About the Book

Table of Contents:
Link to the full table of contents from the book.

Sample Chapter:
View a sample chapter from Powering the Future by Tom Koppel.

Acknowledgements vi

Preface vii

Chapter 1: Miracle Valley

Chapter 2: Engine of the Future

Chapter 3: A Notable Surface of Action

Chapter 4: An Opportunity for Canada

Chapter 5: Small is Beautiful

Chapter 6: Three Guys and a Prayer

Chapter 7: Nugget of Gold

Chapter 8: Going for Broke

Chapter 9: On the Road

Chapter 10: Venturesome but Conservative

Chapter 11: Bad Blood

Chapter 12: Strategic Partners

Chapter 13: Company with a Difference

Chapter 14: The Starting Pistol Has Been Fired

Chapter 15: The Intel of the Auto Industry

Chapter 16: Dare to be Different

Endnotes

Index

SAMPLE CHAPTER

Chapter 7
Nugget of Gold

General Electric’s first PEM fuel cell went into space. Ballard brought it down to Earth, building it out of much cheaper materials and making it run on air and impure hydrogen. But the first practical Ballard fuel cell, one that had to generate power outside the laboratory, went under the sea.

Around the time that Ballard got to work on the military field generator, the company received its first order from a private customer. The buyer was John H. Perry, Jr., a flamboyant Florida entrepreneur and multimillionaire with a flair for self-promotion. His family tree goes back to Commodore Matthew Perry, whose US Navy squadron entered Tokyo Bay in 1853 and forced Japan to open trade with the West. John Perry attended the elite Hotchkiss School and Yale University, and inherited from his father a chain of small newspapers and radio stations, including many in Florida. He settled eventually in Palm Beach, acquiring major interests in the printing and cable television industries.

Perry also took more than a passing interest in American politics, coming to know personally all the presidents from John Kennedy to George Bush, who is, he says, a “kissing cousin” related to Perry on his mother’s side. Perry did not just know them. He bombarded them, and any congressman or senator who would listen, with advice on how to put the nation’s finances in order. He came up with a pet solution, his “national dividends plan,” and spent over $10 million lobbying for it.

Although born into wealth, Perry has never been one of the idle rich. Always a tinkerer, as he says in his autobiography, Never Say Impossible, he loved machinery and enjoyed working on his own car from high school on. Soon he stepped up to airplanes, constructing a plane of his own in the family garage. “I built it—but then I had the sense not to fly it,” he quips. 21 He did learn to fly a commercial biplane, though, and in World War II he served with distinction in the Civil Air Patrol flying coastal patrols and scanning the sea for the periscopes of German U-boats.

After the war Perry’s interest in submarines took a different turn. Living in Florida, he came to enjoy boating, fishing, and spearfishing. Once while diving in the Bahamas, he was chased by a shark and nearly nabbed. He made it back to the boat, pulled himself aboard, cocked his spear gun to take a shot at the marauder and wounded himself. “Sidelined,” he says, “I began thinking that there ought to be a way for hunters to safely hunt sharks underwater. ‘There ought to be a small, not-too-expensive submarine for such work,’ I reasoned. When we got back to Florida I decided to build a prototype.” 22

Perry searched for information on small submersibles and prowled the local stores for building materials: plywood, fibreglass, wire. Then he set aside space in his garage and went to work. His young son Henry enjoyed watching and pitching in. The result, he admits, “looked a little like a cross between a kayak and a blimp—unwieldy, yet light and watertight. Full of confidence, I carried the vessel to the nearby inland waterway, put it in the water and prepared to submerge. Happily, the thing didn’t work. If it had, I’m sure I would have become an accident statistic. As it was, I learned some good lessons and I was still alive.”23

Soon Perry was approaching the challenge with a higher level of professionalism. He moved out of his garage to a small industrial building and hired a skilled welder to build him a proper pressure hull of steel complete with battery power. Again he took his submersible to the inland waterway. Together with an associate, he checked everything, shoved off and put the controls into dive position. The craft went down a few feet, crept forward, then surfaced. He was elated.

Suddenly, though, he felt a thump. He had struck something. Perry threw open the hatch and saw that he had bumped into a small fishing boat. Both boats checked for damage, and everything seemed OK. Perry apologized profusely and returned home, considering his experiment a great success. Then the phone rang. It was the Coast Guard asking whether he knew anything about a collision between a fishing boat and some kind of submarine. Perry owned up to his part in what he thought to be a minor mishap. “Well,” said the guardsman, “that fishing boat sank.”24

But Perry was not deterred. He hired more knowledgeable assistants and built better submersibles. At the time, the late 1950s and early 1960s, oceanographics and undersea research were booming fields. The US Navy was willing to fund research and buy enough small vessels to make the business an attractive one. Meanwhile, Perry and some associates had acquired a private island in the Bahamas. It was an ideal base for undersea research and experimental aquaculture ventures.

By the mid-1960s Perry Oceanographics was building submarines that made headlines. One of them helped to locate a US Air Force bomber that had crashed off the coast of Spain carrying a hydrogen bomb. Perry also worked with the navy to build Hydro-Lab, an underwater laboratory in which scientists could spend extended periods of time.

Throughout the 1970s and 1980s, Perry and his company were at the forefront of minisubmarine construction. Some carried people, others were robot subs operated by remote control. His boats carried such notables as Britain’s Prince Charles on demonstration rides, helped salvage the wreckage of the Space Shuttle Columbia, which exploded just off the Florida coast, and made cameo appearances in James Bond movies. At its peak, the company had more than 250 employees.

In 1987 Perry approached Ballard to have a PEM cell stack built to power one of his submarines, called the PC 1401. It was about the size of a small car and was built to carry a crew of two, who could look out the front through a large Plexiglas bubble. The idea was to replace the battery system with something that took up the same space but could give it much greater range and time underwater. Perry needed a two kilowatt fuel cell system, to be operated on pure hydrogen and oxygen. He wanted it quickly, with delivery in only three months, and was willing to pay $50,000.

The Perry order was a unique challenge for Ballard. With the Mark IV technology then available, the system would require two fifty-four-cell stacks, whereas Ballard had only been building stacks of six and twelve cells. “We had never built that many before,” says Paul Howard, who was in charge of the fuel cell team. “But it was an order. We wanted to respond to it. They had money on the table. I’m sure we didn’t make a profit,” but that was not the point. It was the first Ballard stack that had to operate beyond the controlled conditions of the laboratory, and with people’s safety at stake to boot.

“We figured we would at least cover material costs,” says McLeod, “but the real question was whether or not we could do it. And there was a lot of concern, because we had never built anything that big. Yet everybody understood the significance of why we would do it, and it wasn’t to make money. It was to prove that this technology was a lot more advanced than anybody had ever given it credit for.”

Keith Prater, too, recalls that building the Perry system involved a major and problematical scale up from the small test cells Ballard had been building. The Perry system required a sudden jump to dozens of cells stacked together, with gas manifolds feeding hydrogen and oxygen to all of them efficiently and evenly, to get the required power. “So that was a leap of faith,” says Prater. “Could we actually plumb this thing and make all the cells work? And in the case of the Perry stack, they actually needed two of the things, side by side, put into a round pressure vessel to avoid leaks and so forth.”

But Ballard took the contract and built to Perry’s needs. When the stacks were delivered and installed, it was a historic moment. “That was the first real application of the PEM fuel cell in anything since Gemini,” says David McLeod. When the stacks got to Florida, though, all did not go smoothly. “The installation of it went as expected. There were problems. They originally wired it backwards. They put the oxygen on the hydrogen side.” Eventually, though, it ran and performed well. McLeod and one or two others flew down for a test dive.

But this was not the end of the story. The sub could use even more power, and the Ballard fuel cell was progressing rapidly. In 1989 Ballard replaced the two Mark IV stacks in Perry’s submarine with a single, much more powerful stack of new Mark V cells. This cranked out four and one-half kilowatts but fit into the same space as the system that had totalled only two kilowatts. A year or two later, Ballard would regret supplying Perry with this improved stack, but in the late 1980s, Ballard proudly displayed photos of the Perry submersible in its company brochures.

Unlike the earlier boost in power that came from switching to the Dow membrane, the improvement from Mark IV to Mark V was not due mainly to changes in electrochemistry but to a series of refinements in the cell design. The most important was accomplished by more than doubling the cross-sectional surface area of each individual cell. Not all of this area takes part in the actual electrochemical reaction; some of it is “wasted” on equipment such as bolts and gas manifolds. But a doubling in surface area did not require a comparable increase in the amount of space taken up by these other features. So the active cross-sectional area of the cell, and with it the power output, increased much more than proportionally. As happened at several stages in the development of the Ballard fuel cell, it was good, painstaking engineering more than novel science that made the difference.

Soon after the first Perry system was delivered, Ballard made a second important sale, this time to a much more prominent and prestigious buyer, Britain’s Royal Navy. This came about through a contact that the indefatigable McLeod made at one of the fuel cell conferences he attended together with Watkins. “We ran into a guy from the UK Ministry of Defence,” says McLeod, “one of the back-room guys out of Bath, England. And he was looking at advanced power systems for submarines. He actually had a request for proposal (RFP) in his hand that he was wandering around the floor trying to get people to bid on. I basically ripped this out of the guy’s hand, went and made a photocopy, and said, yes, we’d be delighted to bid on it.”

In fact, just making the bid was an enormous challenge, because the Royal Navy wanted to work towards a system large enough to run a full-size military boat. “This was for a full-up power plant,” says Keith Prater. “The proposal was to scale up the stack and build first, I think, a forty kilowatt unit, and then an eighty kilowatt unit,” and then to gang several of those together to provide enough power for a real submarine. (More recent Canadian government studies of fuel cell submarines foresee a power plant of four hundred thousand kilowatts.)

“It was the first time,” says McLeod, “that any of us had sat down and looked at what the development strategy would be to build something of that size.” But Ballard decided to pour its resources into the proposal, spending around $50,000 of its own money. It was a valuable exercise. McLeod calls it “the best fifty grand that we ever spent. David Watkins and I spent days in my office in the heat of summer putting this bid together.” The briefing document turned out to be three inches thick.

Prater, McLeod, and Ballard flew to England to meet the senior Royal Navy brass. “We made our pitch and impressed the Royal Navy,” says Prater, “but then they had a funding cut.” Not that the money went to someone else. The project simply never went ahead at all. McLeod says there were other complications. The person who had circulated the RFP did not actually have the blessing of key people in the UK Ministry of Defence. “We surprised and embarrassed a whole bunch of people,” says McLeod. “Nobody in the system really knew who we were, and we suddenly showed up and did a presentation about the potential of a fuel cell in a submarine, and basically made them look really stupid.”

But the effort had its benefits. The Royal Navy did have some interest in fuel cells. Its research establishment came up with $50,000 to $75,000 to acquire a pair of Ballard stacks like the first ones that went to John Perry. These were installed in their laboratory and tested, says McLeod, “so they could confirm the data and get a feel for it.” Ballard was quite satisfied with the outcome. “We were really able to leverage from it,” says McLeod. Senior people throughout the military establishments in the UK and the US got to hear about it. “So this gave us a lot of credibility very quickly.” It may even have helped with Ballard’s battery business.

Just as greater attention was being paid to the fuel cell, the battery side of the company also got a major boost in the form of a series of sizeable military contracts. These were to lead, indirectly, to a financial connection that was a turning point for fuel cell development as well.

Amoco had long sponsored Ballard’s ongoing research and development of the rechargeable lithium battery. But the future of this contract was insecure at best, and Ballard was free to manufacture and sell the single-use version of the lithium battery on its own. These were high-powered and complex batteries that operated under pressure and had dangerous chemicals in them. They had to be disposed of carefully and were extremely expensive, which restricted their market almost entirely to the military. To make and sell them, the parent company, Ballard Technologies, had established a battery production subsidiary that was called BTC Engineering and later Ballard Batteries.

As first constituted, Geoffrey Ballard was its president, but it was actually run by three other men. One was the chief scientist, electrochemist Lynn Marcoux, who had known Keith Prater in Kansas and Texas and had played a role in the original Ballard-Schwartz battery work for John Horton in Arizona. Another was Greg Patterson, who became chief engineer. The third was Keith Prater’s father-in-law, Brian Yeoell, an Englishman who had trained as a civil engineer and gained managing and marketing experience working for oil companies in North Africa. Yeoell had immigrated to Canada, where he worked some years with the BC Institute of Technology. By the mid-80s he was semi-retired but was interested in Ballard and offered to help out marketing the single-use batteries.

Because the threesome of Ballard, Prater, and Howard had worked so well together, says Prater, “we thought, hey, let’s create another troika. And those three people were in some ways mirrors of Geoff, Paul and me.” One (Yeoell) was somewhat older and would handle the marketing and entrepreneurial side. One was an engineer. The third was a scientist. “So we thought they could sort of break down the work the same way. But in a sense they were being pushed together, whereas Geoff and Paul and I were attracted to each other.”

The personal chemistry did not work. “Nobody was really in charge,” says Prater. “The three of them were continually battling. Eventually I took over as CEO of this subsidiary.” In the meantime, through his lobbying in Ottawa, David McLeod had heard about an opportunity for Ballard to supply batteries to the Canadian military.

Canada was buying hand-held sniffers that detected poisonous gases and other chemical warfare agents. These portable chemical agent monitors were being manufactured in England, and they ran on a cell that was about twice the length of a largish cylindrical flashlight battery. The Canadian military preferred to buy its batteries from a Canadian source, and Ballard had the capability of making long-lasting lithium batteries to power the devices. After some discussion, the Ballard people felt they had an understanding that an RFP would go out, but that Ballard would in fact be the only available Canadian supplier and was a sure bet to get the contract. Based on this expectation, Ballard began looking for money to set up an assembly line.

Meanwhile, though, the situation got complicated. Yeoell and Prater made the mistake of writing a letter to their contact in Ottawa thanking him for setting up this “sole-source contract.” When the letter was seen by others, the contact had to deny that any such exclusive guarantee had been made. “We had made a balls of it,” says Prater, sheepishly. “But we kept getting signals or indications that we were going to get this contract.” So planning for the assembly line went ahead, which was wise, because the contract eventually did come through.

Before the Canadian contract was in the bag, though, Ballard landed another contract, this one from the US military to manufacture 60,000 much smaller “button type” lithium batteries for night vision goggles. Ballard still had the technology and much of the needed equipment from the Ultra Energy smoke detector battery days. But to go into manufacturing mode would take capital. Up to this point, Ballard had mainly been funded by a large single customer, Amoco. Suddenly, it needed an independent source of money, and quickly. Feelers went out in the Vancouver venture market. This led to a long and intimate business relationship with one of Vancouver’s most respected venture capitalists, Michael J. Brown.

Mike Brown had taken an economics degree at the University of British Columbia and gone on to Oxford as a Rhodes Scholar. He also had a unique financial pedigree. His grandfather, Colonel Albert Malcolm (“Buster”) Brown had founded a Vancouver-based investment company in 1923, and his father, Thomas (Tom) Brown, had become one of the principals in the prestigious local firm of Odlum Brown Ltd. After graduating, Mike Brown first went to work for Odlum Brown but then joined a couple of partners in an independent financial consulting firm.

In 1973 Brown became a founding partner in Ventures West, which managed venture funds that invested in “young technology companies.” By 1987, Ventures West was the leading venture capital company in western Canada, administering $85 million invested in 37 companies, including such successful firms as MacDonald Dettwiler and Associates, Mobile Data International, and Nexus Engineering. In a town dominated by the scandal-ridden Vancouver Stock Exchange (VSE), which was infamous for sleazy deals in which naive investors lost their shirts, Ventures West stood out for its high ethics. “Some say Ventures West is everything the VSE should be and isn’t,” intoned Fleecing the Lamb, a book that exposed these scams.25 Any company backed by Brown and his firm enjoyed a prima facie seal of approval and probity.

In early 1987, Brown was sitting in his dentist’s waiting room thumbing through the magazines when he came upon an article in Popular Mechanics on fuel cells. Brown understood the concept of the fuel cell and remembered the high school experiment in which hydrogen and oxygen were produced by electrolysis. He had a strong interest in science and technology and a personal commitment to environmental protection. In 1990, for example, he was a member of a City of Vancouver task force on atmospheric change. “I had a concern about global warming,” he recalls, “and started writing papers and letters” about it around 1987 or 1988. “I look at things in a fairly long time frame, and I certainly have an environmental bent.”

A few weeks after reading the fuel cell article, Brown got a tip. A financial industry colleague talked to one of Brown’s partners about Ballard’s need for capital to set up its battery production line. Brown hopped into his car, drove across the bridge to North Vancouver, and met with the Ballard principals about their needs. While there, he was given a tour and shown the latest Ballard fuel cell stack. This experience, along with the quality of the Ballard team, whetted his interest in the company. “It was originally the technology that got me excited,” he says, “for sure. But no technology is of any value without people.”

Intrigued by Ballard’s growth potential, he persuaded Canada’s Business Development Bank (BDC) to take an interest as well. Brown got the BDC to ante up around $500,000, while Ventures West came up with some $800,000 for a total of $1.3 million, the first significant infusion of private venture capital in Ballard. Brown took a seat on the company’s board of directors, just as he takes an active role in many of the firms for which he provides seed money. For many years to come, he would be paying the piper and calling the tune. “It’s… worth remembering,” he told BC Business magazine “that Ventures West doesn’t just dish out money. We like to live with a company we finance. That means at a minimum being represented on its board, in some cases even becoming active in its management.”26 Brown himself, for example, served as chair of Mobile Data International (MDI), a connection that was to lead to a key personnel change at Ballard.

Most of the initial $1.3 million was to be spent on setting up the production line for the Canadian and US military batteries. But Brown generally only invests in companies that have the potential to become leaders in their specialized field. Usually the product or service being provided also has proprietary elements that will give the company a long-term competitive advantage. In Ballard’s case it was the fuel cell that really grabbed Brown. Paul Howard heard him call the fuel cell his “nugget of gold,” the part of the company that had true future potential. But there was a basic problem. “You couldn’t write a business plan for what we had” on the fuel cell side, says Keith Prater, which at that time was still little more than just “dabblings at the back of the lab. So it had to be an investment in holding the thing together and helping the battery company make money” while the fuel cell made further progress.

Mike Brown remembers how difficult it was to justify investing in the fuel cell, because it was such an unknown technology. “When I did my due diligence to decide whether we should make the first investment, the question was, who should I phone to find out whether these guys were on the right track or not. Well, the answer was, there was nobody to phone.” There was really no one who knew enough to help him much. “I talked to a few people who sort of set themselves up as experts. A guy at the University of Texas at El Paso. And some guys at Los Alamos. And someone at the Argonne National Laboratory in Chicago. But it was pretty sparse stuff.”

Brown likens the situation to someone having to decide whether or not to invest in the first microcomputer or computer chip. “Who does he phone to see if this thing makes any sense? And the answer, of course, is, you don’t. And I don’t think that comparison is wildly invalid. I think the Ballard fuel cell may have as big an impact on the world around us as the Intel chip.” Not that this view is universally shared, even in the late 1990s, although the media have certainly made the comparison between Intel and Ballard’s potential. “Even now, people think it’s wildly arrogant to speak that way. But think about what could happen here if decent hydrogen storage systems are invented for the car. This thing is going to turn out to be cheaper to make than the internal combustion engine. It’s going to be nicer to drive. It will certainly be more reliable. So people are going to want to have it. I’ve invested in some other things that you could call loosely related to trying to solve environmental problems,” but the Ballard fuel cell “is pretty extraordinary.” It must be special to him; Brown has a large colour poster of the Ballard cell stack hanging on his conference room wall.

He sits back to mull it over. “I’ve got grandchildren,” he says, “My view is that my grandchildren, and certainly their children, will regard fuel cells as standard, normal things, the way you and I look at the internal combustion engine.” But he insists that it is not important to him whether his grandchildren are aware that he played an important part in the fuel cell’s development or not. “I don’t care if anybody else knows. I can sit around in my dotage, talking to myself and dribbling at the mouth, and I’ll know.”

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