The reaction between hydrogen and oxygen to create water releases a precisely quantified amount of energy. Not all this energy can be converted into electricity because some is required to overcome the energy barrier that normally pre- vents the reaction proceeding. When this reaction takes place between oxygen and hydrogen, each provided at a pressure of one atmosphere and at room temperature, the theoretical maximum chemical-to-electrical energy conversion efficiency that can be achieved is 83%.

This efficiency is an ideal and no cell would be able to achieve that figure. The precise reaction conditions will affect the potential efficiency too. If the pressure of the reacting gases is increased, then conversion efficiency can be increased. On the other hand, increasing the operational temperature of the cell will reduce the overall efficiency that can be achieved.

The actual conversion efficiency of a fuel cell is reflected in the voltage that the cell produces between its terminals. The theoretical maximum cell voltage at open circuit for a fuel cell operating at room temperature, when the cell is delivering no current, is 1.229 V. In practice, such a cell would deliver a voltage less than this because of losses resulting from the internal resistance of the cell and activation energy barriers of various sorts at electrode interfaces.

This theoretical maximum voltage only applies to a cell where the cell reaction product is water in liquid form. In most practical cells, where the product is actually water vapor, this maximum falls to 1.18 V. At 100 oC this falls to 1.16 V, and at 800 oC the ideal cell voltage is only 0.99 V. This is equivalent to a maximum ideal efficiency of 67%. In practice, high-temperature cells might approach 50% efficiency. Low-temperature cells can do better than this.

While high-temperature cells are ostensibly less efficient, the loss of electrochemical efficiency is not necessarily a major handicap. The heat generated within the cells can be exploited either to produce more electricity in some form of hybrid system, or it may be utilized in a combined heat and power system, providing useful heat as well as electricity.

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