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
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
A Fuel Cell Primer: The Promise and Pitfalls
Page 2, Rev 7, May 1, 2001
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.”
A Fuel Cell Primer: The Promise and Pitfalls
Page 3, Rev 7, May 1, 2001
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 wellmeaning 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 mid1980s, 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
A Fuel Cell Primer: The Promise and Pitfalls
Page 4, Rev 7, May 1, 2001
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 mid1960s. 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
A Fuel Cell Primer: The Promise and Pitfalls
Page 5, Rev 7, May 1, 2001
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 wellpublicized “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 “loadfollowing”. 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
A Fuel Cell Primer: The Promise and Pitfalls
Page 6, Rev 7, May 1, 2001
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.
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).
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
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
A Fuel Cell Primer: The Promise and Pitfalls
Page 7, Rev 7, May 1, 2001
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-tofive 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.
A Fuel Cell Primer: The Promise and Pitfalls
Page 8, Rev 7, May 1, 2001
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
A Fuel Cell Primer: The Promise and Pitfalls
Page 9, Rev 7, May 1, 2001
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
A Fuel Cell Primer: The Promise and Pitfalls
Page 10, Rev 7, May 1, 2001
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
A Fuel Cell Primer: The Promise and Pitfalls
Page 11, Rev 7, May 1, 2001
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 nonmetallic tanks will lessen this handicap.)
For the auto industry, and probably for
A Fuel Cell Primer: The Promise and Pitfalls
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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 hydrogencontaining 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
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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
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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-
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quality, reliable power that commercialscale 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
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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
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Page 17, Rev 7, May 1, 2001
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 "baseload" 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 cellfocused 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.
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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
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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.
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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
A Fuel Cell Primer: The Promise and Pitfalls
Page 21, Rev 7, May 1, 2001
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 niftylooking 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 carbonbased feedstocks such as natural gas,
coal, and biomass. In the last few years
A Fuel Cell Primer: The Promise and Pitfalls
Page 22, Rev 7, May 1, 2001
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
A Fuel Cell Primer: The Promise and Pitfalls
Page 23, Rev 7, May 1, 2001
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
A Fuel Cell Primer: The Promise and Pitfalls
Page 24, Rev 7, May 1, 2001
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.
A Fuel Cell Primer: The Promise and Pitfalls
Page 25, Rev 7, May 1, 2001
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??
A Fuel Cell Primer: The Promise and Pitfalls
Page 26, Rev 7, May 1, 2001
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-hydrogen80.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)
A Fuel Cell Primer: The Promise and Pitfalls
Page 27, Rev 7, May 1, 2001
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, LightDuty 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
A Fuel Cell Primer: The Promise and Pitfalls
Page 28, Rev 7, May 1, 2001
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
A Fuel Cell Primer: The Promise and Pitfalls
Page 29, Rev 7, May 1, 2001
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: fuelcell-subscribe@onelist.com
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.
A Fuel Cell Primer: The Promise and Pitfalls
Page 30, Rev 7, May 1, 2001