Energy Sample Interview Question 3: Commercializing a New Product

“We have a new fuel cell design ready for manufacturing, but as you know fuel cells aren’t yet in widespread use.  Tell me how you would think about taking our product to market.” 

A fuel cell company employee might simply ask you a question like this conversationally, or a consulting firm might ask it of you in a more 

formalized case format.  Either way, a good answer starts with stating what you know, asking questions to gather more information, and doing a lot of active listening.   You are not going to generate a comprehensive commercialization strategy in 20 minutes, and the interviewer most likely has their own, well-thought-out answer to the question at hand – let the interviewer guide you to the specific issue that they are interested in discussing with you. 

To address this interview question, you need a fair amount of background knowledge about fuel cells.  Having done your homework for the interview, you are likely well versed in the topic.  If not, you need to gather the information by asking a series of specific questions of the interviewer: 

•  The company’s fuel cell uses a proton exchange membrane (PEM) design, considered to be the most promising and widely applicable.  The company has launched a 5 kWmodel priced at about $20,000. 

•  PEM fuel cells are generally expected to be used to power cars and provide back-up power for commercial facilities.  Like most fuel cells, they generate electricity from natural gas at a somewhat higher cost per kWh than the average U.S. retail price, so they are not considered to be greatly appealing as primary generation sources. 

•  Unlike larger types of fuel cells, PEMs operate at the relatively low temperature of 80° C, so their water byproduct is hot, but not hot enough to form steam to run a turbine in a cogeneration configuration.  As a result, their efficiency is lower and cost of energy output higher. 

•  Currently, a number of fuel cell manufacturers have products on the market, but very few backup power or primary generation installations have been completed to date, as adoption has been slow.  The automotive market has not materialized at all. 

For any question about product commercialization or technology marketing, you can use the “4 P’s” framework as a way to organize your thinking and remind you what questions to ask: 

In this case, one of the key issues for the company’s sales success with their new fuel cell product is clearly finding a large, receptive target market. Electricity is a commodity, and thus electricity generators compete on a price basis.  So, you want to outline for your interviewer the major price-related issues you wish to explore: 

1.  The high cost of electricity produced by fuel cells is a major stumbling block to their widespread adoption.  

a.  Is there a market that doesn’t mind paying higher-than-retail prices for power from fuel cells? 

b.  Is there a market in which the cost of electricity from our fuel cell is competitive with or lower than the prevailing retail price? 

2.  In the case of this PEM fuel cell, there is a significant inefficiency in wasting the thermal energy output, which further contributes to a high cost of power.  Is there a way to capture that wasted energy? 

The interviewer tells you that your first question is interesting:  there is a small market of environmentally-oriented individuals and businesses who might on principle pay higher prices for fuel cell-generated electricity. However, that market is finite and cannot provide the sales volume needed to recover all of the product’s R&D costs and sustain the company.   The more promising price-insensitive market is among commercial institutions that value having a backup power source that can fill in for an unreliable grid: hospitals, sensitive financial operations, police and government offices are some examples.   However, our company’s product is too small for most of those applications; large, stationary, high-temperature fuel cells are dominating the backup power market. 

More interesting is the question of where the price of electricity from the grid is actually more expensive than what can be generated by our company’s product.  The interviewer points out that while the average U.S. retail price is lower than the product’s operating cost, some areas of the U.S. have much higher-than-average prices.  Unfortunately, in those areas (Hawaii, New England), the cost of natural gas is also very high, which means that the fuel cell doesn’t have any advantage.  However, the interviewer reveals, in Japan electricity prices are double U.S. prices, and natural gas is plentiful and not exorbitantly priced.  Cheap natural gas fuel in Japan means our fuel cell can 

produce cheap power there, which will compare favorably to the very high market price of power otherwise available there. 

At this point, it becomes clear to you that the company has been looking at a strategy of ramping up sales of its new product in Japan.  Seize onto that as the assumed logical commercialization path, and continue by bringing up your third point:  what if we could capture the waste heat and somehow increase overall efficiency of the product to make it even more appealing to the Japanese market? 

One creative idea, you propose, is capturing the waste heat to use for household hot water or space heating.  The fuel cell’s electrical output runs household appliances, while its thermal output displaces the need to run the hot water heater or furnace. 

Your interviewer asks you what questions you would need answered to validate the feasibility of your idea.  Again, you can reach for the “4 P’s” framework to remind you what key issues need to be addressed for any new product introduction.  The obvious “fatal flaw” questions would include: 

•  Is the hot water output from the fuel cell hot enough for household hot water or space heating?  Is there enough of it to make an appreciable dent in a household heating bill? 

•  Is the kWoutput of our product appropriate, given the electrical load in a typical Japanese home? 

•  Do Japanese utilities offer net metering, whereby the excess power generated can be sold back to the grid so that the fuel cell doesn’t have to run inefficiently at part load when the household doesn’t require the full output? 

•  How would the effective cost of power and heat from a fuel cell compare to a typical Japanese household’s current alternatives? 

•  Can we integrate the fuel cell and hot water systems together effectively, from an engineering perspective?  Would the installation cost be prohibitive?  

•  Do most Japanese homes have enough space to install our size fuel cell? Do most homes in Japan already have natural gas hookups? 

•  Are a typical household’s electrical and hot water/heating demands correlated in time?  If not, is the thermal output from the fuel cell 

storable?