The promise of a Fuel Cell Revolution has come and gone. But don’t discount the technology yet: While companies have struggled with cost and reliability issues over the years, there are still plenty of niche opportunities for fuel cells in today’s market.

Five years ago, the hype around fuel cells was palpable. Then a number of investors got burned when promises about performance and cost were not realized. That put a damper on the enthusiasm and brought the industry back to reality.

“We are definitely in a post-bubble fuel cell world,” says Sam Jaffe, a research manager with IDC Energy Insights.

In this post-bubble world, journalists and investors are far more cautious when evaluating company claims. For example, when Bloom Energy unveiled its 100-kW solid oxide fuel cell for stationary power applications on the popular news program 60 Minutes earlier this year, a chorus of analysts expressed skepticism about the technology. While Bloom was able to capture some high-profile investors and install fuel cells for Adobe, Google and Starbucks, IDC’s Jaffe says that the company hasn’t yet proven the reliability of its device (pictured below).

“There’s no way to overemphasize [reliability] too much,” he says. “That’s still one of the biggest challenges.”

In the electricity market, companies need to be able to prove that a technology works for 10, 20 or 30 years. Long-term durability hasn’t been proven in the fuel cell space yet.

The other issue is cost. The Bloom device (which can run on biogas, but will most likely run on natural gas, not really making it “renewable”) has an installed cost of about $7-8 per watt. That’s about what it costs to install a small residential solar PV system. On the commercial/industrial scale, solar PV is starting to dip below $3 per watt.

However, given that a fuel cell operates far more consistently than solar PV, the cost of electricity starts looking better. Bloom recently announced that it will install 12 100-kW devices on Adobe’s headquarters and deliver electricity for about 9 cents a kWh, beating the 13 cents Adobe pays now. Whether or not Bloom can provide power for that price will depend on the reliability of the device.

Jaffe thinks fuel cells will continue to gain traction, especially in the stationary power space where companies like Ballard Power Systems, FuelCell Energy and United Technologies have been deploying devices for some time. He points to extremely important data centers where companies will pay a premium for back-up power, or in natural gas networks where a fuel cell can provide the electricity and heat needed to expand the gas, thus making the distribution system more efficient.

“There are real world applications…they are a product that is certainly viable for certain applications,” says Jaffe.

One of the more interesting – but still commercially unproven – fuel cell niches emerging is in wastewater treatment. So-called microbial fuel cells (MFCs), which utilize electrothermically-active bacteria grown on an electrode, are able to directly produce electricity from biomass in residential and industrial wastewater streams. These special bacteria (pictured below) have evolved a way to force electrons from their cells, enabling them to transfer those electrons to a metal surface when they break down the waste.

Paul O’Callaghan, an analyst with the consultancy O2 Environmental and creater of the BlueTech Tracker, says that water services can represent 50% of a major city’s energy needs. If MFCs can be installed at water-intensive manufacturing sites or treatment facilities, the energy potential is cumulatively very large.

“There’s 10 times more energy in wastewater than we actually put into treating it,” O’Callaghan says. “So there’s something wrong with the picture.”

University research teams and start-up companies are racing into the sector, installing pilot projects at breweries and paper mills where there’s higher quality biomass in the water. The current leader in the space is an Israeli company called Emefcy. The company recently raised $5 million in venture capital and has signed agreements to install a demonstration-scale device at a few facilities in the next year. Emefcy claims it can generate electricity for 10 cents a kWh.

Another Australian company, Bilexys, is taking the MFC concept a step further. Led by R&D Manager Rene Rozendal, Bilexys is working on a microbial electrolysis cell (MEC) that produces hydrogen gas rather than electricity. The MEC concept was invented and patented by Rozendal, who is also a research fellow at the University of Queensland’s Advanced Water Management Center. Other researchers around the world are working on similar concepts.

By assisting the bacteria and providing a bit of extra voltage between the anode and cathode of the fuel cell, a puff of hydrogen gas is created. Bylexys is targeting industrial customers who might need hydrogen or other high-value products like hydrogen peroxide or caustic soda. Because hydrogen is 5 times more valuable than electricity, Rozendal says the company is “stepping up the economic game.”

“Electricity is a low-value product. If you have an expensive system creating a low-value product, it doesn’t make sense,” says Rozendal (pictured below in the Bilexys lab).

The MEC could be a great way to more efficiently produce hydrogen. In conventional electrolysis, you need two volts to split the hydrogen molecule from water. In microbial electrolysis, you only need a half a volt. So although it may not be entirely renewable, it’s potentially a far cleaner way to produce hydrogen.

Bilexys has installed a 265-gallon pilot project at two breweries so far. If it can secure more capital, the company plans to install a larger demonstration project in the next year.

Unlike conventional fuel cells, MFCs and MECs have very little experience in the field. Up until 2008, the technologies had only been worked on in labs. If the experience of conventional fuel companies is any indication, the timeline to commercial adoption could be a long one.

But considering these technologies are geared toward a very specific application in a sector that is wrought with inefficiencies (ten times more energy in wastewater than is used to treat it), the value proposition is definitely there.

“I think there’s a very strong case,” says Rozendal.

For a deeper look at how microbial fuel cells work, take a listen to this week’s podcast linked above. We’ll also hear more from Sam Jaffe about lessons learned in the conventional fuel cell sector.