., Los Alamos, N.Mex., would be to have decentralized power. "Utility companies could start turning off the high-maintenance parts of the grid," he says. "What it all boils down to is economics." Environmental benefits of fuel cells are clear. Compared with electricity generated from combustion-based processes in the U.S., a fuel-cell plant such as Onsi's 200-kw model on average can save more than 40,000 pounds of air pollution and 2 million pounds of potential greenhouse gases during each year of operation. Powered by wind Author Romm, who is executive director of the Washington-based Center for Energy and Climate Solutions, says wind power will be the hot renewable energy of the coming decade because of its affordability. Ironically, windmills powered machines to grind, pump, and saw in the 18th century before steam engines were used. According to the American Wind Energy Assn., Washington, the cost of electricity from utility-scale wind systems has dropped by more than 80% over the last 20 years. In 1981, the cost per kw-hr was 38 cents; now it is just 4 cents. While the number of companies actually generating their own power with wind turbines is small, it has become a more feasible option. Atlanta-based Interface Inc., a manufacturer of carpeting and other flooring products, plans to have a windmill up and running at its Belleville, Ont., facility by the middle of 2001. Rahumathulla Marikkar, director of technology and environment at the 100,000-sq-ft plant, says the windmill will produce 650 kw of power and will cover about 70% of the plant's power needs. Ventura, Calif.-based Patagonia Inc. has decided to make wind energy its only source of electricity. The outdoor clothing company contracted with Enron Energy Services, a subsidiary of Houston-based Enron Corp., to meet its power needs. A 16-Mw wind power facility was built in Palm Springs, Calif., by Enron Wind Corp., also a subsidiary of Enron Corp. Deregulation of California's electricity market facilitated Patagonia's decision to adopt wind power. Solar as a supplement Photovoltaic cells that convert sunlight directly into electricity have dropped in price by a factor of 10 since 1980. Still, the cost of generating electricity using solar power runs approximately 11 cents per kw-hr compared to 6 cents to 8 cents per kw-hr for a modern combustion turbine. Not yet practical for large-scale power needs, solar cells can be an effective supplementary source of electricity. A leader in implementing alternative energy technologies, Interface Inc. is using solar power to generate electricity at several of its plants. In City of Industry, Calif., Interface last year dedicated the largest industrial, majority privately funded, solar installation in the U.S. at one of its Bentley Mills of California plants. The solar array, located adjacent to the plant, is generating 127 kw of electricity, covering 6% of the plant's peak power demand. The solar panels collect energy from the sun during the daylight hours. An inverter converts that energy from DC to AC and controls the flow of power between the plant and the panels. The energy is fed immediately into the plant's electricity grid, which powers 29 industrial carpet tufting machines and a host of support equipment that works 24 hours a day manufacturing broadloom carpet. "It's a stake in the ground; a place where we can begin important research and development on the potential of solar energy to power our industrial operations worldwide," said Interface chairman and CEO Ray C. Anderson at the dedication ceremony. Jim Hartzfeld, a senior vice president with Interface Research Corp., Kennesaw, Ga., says the solar installations will help make the technology feasible for Interface before the company's competitors. "It's also a marketing opportunity," he says. "It's one of the biggest, most tangible symbols internally of our company walking our talk." In December of last year, Netherlands-based Van Melle NV, a global producer of confectionery products, installed a large solar array at its manufacturing facility in Erlanger, Ky. The system consists of 714 modules manufactured by Siemens Solar Industries, Camarillo, Calif., and generates 44 kw of electricity at peak hours. The generated power is fed into the system serving the manufacturing facility and office. Plans include a wind turbine to be completed this year. Kevin Mackamul, manager of systems engineering for Siemens, says Van Melle wanted to incorporate a roof-top solar system on its warehouse addition. Originally designed for up to 100 kw of power, the system's performance can be monitored by the public in the plant's lobby area. "We expect to see more of this in the future," says Mackamul. "Van Melle is a real pioneer. It is demonstrating its concern for the environment." Energy from waste Manufacturers are realizing some significant savings by converting waste from production processes into fuel. St. Louis-based Anheuser-Busch Cos. Inc., for example, is using low-cost biomass waste streams to generate power. Bacteria is used to treat wastewater from brewing operations; a byproduct of the process is methane, which then is used to help provide up to 15% of the brewer's fuel needs. In another example, Brisbane, Australia-based energy company Stanwell Corp. announced in March that it would start building a powerplant fueled by waste sugar fiber and wood waste. The cogeneration plant, to be built jointly with the Heck Group at its Rocky Point, Australia, sugar mill, will produce power for homes, as well as steam and electricity for nearby industrial users. In addition to the economic reasons for exploring energy options, firms have found environmental ones as well. Concerns over global warming and efforts to manufacture in a sustainable fashion are helping to push the transition away from grid power.