A Fuel Cell Primer - School of Engineeringjmfent/FuelCell Primer.pdf · A Fuel Cell Primer: The...

A Fuel Cell Primer:

The Promise and the Pitfalls

"Not long ago, the fuel cell was dismissed as an environmentalist’s pipe dream....Now it is the subject of a heavily financed research-and-development race among

some of the world’s biggest auto makers." Jeffrey Ball, The Wall Street Journal

By Tom Koppel Ph.D. and Jay Reynolds 2000 by Tom Koppel and Jay Reynolds

All Rights Reserved

A Fuel Cell Primer: The Promise and Pitfalls , Rev 7, May 1, 2001

Table of Contents: What is a Fuel Cell?............................................................................................................ 4 Not All Fuel Cells Are Created Equal ................................................................................ 5 Ballard and its Allies........................................................................................................... 7 The California Connection.................................................................................................. 9 The Competition, GM and Toyota.................................................................................... 10 Fuel, The Great Unknown................................................................................................. 12 Political Uncertainties....................................................................................................... 14 Commercial-Scale Stationary Power ................................................................................ 15 Home-Size Stationary Power............................................................................................ 19 Portable/Standby Power.................................................................................................... 21 Related Technologies and Markets................................................................................... 22 A Glimpse at the Hydrogen Economy.............................................................................. 23 APPENDICES .................................................................................................................. 26 APPENDIX OF TABULAR DATA................................................................................. 27 APPENDICES OF USEFUL WEB SITES....................................................................... 27 Additional Resources – Video, pdf and Web.................................................................... 27 Hydrogen and Fuel Cell Resources................................................................................... 27 Fuel Cell Companies:........................................................................................................ 28 Governmental Resources: ................................................................................................ 28 Additional Online Resources ............................................................................................ 29 About the Authors............................................................................................................. 30 Disclosures of Our Investments ........................................................................................ 30 Disclaimer ......................................................................................................................... 30


The incredibly rapid advance of fuel cell technology shows that necessity really can be the mother of invention.

There is no mistaking the necessity. We in the industrialized countries have been consuming the world’s limited energy resources at a rate that cannot be sustained, much of it in inefficient internal combustion vehicles that burn non-renewable fuels. And we’ve been despoiling the environment in the process. Estimates from the Environmental Protection Agency indicate that motor vehicles in the U.S. account for 78% of all carbon monoxide emissions, 45% of nitrogen oxide emissions and 37% of volatile organic compounds. Worldwide, over one billion people living in urban areas suffer from severe air pollution, and according to the World Bank over 700,000 deaths result each year. Moreover, each gallon of gasoline produced and used in an internal combustion engine releases roughly twenty-five pounds of CO2, a greenhouse gas that contributes to global warming.

In response to the critical need for a cleaner energy technology, invention kicked into high gear. Fuel cells generate energy with little or no harmful emissions. So, beginning a decade ago, significant government seed money was put into fuel cell R & D. Private capital soon followed. In just ten years, the power of fuel cells was boosted roughly twenty fold, making them easily compact and light enough to power our cars. Drastic cost reductions have made them contenders to deliver stationary and portable energy for a multitude of other applications. The advances in fuel

cell technology are real. As one leading fuel cell engineer has said, “This is not just smoke and mirrors.” Fuel cells promise to greatly reduce energy-related environmental impacts without significantly compromising our modern lifestyles.

Little wonder, then, that some investors have been betting, and winning big, on publicly traded companies with major stakes in fuel cell technology. From the beginning of 1995 to the end of 1997, the share price of the acknowledged leader in the field, Ballard Power Systems, soared 1100 %. Despite the tech stock meltdown of last year, since the end of 1999 Ballard’s shares rose 182%, closing at $51.34 at the end of April. The overall performance of a few of the smaller players was also impressive. FuelCell Energy’s share price, for example, shot up a remarkable 255% in that same time period. However, Plug Power’s stock decreased 66%. In most cases if investors bought near the high points for these stocks and held, by April they had lost half their equity or more. That’s why we speak of “pitfalls” as well as promise.

Until now, this sort of meteoric rise in market capitalization was largely reserved for biotech and Internet stocks. But as Red Herring magazine observed last year, “There is potentially far less economic and political risk associated with fuel-cell stocks. While biotech products have to pass Food and Drug Administration test trials, and many Internet stocks have unproven revenue models, fuel-cell companies could succeed for fundamental business reasons alone.”


Still, most of the fuel cell companies do not yet have a commercial product to offer and have never turned a profit. Some of the most important issues affecting fuel cell commercialization have yet to be answered. In light of such rapid technological breakthroughs, who’s to say that today’s leaders will remain at the head of an expanding fuel cell pack. And given the run-up in share prices, perhaps fuel cell stocks are already overvalued. The buzz and well-meaning halo of virtue surrounding this clean, green technology can be infectious. But investing in fuel cell companies is nothing if not speculative.

This report is presented in the hope

that it can help you to cut your way through the hype and jargon. We will explain very briefly how fuel cells work; outline the main types of fuel cells and their relative merits for specific applications; and introduce you to a few of the leading fuel cell companies. We will also outline their development and marketing strategies, discuss their alliances (if any) with larger corporations; and warn of the major uncertainties that face this burgeoning new industry. Finally, we will provide links and recommended reading that should expedite your further digging. All of this will, we trust, help you to make well-informed decisions.

What is a Fuel Cell?

A fuel cell is a clean and quiet device that generates electricity from hydrogen and oxygen. An individual cell delivers very little power, so thin cells are combined like slices of bread in a loaf to form a fuel cell "stack." Fuel cells simply reverse the familiar high school science demonstration in which

electricity is put through water to produce hydrogen and oxygen. In the most common transportation fuel cell, a polymer plastic membrane coated with platinum is sandwiched between two flat electrodes. Hydrogen flows in on one side, oxygen from the air on the other. They combine to form water so pure you can drink it and generate electricity without combustion or nasty emissions.

A fuel cell is a bit like a battery, but better, because it needs no slow recharging. It produces electricity as long as fuel and air are supplied to it.

British lawyer and physicist Sir William Grove discovered the principle of the fuel cell in 1839, decades before the invention of the internal combustion engine. But then it largely languished until the Apollo space program in the 1960s. No batteries could last long enough for a flight to the moon. NASA spent tens of millions of dollars in a successful crash program that used fuel cells to power the on-board electrical systems.

They worked, but the commercial potential of fuel cells seemed minimal. The cells that NASA deployed were hand-built and used exotic materials, so the cost per kilowatt of power was astronomical. They were also bulky. Other types of fuel cells were more promising, though, and research continued at a low funding level at several national laboratories and universities. Beginning in the mid-1980s, government agencies in the US, Canada and Japan significantly increased their funding for fuel cell R & D. Meanwhile, the environmental advantages of fuel cells became a political factor, and their green potential


began to capture the public imagination. When advances in the output of fuel cells reached the point where it was clear they could power a car, investment in the technology began to grow exponentially. The rest, as they say, is history.

Not All Fuel Cells Are Created Equal There are six major types of fuel

cells with potential for a variety of commercial applications.

The first to be fired into space was

the proton exchange membrane (PEM) fuel cell, which was developed by GE and performed successfully on the Gemini orbital missions of the mid-1960s. Then it was abandoned, and GE’s patents gradually ran out. Ballard Power Systems, with Canadian government funding, began improving PEM in 1984, as told in the book by one of us, Powering the Future: The Ballard Fuel Cell and the Race to Change the World. Today, PEM is the main type being commercialized to power automobiles.

The Apollo moon missions used the

alkaline fuel cell (AFC) developed by United Technologies Corporation. Now, under the aegis of its subsidiary, International Fuel Cells, a greatly improved version provides electrical power to the space shuttles. AFCs worked well in space, where the rocket was already supplied with extremely pure liquid hydrogen and oxygen. But it was not suited to operating on air and impure hydrogen.

By contrast, PEM had the potential

to work on air and less pure hydrogen (such as gas that is "reformed" from a

convenient liquid fuel like methanol). This makes PEMs more suitable than AFCs for use down here on earth. But the early PEM cells needed so much expensive platinum catalyst that this was prohibitive except for space and some military uses. (This has been solved by spreading such a thin layer of microscopic platinum particles on the electrodes that very little is now required.) Another plus for PEM is that it begins generating power at room temperature and attains its peak power at about 80° Celsius (176° Fahrenheit), allowing the relatively fast startup needed for cars. And it responds almost instantaneously to changing power demands, which is crucial for transportation.

The phosphoric acid fuel cell

(PAFC) was actually the first type to be commercialized (by US and Japanese companies) at a very modest level for stationary power use, beginning in the 1980s. Several hundred units, mainly using natural gas and generating 200 to 250 kilowatts, have been installed around the world. Like PEM, PAFC can run on impure hydrogen and air. But its power output is considerably lower than PEM; it does not respond well to changing power demands; and its operating temperature of around 200° Celsius (395° Fahrenheit) means much longer startup times. Still, in the late 1980s and early 1990s, the US government put tens of millions of dollars into PAFC. The thinking was that PAFC was a relatively proven technology. And with a large battery bank for peak acceleration and hill climbing, it might be suitable for buses.

Two other types of cells operate at

much higher temperatures of 650° to


1000° Centigrade (1202° to 1831° Fahrenheit), making them even less suitable for ground transportation because of their long warm-up time. But they have other advantages. The solid oxide fuel cell (SOFC) uses a cheap catalyst and can operate on unreformed natural gas or propane. It has high overall efficiency, which can be improved further if the heat it gives off is captured and used (e.g. to drive a turbine or heat a building.) It can also be made relatively small.

The molten carbonate fuel cell

(MCFC) also uses an inexpensive catalyst, has high efficiency and produces excess heat that can be captured and utilized. It can run not only on natural gas and propane, but even on diesel fuel, which makes it suitable for ships and stationary power in remote places, such as islands, where delivering a supply of natural gas is difficult or impossible.

Finally, the direct methanol fuel

(DMFC) cell is a lot like PEM in terms of its catalyst and operating temperature. It has the advantage that it can be directly fed unreformed liquid methanol, rather than gaseous hydrogen from a reformer. The technology is years behind PEM at present. If perfected, though, it would eliminate the need for fuel reformers in cars.

Markets and Major Companies By far the greatest public interest has

focused on fuel cells for transportation, especially cars and buses. This reflects both the urgent need for cleaner cars and the colossal size of the transportation market. The amount of money that has gone into R & D for fuel cells aimed at

the car and bus markets has eclipsed expenditures on all other types combined. Moreover, it was putting prototype fuel cell vehicles on the road in the mid-to-late 1990s -----with well- publicized “roll-outs” in places like Berlin’s Brandenburg Gate and in front of California’s state capitol in Sacramento-----that really gave this technology visibility. Finally, we all drive cars, right? So we can easily imagine owning one powered by clean, quiet fuel cells in the not-too-distant future. It is what most of us picture when we think of the coming fuel cell revolution.

Vehicles, and especially cars, impose

special requirements on fuel cells. They must be able to start up quickly and operate in environments ranging from extreme winter cold to dry desert heat. They must be compact and as lightweight as possible. They must be able to stand vibrations and respond well to rapidly changing power demands. Finally, a supply of fuel must be widely available.

The only well-advanced type of fuel

cell that is really suitable for mass transportation is PEM. This is mainly because its low operating temperature allows for relatively short start-up times (thirty seconds or less) and because it responds almost instantaneously to changing power demands, a characteristic known as “load-following”. PEM cell stacks have already been made compact and powerful enough to fit easily into a passenger car, and they offer power and acceleration equal to, or even better than, the internal combustion engine. So there is no reason to expect them to encounter consumer resistance if they can be made


cost competitive, and if the needed fuel infrastructure can be established. Two big ifs.

Also under development, though, is

the direct methanol fuel cell (DMFC), which may in a few years provide serious competition to PEM for cars. Its advantage, as mentioned, is that it can run on methanol without a separate fuel reformer. Its main drawback, until now, is that its power density was much lower than PEM, but improvements on that score have been rapid. The development of a small, efficient and inexpensive methanol reformer for PEM is one of the current challenges facing the car makers. Yet methanol could turn out to be the only practical way of delivering hydrogen for fuel cell cars, at least over the next decade or longer. So if the methanol reformer proves to be a stumbling block, DMFC could yet turn out to be the technology of choice. Even Ballard, the PEM leader, has hedged its bets by purchasing non-exclusive rights to a proprietary DMFC technology developed by the Jet Propulsion Laboratory and Loker Hydrocarbon Research Institute.

Ballard and its Allies In the race to put fuel cells into cars

and buses, the apparent leader is Ballard in partnership with DaimlerChrysler and Ford. Starting in 1990, Ballard put its fuel cells into a series of increasingly impressive prototype buses that ran on compressed hydrogen. The first small bus, rolled out for the media in 1993, was the first-ever fuel cell vehicle capable of carrying passengers with reasonable speed and operating range. Several larger prototypes followed. In the late 90s, six Ballard-built fuel cell

transit buses were put onto the streets of Chicago and Vancouver.

Ballard Powered Transit Busses

They proved themselves by

successfully carrying thousands of fare paying passengers on normal transit routes for two years. In Germany, Daimler-Benz has put Ballard cells into its own prototype NEBUS (short for New Electric Bus), which is similar, but not identical, to the ones in Chicago and Vancouver. Meanwhile, Daimler put Ballard cells into its series of prototype cars (called NECARs, for New Electric Car).

The Necar 3

In 1997 Daimler-Benz (soon to

become DaimlerChrysler) and Ballard made a $ 390.8 million ($ 508 million Canadian) deal under which Daimler acquired a 25% stake in Ballard. They also formed a joint venture company called DBB Fuel Cell Engines (owned two-thirds by Daimler, one-third by Ballard) to manufacture fuel cell engines. These engines integrate the


fuel cell stacks (built by Ballard) with all the other equipment required for fuel supply, cooling, electronic controls and the like, since an automotive fuel cell has to be about ten times more powerful than those for residential use.

A half year later, Ford joined this

alliance by investing $ 420 million ($ 616 million Canadian) in cash, technology and assets to acquire a 15% equity interest in Ballard Power Systems and a 22% equity interest in Xcellsis (the new name for DBB Fuel Cell Engines.) The net effect was the reduction of Ballard’s equity interest in Xcellsis from 33% to 27%. The addition of Ford to the alliance also included the formation of Ecostar Electric Drive Systems in which Ballard has a 21% interest. Thus, Ecostar brings to the alliance Ford’s design and production expertise in electric drivetrains.

Ballard’s early prototype vehicles

were buses, mainly because in the early 1990s the fuel cell stacks were not yet compact enough to fit into a car. Likewise, the first commercial fuel cell vehicles to hit the road will also be buses. In this case, though, the reason is in part that supplying a fleet of buses with fuel is a much simpler proposition than providing fuel to thousands of cars.

DaimlerChrysler has sold its first 30

busses to 10 European cities from Madrid to Reykjavik. These will enter service starting 2002.

But fuel cell cars are only a few

years behind, and the car market is the major leagues. DaimlerChrysler intends to inject $ 1.5 billion into its fuel cell auto effort over the next few years. The aim is to offer fuel cell cars for sale by

2004. This is expected to be a four-to-five seater based on the small A-class Daimler car that is already being sold in Europe with an internal combustion engine. Ford seems to have a similar target date for its first commercial fuel cell car, a five-passenger sedan.

Press releases from the Daimler,

Ford and Ballard alliance indicate an initial production level of 40,000 fuel cell engines a year, rising to 100,000 within another year or two. Meanwhile, Ballard recently opened its first production facility in Canada. But this is a relatively small plant aimed mainly at working out the production-line bugs and satisfying demand for fuel cell stacks up until the 2004 entry into the auto market.

Looking ahead, Ballard is currently

sitting on over $ 500 million ($ 800 million Canadian) in cash, most of it earmarked for building a much larger plant. The location has not yet been announced, but it is likely to be in the US. This plant will be capable of building 250,000 to 300,000 fuel cell stacks a year. Most will probably be sold through Xcellsis to supply the fuel cell engines needed by DaimlerChrysler and Ford. But Ballard is also “open for business,” as its management likes to say. It is free to sell its stacks to buyers outside its alliance with DaimlerChrysler and Ford. And nearly every other major auto company in the world has, over the last decade, leased and tested Ballard’s cell stacks. For this reason, some euphoric commentators have argued that Ballard could perhaps become the Intel of the fuel cell industry, supplying the cell stacks to nearly all the car manufacturers.


The California Connection One major incentive for auto

companies to bring fuel cell cars to market has been the regulations of the California Air Resources Board (CARB). These require that, starting in 2003, 10% of all new cars sold in that state will have to be extremely low emission models. Of these, 20% (or 2% of all cars) must be “zero-emission” types (ZEVs), a requirement that can be satisfied only by battery or fuel cell powered vehicles. As the regulations now stand, auto makers that fail to comply will face stiff fines under a complex formula of penalties and credits. The largest manufacturers are most heavily targeted by the regulations.

Not surprisingly, the major auto

companies have lobbied to have the ZEV mandate weakened and its starting date postponed. They point to difficulties in meeting the target date, especially doubts that a fuel infrastructure for fuel cell cars can be in place by the deadline. At the same time, environmental groups urged the state government to stick to the mandate and its strict timetable. Other states have watched closely, as has the federal government and four states have indicated that they would follow California’s lead. At a September 2000 meeting, CARB voted unanimously to uphold the so-called ZEV mandate, but since then it has cut the 4% requirement to 2%.

But California will not have to leap

in cold turkey. A program called the California Fuel Cell Partnership is paving the way for the introduction of fuel cell vehicles in the Golden State. This collaboration, launched in April 1999, initially involved the State of

California, DaimlerChrysler, Ford, Ballard and three large oil companies: ARCO, Texaco and Shell. The purpose was to establish cooperation between the car companies and fuel suppliers, to experiment with the necessary fuel infrastructure, and to demonstrate fuel cell vehicles under realistic day-to-day driving conditions. Since last year, several other auto companies have signed on, along with another major fuel cell company, International Fuel Cells, and Methanex, the world’s largest supplier of methanol. And in October 2000 GM and Toyota announced that they would join as well.

Under the Partnership about 70 fuel

cell cars and buses will be tested between 2001 and 2003. Fourteen vehicles, most of them powered by Ballard cells, were unveiled at a gala event in Sacramento in November. Judging by the interest generated by the Ballard buses in Chicago and Vancouver, the California media will keep fuel cells and their environmental upside in the news over the next few years.

Although not nearly as large a

market as autos, fuel cell buses still offer great potential profits for companies like Ballard and DaimlerChrysler. And buses have advantages over cars for initial market entry. Transit buses operate on fixed routes within the limits of a city or district. The fuel, therefore, can be compressed hydrogen gas that is dispensed daily at central depots. There is no need for an extensive network of fueling stations. Compressed hydrogen is bulky, so fuel cell buses have rooftop tanks that give them a high profile. The car-buying public might not like the high-top look, and extra wind drag is a


consideration for cars driving at 60 mph or more. But no one cares much what a transit bus looks like, and their average speed is much lower.

Buses have another advantage. It is

mainly public agencies that operate transit fleets. They have political incentives to demonstrate at least a symbolic commitment to cleaner vehicles. Current estimates are that the purchase price of the first generation of fuel cell buses may be as much as twice as high as ordinary diesel buses. For private cars, such a price penalty might doom the introduction of fuel cells. But public subsidies for zero emission buses would be no more of a political problem than subsidies for other mass transportation.

Only Ballard (which has a small

separate bus engine facility in California) and DaimlerChrysler (the world’s largest manufacturer of buses) are moving quickly into the bus market.

The Competition, GM and Toyota No other pure fuel cell company is a

close contender with Ballard for automobile or bus fuel cells. However, International Fuel Cells (IFC), the subsidiary of United Technologies Corporation, is a possible long-term threat. Until recent years, its main focus was on alkaline fuel cells (e.g. for the space shuttle) and phosphoric acid units for stationary power generation. (It has sold over 200 of these power plants around the world.) More recently, though, IFC has moved into PEM development as well. It has demonstrated a 40 kilowatt PEM stack that runs on hydrogen and is working on

a 50 kilowatt model that it intends to run on gasoline (presumably with a gasoline reformer). IFC also promises to demonstrate a PEM bus in 2001. That it is serious about auto fuel cells is shown by its recent agreement to work with Hyundai on a fuel cell stack. (Hyundai is also leasing cell stacks from Ballard.) IFC also has a new joint venture with Shell to develop fuel processors for PEM cells.

There is also Johnson Matthey (JM),

of Britain, the world’s largest supplier of noble metal catalysts for such things as catalytic converters to reduce emissions in cars. Since 1994 JM has worked closely with Ballard and other companies on reducing the amount of high-priced platinum for fuel cell catalysts. Recently, though, JM has announced that it intends to enter the PEM fuel cell market itself. Given its size (over 8000 employees), JM has to be taken seriously as a dark horse in the fuel cell race.

The most serious challenge to

Ballard and its allies for the auto market is likely to come from other huge auto companies that can afford to put billions of dollars into fuel cell R & D. They are under the same pressure as DaimlerChrysler and Ford to put zero emission cars onto the California market within a few years. The key players appear to be General Motors and Toyota.

General Motors had a modest PEM

fuel cell program in the mid-to-late 1980s. Then, after apparently shutting it down for a year or two, it has been working on its own PEM fuel cells since the early 1990s. (At the same time it has leased and experimented with Ballard fuel cell stacks, but these are sealed to


protect Ballard’s proprietary technology.) GM is well situated to compete not only due to its sheer size and financial muscle but also because it already has the electric drive train technology and know-how gained from its development of “pure” electric cars such as the EV-1. (Several hundred of these battery-powered vehicles were leased to customers in California and Arizona in the late 1990s. But considering GM’s huge investment, the program has to be considered a failure, and the EV-1 was withdrawn from the market in January 2000.)

Toyota also has expertise in

advanced electric vehicle technology, mainly gained in developing its RAV4 electric vehicle and its “hybrid” Prius, which combines a small gasoline engine with a rechargeable battery. More than 35,000 Prius vehicles are already on the road in Japan. Boasting mileage of 52 mpg in city driving and 45 mpg on the highway, the Prius is now selling throughout the U.S. at a list price of $20,450. (City mileage is higher.)

For an excellent source on the

development of hybrid cars, see Forward Drive: The Race to Build “Clean” Cars for the Future, by Jim Motavalli.

Toyota has said that it intends to be

first to market with a fuel cell car and recently specified that this will be a hybrid vehicle combining a fuel cell and a sizable battery. GM has announced that it plans to have a “production ready” fuel cell car in 2004. (GM has clarified that this does not necessarily mean having cars in the showroom that year.) How likely is it that either company, or both, can enter the fuel cell auto market

as early as DaimlerChrysler or Ford, with their Ballard technology?

In mid-1998 the California Air

Resources Board published a massive and detailed status report on the development of, and prospects for, fuel cell cars. This study was compiled by a panel of fuel cell experts who had visited virtually all the relevant companies in the world. It concluded that the alliance using Ballard technology was at least a year or two ahead of both GM and Toyota. GM’s fuel cells seemed clearly behind Ballard’s in power density at the time. But GM was devoting considerable resources to fuel cells (mainly through its Opel division) and could hardly be ignored. Toyota was particularly cautious about revealing the details of its fuel cell program to the visitors. The statistics revealed for Toyota’s fuel cells showed them to be lagging far behind on power density, but the report noted that Toyota was very strong in related technologies required for electric vehicles.

In 1999 GM and Toyota announced

an agreement to share fuel cell technology with each other. This was an unprecedented step. Obviously, they are determined not to fall behind DaimlerChrysler and Ford. And in February 2000 GM claimed that it had developed the “most advanced operational fuel cell today,” with a stack 15 percent smaller than the nearest competitor. This claim, if valid, would presumably make the GM stack more compact than Ballard’s 900 series stack, which was unveiled a month earlier. A five-seat Opel prototype car, running on liquid hydrogen and using this stack, was the pace car for the marathon at the


Summer 2000 Olympic Games in Sydney, Australia.

In July 2000 Mitsubishi revealed that

it has developed its own “high efficiency” auto fuel cell, and a compact reformer to allow it to run on methanol. The system is said to fit under the floor of a small car, and the company is working on the “practical application” of this technology. So, perhaps Mitsubishi also has to be counted as a dark horse in the auto fuel cell race. Along with several other Japanese companies, Mitsubishi will also be receiving government funding to develop direct methanol fuel cells.

Two other heavyweight contenders

are Honda and Nissan. In August Honda surprised the industry by announcing plans to commercialize a PEM fuel cell car in 2003. Honda has been developing its own fuel cell technology while leasing Ballard cell stacks as well. It put a Ballard-powered prototype car on the road in California toward the end of last year. So did Nissan.

Of the other major auto companies,

most have leased Ballard technology and apparently intend to buy future fuel cell stacks rather than develop their own. These include Volkswagen, Yamaha and Hyundai, although, as mentioned, the latter is also working with International Fuel Cells on PEM technology for cars.

Why all the emphasis on a “race” to

have the first commercial fuel cell car? Ballard and Daimler executives have stated that being first to market would allow them to help determine the regulations, safety standards and comparative performance benchmarks for fuel cell autos and stacks.

Fuel, The Great Unknown Although the commercial

introduction of fuel cell cars could be only three to four years away, one huge unknown still overshadows this step. It is not yet absolutely certain what the actual fuel will be for the first generation of cars.

In some ways it would be simplest

and best to have auto fuel cells directly supplied with pure hydrogen. This would be made (most likely from natural gas) at industrial-scale plants and then dispensed. Such a fuel infrastructure would eliminate the on-board “reformer” needed to produce gaseous hydrogen from a liquid fuel such as methanol or possibly gasoline. Environmental studies show that if the hydrogen for cars were produced from natural gas at centralized facilities, the amount of carbon dioxide released across the entire fuel cycle would be much less than if methanol or gasoline were reformed on board the car.

But dispensing and carrying

hydrogen entails major problems. Compressed hydrogen is bulky, which is why the Ballard and Daimler buses have large rooftop tanks. For a car, using current technology the required rooftop tank to allow 250 miles of driving between refills would have to measure about three feet on each side, and it would raise the car’s roof profile about eight inches, not even counting the thickness of the tank itself. And of course the tank would have to be strong to withstand the pressure, so its weight would be added up top. (Newer non-metallic tanks will lessen this handicap.) For the auto industry, and probably for


consumers, such a design seems to be a non-starter. In any case, no infrastructure for making, distributing and dispensing compressed hydrogen for tens of thousands of cars yet exists. Establishing one would certainly be expensive.

Liquid hydrogen is much more

compact. It would fit into tanks only slightly larger than a conventional gasoline tank for a comparable range. But to liquefy hydrogen requires first refrigerating it to minus 253° Celsius (490° Fahrenheit), a process that makes huge energy demands of its own. Then the liquid has to be kept in expensive cryogenic storage tanks. In a car, over time between visits to the filling station, some of the hydrogen would boil off and disperse as a gas, thereby going to waste. In closed garages, this could also pose safety problems. Finally, all the production and distribution issues for compressed hydrogen would exist, in spades, for liquid hydrogen.

A long-term alternative that may

prove safer and simpler for cars is the on-board storage of hydrogen absorbed in tanks containing powdered metal hydrides. This is being developed by a number of companies, including Energy Conversion Devices “ENER”. Comparisons of the amount of hydrogen that can be stored for each liter of volume tell the story. For compressed hydrogen, 31 grams per liter. For liquid hydrogen, 71 grams. But for ENER’s metal hydride system, 103 grams.

With metal hydride enough hydrogen

for a car’s normal range could be held in a tank comparable in size to a conventional gasoline tank. A similar concept, but one that is only at the

earliest stages of development, is to have the hydrogen absorbed into extremely fine carbon, called nanotubes or nanofibers. The metal hydrides are heavy, adding undesirable weight to the vehicle. Carbon, however, is light, and it seems to promise vastly greater storage capacity than hydrides. (There have been claims that with carbon storage a car might fill up only once a month!) In both cases, gaseous hydrogen would be pumped (injected) into a “tank” full of these hydrides or fibers. As the car runs, the hydrogen-containing medium would be heated to draw off a steady stream of gaseous hydrogen to be fed to the fuel cell.

Because of all the unknowns

surrounding “direct” use of hydrogen in fuel cell cars, the auto manufacturers and government agencies have focused attention on deriving the hydrogen from a liquid fuel, at least for the first decade or two. Liquid fuels are easy to transport, and people are accustomed to handling them.

The main candidates are gasoline

and methanol. Both must be “reformed” at fairly high temperatures to generate gaseous hydrogen for the fuel cell. The reformer is really a miniature petrochemical factory, and it represents a difficult technological challenge in its own right.

Of the two, gasoline is considered by

far the more difficult fuel to reform. In fact, Chrysler (together with the Arthur D. Little company) had been working on a gasoline reformer for fuel cell cars at the time it merged with Daimler-Benz. The project was not going well, and was shelved. Since then, however, a number of companies have reported progress on


gasoline reforming. One of them, Nuvera Fuel Cells, announced last year that it would supply prototype gasoline reformers to four auto companies, as well as to the fuel cell company Plug Power under a Department of Energy program. International Fuel Cells, in collaboration with Toshiba, is also working on a gasoline reformer. And even DaimlerChrysler, which has emphasized methanol, is now also hedging its bets with resumed work on gasoline reforming. The jury is still out. If an efficient and low cost gasoline reformer can be developed, the first fuel cell cars could run on ordinary (or more likely a special grade of) gasoline. This would eliminate most of the cost, complication and delay of installing a separate fuel infrastructure.

However, because of the apparent

difficulties with gasoline reforming, methanol has been in the fuel cell limelight almost by default. It is a relatively easy to handle liquid that is made from natural gas. The world currently produces a surplus of natural gas, much of which is flared off or vented in distant oil fields. But even methanol reforming is difficult. DaimlerChrysler had promised to unveil its latest fuel cell car, designed to run on methanol, in late 1999 or early 2000. It was not demonstrated until late 2000. One reason was probably delays in perfecting the reformer.

If a good methanol reformer is ready

in time to put cars on the road in California in, say, 2004, there will have to be filling stations equipped to dispense it. Estimates are that installing a new methanol retail system at a typical gas station costs $ 55,000 to $ 70,000, and retrofitting a gasoline system for

methanol about $ 40,000. (This is for cleaning the old tank and installing a liner.) The methanol industry estimates that it would cost $ 3 billion to equip every third gas station in the US with a methanol tank and pump. That’s no small change, although the cost would probably not be prohibitive. Still, the question remains, who will pay for, or subsidize, this new infrastructure?

Methanol, therefore, may prove to be

a viable fuel for fuel cell cars. Yet, some hydrogen enthusiasts raise an interesting question. If practical “direct” hydrogen technologies (such as metal hydrides) are only a few years farther down the road, why spend billions to install a methanol infrastructure that may be used for perhaps a decade? Some also hope that once a hydrogen infrastructure is in place, older internal combustion engines can be retrofitted to run on hydrogen as well. BMW, of Germany, has been developing hydrogen internal combustion engines for 20 years, and Daimler-Benz also put considerable R & D money into them in the past. Burning hydrogen in engines is not as clean or efficient as feeding it to a fuel cell, but it is still a lot cleaner than burning gasoline.

With the 2003 California mandate

looming, the auto companies will have to look hard at these choices and soon.

Political Uncertainties As already discussed, the California

mandate has largely set the auto fuel cell timetable. But it is not carved in stone. Originally, back in the early 1990s, California was going to require that 2% of new cars be ZEVs by 1998. At that


time, with fuel cell cars barely on the distant horizon, this meant pure battery powered electrics like GM’s EV-1 or Toyota’s RAV4. But when it became clear that the car companies could not meet the target, California backed off. Is there the political will this time to retain the 2003 mandate in the face of heavy lobbying? A crucial question.

Ensuring that a fuel infrastructure is

in place on time is not an imaginary problem dreamed up by Detroit. Will California, and other states that have been following its lead on clean air regulations, come up with the needed subsidies? And will Congress pass pending legislation to subsidize alternative fuel vehicles?

One factor that may affect the

outcome is that hybrid cars combining gasoline engines and battery power are already on the market and proving to be popular. Many additional models are on the way from nearly every major manufacturer, including some targeted at the large sport utility vehicle sector. Hybrids can more than double conventional gasoline mileage. Because their small gasoline engines run at optimum speed to minimize emissions, they also greatly reduce overall air pollution. In the jargon of California’s air resources board, the Honda Insight has been certified as an Ultra Low Emission Vehicle (ULEV), while the Toyota Prius is a Super Ultra Low Emission Vehicle (SULEV). (SULEVs run 75 percent cleaner than ULEVs, and they are both a lot better than what most of us have been driving.)

Might not the very success of hybrids satisfy government regulators (and even the environmentally conscious public) enough to reduce the urgency to

push for the even cleaner ZEVs, which include fuel cell cars?

These are among the toughest

questions to be asked by any investor who feels inclined to bet on the rapid commercialization of transportation fuel cells.

Commercial-Scale Stationary Power Providing electrical power to

individual buildings, businesses or even entire villages or small towns (so-called “distributed power”) is potentially a huge market for fuel cells. Globally, stationary power generation is already a $ 100 billion market and bound to grow. An estimated 750 million households, mainly in the Third World, are not electrified, and for many of these households there is no nearby power grid. As Seth Dunn, author of Micropower: The Next Electrical Era, argues: "In these parts of the world, decentralized technologies have enormous potential to bring power to the people, allowing the development of stand-alone village systems and doing away with the need for expensive grid extension. And for a rapidly growing urban base, small-scale systems can substantially reduce the economic and environmental cost of electrical services."

But even where a power grid exists,

as in the US, voltage fluctuations and total power outages can wreak havoc at places like computer centers and hospitals. An estimated $ 4 billion is spent each year in the US just to ensure uninterrupted power supplies when the grid fails. This alone creates a very significant niche market for the high-


quality, reliable power that commercial-scale stationary fuel cells, mainly running on natural gas, can provide. And when a stationary unit is running and generating more power than needed, the excess power can be sold back to the grid.

It is a market that is already

established on a modest scale. International Fuel Cells has sold over 220 of its 200 kilowatt phosphoric acid power units around the world. One of them was bought by a data processing center in Nebraska following a costly computer crash in 1997. Last year, five 200 kilowatt IFC units were installed at a post office in Anchorage Alaska. And soon six will be installed at a school in Connecticut. To quote Seth Dunn again:"We're beginning the 21st century with a power system that cannot take our economy where it needs to go. The kind of highly reliable power needed for today's economy can only be based on a new generation of micropower devices now coming on the market. These allow homes and businesses to produce their own electricity, with far less pollution."

Stationary fuel cells are in many

ways simpler to design than those for transportation, which is one reason their commercialization has already begun. They don’t need to be particularly compact or light weight. Nor is there usually any need for them to start up quickly. In most cases they are meant to run continuously for days, weeks, indefinitely, which makes high temperature types of fuel cells acceptable. In fact, the excess heat can be captured and used to heat water, or to run a turbine, and thereby generate additional electricity. This allows them to achieve higher overall efficiencies

than transportation fuel cells. (Even with PEM stationary cells, which operate at relatively low temperatures, some heat can be captured and used to heat water.) The entire stationary power market is also less dependent on politics and regulation. In fact, recent moves toward deregulation have encouraged new options, including feeding excess power back to the grid.

Whereas only PEM cells are well

suited for transportation (with direct methanol possibly waiting in the wings), there are four types of cells contending for the stationary market.

As mentioned, phosphoric acid

(PAFC) units have already been on the market for about ten years and have been built in sizes ranging up to 11 megawatts. Most common, though, are units in the 50 to 500 kilowatt range. PAFC stacks need to have their fuel “reformed” to eliminate carbon compounds that would poison their noble metal catalysts. But the reformers do not have to be compact or start up quickly, and so are less difficult to design than reformers for vehicles. The 200 kilowatt power plants sold by International Fuel Cells can run on a choice of fuels: natural gas, propane, butane or methanol. . Their efficiency is between 40% and 50%, about the same as PEM. Cost has been a problem, though. The cost per kilowatt generated by PAFCs (around $ 4000) is much higher than is acceptable for really widespread commercial acceptance. (The ordinary gas turbines used by utilities to generate electricity come in at $ 500 to $ 1000 per kilowatt.) There have been rapid cost reductions for other stationary fuel cell types, but not PAFC. This may make them a technological


dead end, and in the last few years most R & D money has been going elsewhere.

Just approaching commercialization

are Ballard Power’s 250 kilowatt PEM stacks, which are designed to run on natural gas. The first three demonstration units have been installed, including the one mentioned in Berlin, Germany. Like PAFCs, PEM stacks need to have fuel reformers. Because PEMs run at a low temperature and cannot generate steam, it is harder to capture their excess heat and channel it into useful applications for “cogeneration” of both heat and electricity. Like PAFCs, PEMs have efficiencies in the 40 to 50% range. At first glance, it may look as though they have no advantages over PAFCs. However, because stationary PEMs are made out of the same materials as transportation PEMs, the economies of scale that will kick in as the bus and car engines are commercialized should help bring down the unit cost of stationary PEMs as well.

Ballard is the clear leader in the

stationary PEM field. As in transportation, so in stationary Ballard is allied with other corporations that offer deep financial pockets and existing marketing networks. One is the French company Alstom, which owns 15.8 % of Ballard Generating Systems and has the exclusive franchise to sell Ballard’s stationary units in Europe. For the large Japanese market there is EBARA, which last year injected an extra $ 19 million ($ 28.3 million Canadian) thereby boosting its stake in Ballard Generating from 6 % to 11.4%. EBARA is more interested in small, single home generating units than in the large 250 kilowatt power plants. The partner for the rest if the world is

New Jersey-based GPU International, which holds 10.4 % of Ballard Generating. Ballard’s geographically spread alliances give it a good strategic position to market its technology worldwide. But IFC also has alliances, notably one with Toshiba to develop and distribute PEM stationary fuel cells in Japan.

For stationary power, fuel cells

running at much higher temperatures than either PAFC or PEM have distinct advantages. There are two main types in contention.

Molten carbonate fuel cells (MCFC)

achieve relatively high basic efficiencies of 60% or more, and when the intense heat is captured and harnessed for cogeneration, between 70% and 80%. They use inexpensive catalysts, rather than costly noble metals. And because of their high-temperature operation, they don’t need reformers to run on a wide range of fuels, including natural gas, propane and even diesel. As mentioned, the latter makes them especially appropriate for remote places such as islands, and also for ships.

The company that appears to have

the edge in MCFC is FuelCell Energy (FCEL), which is headquartered in Danbury, Connecticut. Like Ballard in the early 1990s, the company, formerly called Energy Research Corp., pursued both battery and fuel cell technologies. Then it sold its battery business to shareholders under the name Evercel, and in September 1999 the company was renamed FuelCell Energy, which has been focused on large-scale stationary power. It had 114 employees at the end of 1999 and enjoys a strong financial position following an April stock


offering that netted it $ 58 million. This is earmarked for greatly expanding its current production capacity. Also, like Ballard, FCEL has enjoyed very strong government support, receiving upwards of $ 200 million from the Department of Energy (DOE) over the years for a variety of projects. With over $ 60 million in the bank, and renewal by DOE of a $ 40 million contract, FCEL is in a strong financial position to forge ahead with its commercialization plans.

FCEL’s primary focus is on modular

and scalable “building block” units of 250 to 300 kilowatts each. In part this is because the company sees it's power plants as being ideally suited for "base-load" applications (running full time once started up), rather than for stand-by or peak-power use. But FCEL also believes that the cost of the necessary supporting equipment for a fuel cell power plant is so high (50 to 75% of the total) that it only becomes economically viable at this size. FCEL expects to take its first commercial orders for these units in the second half of 2001. With Ballard also focusing on 250 kilowatt PEM units, FCEL is its most direct competitor.

FCEL’s Modular Cell

FCEL has also taken the strategic

partnership route in moving to

commercialization. It has licensed to MTU (a division of DaimlerChrysler) the exclusive rights to sell it’s technology in Europe and the Middle East. In Asia, the Marubeni Corporation of Japan is FCEL’s key partner. In June 2000 Marubeni committed itself to a $6.25 million contract under which FuelCell Energy will deliver one 250 kilowatt plant in 2001, followed by either four more 250 kilowatt plants or a one megawatt plant. FCEL also apparently has the inside track for a contract to supply a one megawatt demonstration plant for King County, Washington (the Seattle area) that would run on gas from municipal waste.

The electricity would be used for water treatment under a program supported by the US Environmental Protection Agency.

Like MCFCs, solid oxide fuel cells

(SOFC) can attain higher efficiencies than PEM or PAFC, which could prove to be essential in stationary applications where the units are competing directly with the cost of electric power via the grid. In medium to large units, where excess heat is used to power a turbine, they can attain 75% efficiency or better. Also like MCFC, because of their high temperature, which burns the carbon oxides that poison the catalysts of lower temperature fuel cells, SOFC’s can operate on natural gas, propane and methanol without the need for reforming.

No small exclusively fuel cell-

focused company is working on commercial-size stationary SOFCs. They are of interest to investors, therefore, mainly as potential competition for FCEL and Ballard. The leading company is Germany’s Siemens.


It 1998 Siemens acquired Westinghouse Power Generation, which had also been developing SOFC technology. Now they are working on a “hybrid” SOFC system with DOE support. The $16 million system combines a 200 kilowatt Siemens Westinghouse solid oxide fuel cell and a 50 kilowatt turbine, and it reportedly performed well in its initial test.

Stationary power is shaping up to be

a market with enormous growth potential for fuel cells. However, there is already competition for similar-sized power plants, and additional companies are likely to enter the field. Of the pure fuel cell companies, Ballard is certainly off to a good start with its PEM units and strong alliances in North America, Europe and Japan. Ballard’s PEM cell stacks, which are built out of thin layers of materials that can roll off a largely automated assembly line, are simple to manufacture and are likely to enjoy an initial unit cost advantage. On the other hand, for sizable fixed generating units, initial cost is not the only consideration. FCEL has a technology with a significant edge in efficiency and an advantage on fuel type that could prove to be decisive in the longer run. The company further claims a significant advantage in simpler and less costly supporting equipment. In particular MCFCs, unlike PEMs, need no complex fuel reformation to operate on natural gas. SOFCs offer similarly high efficiency, especially where cogeneration is possible.

To summarize, the fuel question is

simpler for stationary than for transportation fuel cells, and fuel infrastructure is no barrier to commercialization. Still, the overall

long-term outlook in stationary fuel cells is also quite complex. What is the cost tradeoff, for example, between the relative simplicity of PEM’s manufacturing, on one hand, and its need for a fuel reformer on the other? Governmental incentives will likely foster the buyback of “green power” by utilities. This could significantly reduce the importance of initial investment costs (which may favor PEM) relative to long-term considerations such as total efficiency (which probably favors MCFC or SOFC). As with transportation fuel cells, for stationary fuel cells too the likely interplay of politics and ordinary commercial considerations is difficult to assess.

Home-Size Stationary Power Although commercial-size stationary

fuel cells are already on the market, much smaller home-size units are not far behind. These can range down to as small as one kilowatt, which is enough for lights and small appliances, but not things like electric stoves and dryers. One kilowatt is apparently considered suitable for the Japanese market, with its small homes and apartments. For the US market, though, the power plants being developed are mainly in the three to seven kilowatt range. About the size of a refrigerator, these have the capacity to run major appliances and also provide some cogeneration of hot water or even central heating. The fuel of choice is natural gas.

The main players to date are Ballard

and Plug Power, based in Latham, New York. Both are using PEM technology. But they are not in direct competition. Ballard’s effort has been in the one


kilowatt range for the Japanese market in cooperation with EBARA and Tokyo Gas, Japan’s largest gas utility. A possible indicator that commercialization is on track is the recent increase in EBARA’s stake in Ballard Generation Systems.

Plug Power is 20% owned by GE

Power Systems. In the first quarter of 2000 Plug produced 22 fuel cell systems for laboratory and field testing. Its plan for the remainder of 2000 had been to produce 500 “pre-commercial” units, which were to be purchased by GE for a very extensive field test. The next target was to bring its commercial units to market in 2001. Based on this ambitious schedule and the strength of GE behind it, Plug’s share price soared more than 1000% in a single year, making it –briefly--one of the real darlings of the fuel cell speculative play.

In May, however, Plug suffered a

setback when the pre-commercial units did not satisfy GE’s specifications for operations independent of the power grid. GE is no longer contractually obligated to purchase what was to have been 485 units. Plug has stated that its relationship with GE remains intact, and the chief operating officer of GE Power Systems recently joined the Plug board. However, in August Plug announced that it was delaying the launch of its first commercial product until the first half of 2002. The share price tumbled. But in April 2001, Poug backtracked and said it will sell 125 to 150 five kilowatt units this year, starting in July. .

A newcomer to PEM home power is

H Power, (HPOW) recently taken public, with 85 employees in New Jersey and its Canadian affiliate in Quebec. H

Power's proposed entry into the home power market follows their delivery of 50 (of 65 ordered) backup power units to the New Jersey Department of Transportation to power variable message highway signs.

In March 2000, H Power installed

the first prototype stationary fuel cell system for ECO Fuel Cells, LLC, a subsidiary of Energy Co-Opportunity, Inc., an investor in H Power. ECO has agreed to purchase 12,300 stationary fuel cell systems over several years for an aggregate purchase price of approximately $81 million, dependent upon ECO's ability to purchase and resell those systems to their rural customers. Like Plug, H Power's goal is to begin shipping commercial units in the second half of 2001.

Another possible contender for the home market is a Canadian company based in Calgary, Global Thermoelectric. It has 110 employees and a recent market cap of $337 million but its main commercial focus has been thermoelectric generators and diesel fired heaters. These are used by oil and pipeline companies for power and heating at extremely remote locations. For both applications, fuel cells could also play a role.

Global purchased an existing SOFC

technology from a German company and has been improving it with the small home market in mind. Another possible use is to generate electric power for internal combustion engine cars (to run air conditioning, for example) even when their engines are turned off. Global has been working on this with the huge Delphi car accessory company (formerly part of the GM empire) and also with BMW.


Small SOFCs can also be applied to

home use. With cogeneration they should be able to attain efficiencies considerably higher than PEM. As with larger SOFC’s, they do not need fuel processors and can run on a variety of fuels. In July 2000 Global got a welcome injection of new financing when a major Canadian gas utility, Enbridge Inc. spent $ 17 million ($ 25 million Canadian) for preferred shares in Global “to give the firm the financial clout it needs for commercial launch of its residential natural gas fuelled unit within five years.” Enbridge distributes natural gas to 1.5 million residential customers in Ontario and could also act as distributor for the fuel cell power plants. Global is expected to deliver its first test units to Enbridge in 2001. Shares in Global jumped 11 percent on the news.

The potential market for individual

home units is difficult to quantify, but it could well turn out to be enormous, especially if the cost of electricity from the grid continues to spiral upward. In addition, utilities have not expanded their capacity to keep up with demand. One California utility recently warned of “rolling brownouts” in extremely hot weather when air conditioners push the grid beyond its capacity.

Of course, once such units are on the

market, it will also become practical to build houses in more remote places where the cost of bringing in power lines would be exorbitant. The units should also offer uninterrupted power, which could be important to individual households with computers and other electronics, just as it is for businesses. Certainly in some parts of the US, and in

much of the Third World, the ability to have quiet, clean, reliable power could be decisive. Noisy and quirky gasoline or diesel generators are just not the same. Finally, there are places where natural gas is cheap relative to grid electricity, making self generation a very competitive option.

Portable/Standby Power Another possibly huge niche market

is small portable units. Ballard, in collaboration with the Coleman Sunbeam company (makers of camping gear such as Coleman stoves, and Sunbeam appliances) promised to demonstrate such a product by the end of 2000 and to have it in stores by the end of 2001. It has missed this first target but still plans to deliver to stores by late this year. However, for most of us, this may be the first fuel cell we can actually buy and use. Ballard and Coleman have been very quiet about the details, such as exact size and the fuel it will use, but most speculation is that it will be around one kilowatt and use replaceable or refillable cylinders of compressed gas. This would put it in direct competition with very small home gasoline generators for backup power when windstorms bring down the power lines. It might also be popular for camping trips, or for recreational vehicles, or simply to run electric tools in places that are too far to reach with normal extension cords. Ballard and Japanese consumer products giant Matsushita have announced an even smaller 250 watt portable unit for the Japanese market.

Finally, another notch down in size

are very small PEM fuel cells to run electronic devices and for such niche


markets as bicycles. Ballard and H Power, for example, have developed prototypes in the 20 to 100 kilowatt range.

One cutting edge company investors

may want to look at is Manhattan Scientifics Inc, which has offices in Los Alamos, New Mexico and New York. Manhattan bought a very compact PEM technology from a German company and has further developed it to power the world’s first prototype fuel cell bicycle. Using a 670 watt PEM cell, the nifty-looking Hydrocycle can go 70 to 100 kilometers on a two-liter tank of compressed hydrogen.

Fuel Cell powered “Hydro Cycle”

As the company’s literature points

out, in China, India and Japan alone there are currently 405 million bicycles in use. The air in those countries is already heavily polluted by emissions from two-stroke and diesel engines. So there should be an enormous world market for clean electric bicycles.

Manhattan Scientifics is also

developing really tiny direct methanol fuel cells that fit in the palm of your hand and could replace batteries for a vast number of consumer products, from laptops to camcorders and cell phones. They claim that these have three times the energy density of advanced nickel

metal hydride batteries. But the little Los Alamos lab is not alone. Much of the work on these so-called micro fuel cells is being done by huge electronics and battery companies, such as Motorola. None of them seem close to having a commercial product yet, and the work is shrouded in secrecy. But surprises in this potentially lucrative field can be expected.

Related Technologies and Markets A large number of companies—some

of them small, innovative and worth considering by investors—are developing and/or already manufacturing a wide range of products and equipment supportive of fuel cells. These include power management systems, hydrogen sensors, pressure equipment, fuel reformer components, etc. The success of such companies may depend on the overall pace of fuel cell commercialization, and on which specific fuel cell technologies turn out to be the winners. We will briefly mention only a few to indicate the broad areas investors may want to consider.

Methanex corporation,

headquartered in Canada, is by far the world’s largest producer of methanol. This is made from natural gas at facilities mainly in Chile and New Zealand and transported in special supertankers. Methanol is used as a chemical in a vast number of industrial applications and in a number of consumer products, including paint strippers, duplicator fluid, model airplane fuel, and dry gas. It can be manufactured from a variety of carbon-based feedstocks such as natural gas, coal, and biomass. In the last few years


there has been an oversupply of methanol on world markets. Methanex has responded by buying up smaller rival companies and in a number of cases mothballing facilities. But Methanex is also a member of the California Fuel Cell Partnership. If it appears likely that methanol will become the fuel for the first generation of fuel cell cars, demand for Methanex’s product should increase significantly. And Methanex will have the capacity to expand production rapidly.

Nuvera Fuel Cells is a privately held

corporation (resulting from the merger of De Nora Fuel Cells and Epyx Corporation) based in Cambridge, MA. Nuvera announced in July 2000 that it was about to ship the world’s first gasoline reformer for testing by four auto companies in the US, Europe and Japan. The company will also deliver a reformer to Plug Power under a US Department of Energy program. If this gasoline reformer is efficient and can be produced at a reasonable price, Nuvera could have the inside track on a very large market.

Regardless of what fuel is used in

cars, fuel cell buses are likely to run on compressed hydrogen. DCH, of Middleton, Wisconsin, manufactures hydrogen sensors and related safety equipment for use in garages and similar spaces.

As the stationary fuel cell power

market grows, so will the demand for technology to process that power. Fuel cells generate direct current, but most electrical uses require alternating current. So the demand for power converters (which have been marketed for decades for use with solar systems)

should increase. Many companies already manufacture these devices, but this entire small industry should enjoy a boost as fuel cells come to market.

As mentioned, stationary systems

may generate more power than needed at any given time. If the system has grid access, the excess power can be sold back to the grid. But this requires specialized equipment. Satcon Technology, of Cambridge, Massachusetts, has developed a utility grid interface for fuel cell distributed power generation systems up to 50 kilowatt. The interface also inverts the low voltage DC power from fuel cells (or other distributed power generation systems) into useable AC power.

Finally, there are companies with a

sizable stake in hydrogen storage technologies. Energy Conversion Devices, for example, has 325 employees based in Troy Michigan. ECD, now 20% owned by Texaco, has developed the metal hydride storage system mentioned earlier. (ECD also has intellectual property in nickel metal hydride batteries, thin film photovoltaic arrays, phase change memory and a “regenerative” fuel cell that has not yet been unveiled.) If low-cost and effective methanol and gasoline reformers cannot be perfected, the metal hydride storage system for hydrogen could prove to be an extremely important niche technology.

A Glimpse at the Hydrogen Economy Much of our discussion has focused

on what is likely to happen with fuel cells in the next five to ten years. How quickly will they reach market? Who


will be first to bring them to market in each category? What fuel will they use in the first generation?

For investors thinking long term,

though, there is the intriguing prospect of the clean, green “hydrogen economy.” In this future vision, hydrogen in various forms will be the nearly universal energy “currency.” It can be produced using many energy sources, and like money in the bank, it can be stored for use when needed. In this hydrogen future, fuel cells will no doubt be one of the most important technologies. But there has been a lot of hype spun about fuel cells and hydrogen. Just how environmentally friendly fuel cell use will be, and how fast the hydrogen economy actually emerges, depends on many factors.

Hydrogen is not a freebie. It bonds

so readily with other elements that essentially it does not exist on earth in a directly usable form. It can be obtained from hydrocarbons (such as natural gas), but this still leaves us largely dependent on fossil fuels. And obtaining it that way still generates carbon dioxide. (Precisely how much CO2 is released depends, as we have seen, on the fuel and how the hydrogen is produced.) If hydrogen is produced at central facilities, there are many ways the CO2 can, in principle, be captured and recycled into useful materials, injected into the ground or seabed, used to grow algae, or prevented in other ways from actually dispersing into the atmosphere. The cost and practicality of these methods, though, is another question.

In theory, producing hydrogen from

water by electrolysis and using it in fuel cells is an almost perfectly benign and

sustainable fuel cycle. But this is true only if the electricity comes from a clean and sustainable source, such as solar or wind power. This could be done locally in “micro” applications. Some people envisage solar cells on our roofs, generating a trickle of electricity that is used (via electrolysis) to produce hydrogen for our cars. Such a system might work in rural areas. But is it viable on a large scale? Do we really want to pave over our deserts with solar panels, or have wind farms on every mountaintop, or lining all our shorelines? And even then, will the hydrogen produced be enough? Obtaining abundant energy for the hydrogen economy may depend on using a combination of sources. But more likely it will also have to await a really major energy breakthrough, such as the development of some kind of clean fusion power.

Even if hydrogen can be produced

cheaply and cleanly on a large, industrial scale, it must then be stored and transported for distribution to end users. Hydrogen a difficult gas to contain. It leaks easily, which makes sending it through pipelines difficult and probably a lot more costly than natural gas. As we’ve seen, compressed hydrogen is bulky. Liquid hydrogen requires a refrigeration process that consumes perhaps one third of the useful energy. And then storing the cryogenic fluid is a challenge.

Probably the best solution would be

to store the hydrogen in a “solid” form, such as absorbed in a metal hydride or, even better, in one of the brand new carbon forms. Metal hydrides are heavy, though. So a tanker truck would be hauling around a lot of metal for a small


amount of hydrogen, and it would be doing so even when empty. Storage in much lighter carbon “nanotubes” is a very promising technology that has only appeared on the horizon within the last few years. Claims have been made for vast storage capacity, but not all of these claims have held up so far under closer scrutiny. This is one area to watch very closely, since breakthroughs here could be especially significant in how fuel cell car commercialization plays out.

In short, clean, unlimited energy

based on hydrogen is not around the next corner. Fusion power, for example, has been promised for many decades, and still it does not seem anywhere near reality. The pure hydrogen economy will require major technological breakthroughs, followed by commercialization of them in several areas. How fast these breakthroughs will come is anyone’s guess.

Balancing this skepticism, though, is

the fact that many in the oil industry seem to be embracing the vision of the hydrogen economy. “The future of BP is in the sun and hydrogen,” says Peter Knoedel, a director of British Petroleum’s German division. “For us, hydrogen is clearly the fuel of the future,” agrees Erhard Schubert, of

GM’s Global Alternative Propulsion Center. And former Saudi oil minister Sheik Yamani has predicted that fuel cells will make a major dent in demand for gasoline by the end of the present decade.

Talk is cheap, of course. But oil

companies have also acted. BP Amoco, Shell and Texaco have all increased their investments in photovoltaics to produce electricity directly from sunlight. Texaco has taken a 20% stake in Energy Conversion Devices, which gives it access to photovoltaics, fuel cells and hydrogen storage technologies. BP Amoco has slowly shifted its revenue stream from crude oil to natural gas, the main potential fuel source for fuel cells.

The vision of a hydrogen future was

first put forth by Jules Verne in 1874. More than a century later, we are still far from reaching that promised land of clean, reliable power running on inexhaustible hydrogen. But advances in energy technology are coming at a remarkable pace. And one of the keystones of any hydrogen future—the fuel cell—will almost certainly be in place in time for the world to take full advantage of those other steps forward. For investors, the challenge is to get in on the action.


APPENDICES Some Benchmarks--A Time Line of Fuel Cell Commercialization The following is a brief summary of what to expect over the next few years on the path to fuel cell commercialization. Failure to keep up with this timetable may indicate a significant problem for a company or technology. 2001 More California partnership vehicles on the road; First Ballard Coleman portable

generators go on sale in stores; First Plug Power 5 kilowatt hom units delivered. First 250 kilowatt commercial stationary fuel cell stacks delivered by Ballard; FuelCell Energy delivers 250 kilowatt plant to Marubeni in Japan. FuelCell Energy delivers 1 megawatt plant for Seattle water treatment.

2002 First DaimlerChrysler buses delivered in Europe; Ballard’s fuel cell engines for

buses go into commercial production. 2003 Wrap up of California Partnership; Fuel infrastructure being put into place;

California ZEV regulations officially come into force. First Honda commercial fuel cell cars come onto the market in Japan??

2004 First commercial fuel cell cars (made by DaimlerChysler and possibly Ford) roll

off assembly lines for sale in California; GM fuel cell car “production ready”; Toyota hybrid fuel cell car??


APPENDIX OF TABULAR DATA Ticker Company $/Share Price/Sales* Mkt Cap** Insider % Inst. % Float** BLDP Ballard Power 53.23 81.3 4741 2 11 87.3 DCH DCH Technology 2.05 47.01 57.1 14 2 24 ENER Energy Conversion Devices 27.16 10.83 530.7 41 11 11.5 FCEL FuelCell Energy 68.9 42.56 1088.0 27 29 11.5 GLE Global Thermoelectric 20 13.24 HPOW Hydrogen Power 7.74 82.56 413.4 64 5 19.2 MKTY*** Mechanical Technology, Inc. 6.53 37.55 231.5 46 11 19.1 PLUG Plug Power 20.2 127.12 888.4 81 6 8.4 SATC Satcon 11.12 154.7 142.0 43 21 7.9 All values from Yahoo as of 4/30/2001 ** Millions *** MKTY owns approximately 1/3 each of PLUG and SATC

APPENDICES OF USEFUL WEB SITES

Additional Resources – Video, pdf and Web “Green Power” http://www.education.lanl.gov/resources/fuelcells/fuelcells.pdf Written by Sharon Thomas and Marcia Zalbowitz at Los Alamos National Laboratory in Los Alamos, New Mexico. Assistance in preparation provided through the Los Alamos National Laboratory, Office of Advanced Automotive Technologies, and the U.S. Department of Energy. RedHerring – FC’s, Ballard and Hydrogen Economy The next Intel? Ballard Power wants to make fuel cells as ubiquitous as CPUs http://www.herring.com/mag/issue80/mag-next-80.html

Fuel-injected stocks - Will fuel-cell stocks become the next page of the New Economy? http://www.herring.com/mag/issue80/mag-injected-80.html

Energy: fuel cells explained How fuel cells generate electricity from hydrogen and oxygen http://www.herring.com/mag/issue80/mag-fuel-80.html Can Iceland run on hydrogen? Why everyone is watching the world's first major effort to replace fossil fuels with fuel cells http://redherring.com/mag/issue80/mag-hydrogen-80.htm Roundup: Who’s Who in the Fuel Cell Race See: http://www.stockhouse.com/shfn/jun00/061500com_fuelcell.asp Renewable Power http://www.videoproject.org/renewablepower.html

Hydrogen and Fuel Cell Resources Technology Partners in the California Fuel Cell Partnership include: Ballard Power Systems, (www.ballard.com)

http://www.education.lanl.gov/resources/fuelcells/fuelcells.pdf

http://www.stockhouse.com/shfn/jun00/061500com_fuelcell.asp

http://www.videoproject.org/renewablepower.html

http://www.videoproject.org/renewablepower.html

http://www.ballard.com/



DaimlerChrysler, (www.chrysler.com) Ford Motor Company, (http://www.ford.com/default.asp?pageid=70&storyid=660), Honda, (www.honda.com) Nissan, (www.nissan-usa.com) Volkswagen, (www.vw.com/) Fuel Partners: ARCO, (www.arco.com) Shell Hydrogen, (www.shellhydrogen.com) Texaco (www.texaco.com) (ENER also participates in the Partnership by virtue of Texaco’s 20% ownership of ENER) Government Partners: California Air Resources Board http://www.arb.ca.gov/msprog/zevprog/zevprog.htm California Energy Commission http://www.energy.ca.gov/ South Coast Air Quality Management District http://www.aqmd.gov/ U.S. Department of Energy http://www.ott.doe.gov/ Recommended: See http://www.rmi.org/images/other/HC-StrategyHCTrans.pdf for an excellent discussion by the Rocky Mountain Institute of a phased transition to a distributed H2 generation system and the costs/savings associated therewith.

Fuel Cell Companies: Ballard Power www.ballard.com Energy Conversion Devices www.ovonic.com Energy Ventures Inc. http://www.energyvi.com/ FuelCell Energy http://www.ercc.com/ Global Thermoelectric http://www.globalte.com/ International Fuel Cells http://www.hamilton-standard.com/ifc-onsi Nuvera Fuel Cells http://www.nuvera.com/

Governmental Resources: California Air Resources Board ZEV (Zero Emission Vehicles) Regulations – select "California Exhaust Emission Standards and Test Procedures for 2003 and Subsequent Model Zero-Emission Vehicles, and 2001 and Subsequent Model Hybrid- Electric Vehicles, in the Passenger Car, Light-Duty Truck and Medium-Duty Vehicle Classes” http://www.arb.ca.gov/msprog/levprog/test_proc.htm Department of Defense Fuel Cell Demonstration Program http://dodfuelcells.com/ DOE Office of Transportation Technologies http://www.ott.doe.gov Energy Efficiency/Renewable Energy Network

http://www.chrysler.com/

http://www.chrysler.com/

http://www.ford.com/default.asp?pageid=70&storyid=660

http://www.ford.com/default.asp?pageid=70&storyid=660

http://www.honda.com/

http://www.honda.com/

http://www.nissan-usa.com/

http://www.nissan-usa.com/

http://www.vw.com/

http://www.arco.com/

http://www.arco.com/

http://www.shellhydrogen.com/

http://www.shellhydrogen.com/

http://www.texaco.com/

http://www.texaco.com/

http://www.arb.ca.gov/msprog/zevprog/zevprog.htm

http://www.energy.ca.gov/

http://www.ott.doe.gov/


http://www.rmi.org/images/other/HC-StrategyHCTrans.pdf


http://www.ovonic.com/

http://www.energyvi.com/

http://www.ercc.com/

http://www.globalte.com/

http://www.hamilton-standard.com/ifc-onsi

http://www.arb.ca.gov/msprog/levprog/test_proc.htm

http://dodfuelcells.com/



http://www.eren.doe.gov Energy Efficiency and Renewable Energy Network http://www.eren.doe.gov/distributedpower/ (How the government is working to remove barriers to distributed power projects across the country.) Environmental Protection Agency, Alternative Fuels http:// www.epa.gov/omswww Frequently Asked Questions re Hydrogen http://www.eren.doe.gov/hydrogen/faqs.html Hydrogen and the Materials of a Sustainable Energy Future http://education.lanl.gov/ United Nations Framework Convention on Climate Change http://www.unfccc.de/ United States Council For Automotive Research http://www.uscar.org/ International Hydrogen Plans and Policies From: http://www.hyweb.de/gazette-e (Excellent graphics and discussion regarding governmental hydrogen and fuel cell funding.) Germany, http://www.hydrogen.org/Politics/germany.html Bavaria, http://www.hydrogen.org/Politics/bavaria.htm Hamburg, http://www.hydrogen.org/Politics/hh.html USA, http://www.hydrogen.org/Politics/usa-main.htm

Additional Online Resources The Hydrogen and Fuel Cell Letter http://www.hfcletter.com Started in 1986 as "The Hydrogen Letter," it is a highly recommended source providing in-depth coverage of the fuel cell and hydrogen industries. Editor and publisher Peter Hoffmann, a former McGraw-Hill World News/Business Week correspondent, has written about these areas since the mid-1970s. Printed and mailed monthly; US $ 230 per year in U.S. and Canada, $250 anywhere else (including air mail). The Hydrogen & Fuel Cell Investor – http://www.h2fc.com/ a comprehensive weekly compilation of news, alliances, editorial analysis and observations from on-site visits. $95 per six months. David Redstone, Publisher

http://www.eren.doe.gov/

http://www.eren.doe.gov/distributedpower/

http://www.epa.gov/omswww

http://www.eren.doe.gov/hydrogen/faqs.html

http://education.lanl.gov/

http://www.unfccc.de/

http://www.uscar.org/

http://www.hyweb.de/gazette-e

http://www.hydrogen.org/Politics/germany.html

http://www.hydrogen.org/Politics/bavaria.htm

http://www.hydrogen.org/Politics/bavaria.htm

http://www.hydrogen.org/Politics/hh.html

http://www.hydrogen.org/Politics/usa-main.htm

http://www.hfcletter.com/

http://www.h2fc.com/


Fuel Cells 2000 is an independent, nonprofit organization dedicated to the commercialization of fuel cell technologies. To SUBSCRIBE to this list server for FC news updates, send a BLANK email (no subject) to: [email protected] Website: Fuel Cells 2000 http://www.fuelcells.org/ U.S. Fuel Cell Council http://www.usfcc.com World Resources Institute http://www.wri.org

About the Authors Tom Koppel is an award-winning freelance writer and the author of “Powering the Future – The Ballard Fuel Cell and the Race to Change the World”. He has contributed feature articles on business, science, history and travel to national magazines in Canada and the U.S. for nearly twenty years. He has been following developments in the fuel cell industry for over ten years, publishing his first work in the field for the Financial Post Magazine and Reader’s Digest. Tom lives on Salt Spring Island, British Columbia. Jay Reynolds is an avid follower of emerging technologies and has worked in oil and gas and primary metals industries as a consultant and inventor. Jay lives in Hood River, Oregon where he enjoys growing giant hybrid pumpkins with his son. Disclosures of Our Investments As of July 27, 2000, Jay Reynolds owned stock in Energy Conversion Devices and from time to time in other companies engaged in fuel cell development. Tom Koppel owns no stock in any fuel cell or fuel cell-related company. The authors are not being compensated by any company referred to within this report.

Disclaimer We do not make specific trading recommendations or give individualized market advice. Information contained in this newsletter is provided as an information service only. We recommend that you get personal advice from an investment professional before buying or selling stocks or other securities. The securities markets are highly speculative areas for investments, and only you can determine what level of risk is appropriate for you. Although we have reported from sources that we deem reliable, no warranty can be given as to the accuracy or completeness of any of the information provided or as to the results obtained by individuals using such information. Each user shall be responsible for the risks of their own investment activities and, in no event, shall we be liable for any direct, indirect, actual, special or consequential damages resulting from the use of the information provided.

http://www.fuelcells.org/

http://www.usfcc.com/

http://www.wri.org/

A Fuel Cell Primer - School of Engineeringjmfent/FuelCell Primer.pdf · A Fuel Cell Primer: The...

Documents

Transcript of A Fuel Cell Primer - School of Engineeringjmfent/FuelCell Primer.pdf · A Fuel Cell Primer: The...