[Note: all prices are in US dollars, not Canadian]
Welcome to the first of our update articles.

Epilogue

Since the publication of the hardcover edition of Powering the Future in Fall 1999, the Ballard fuel cell story has evolved rapidly. As of Spring 2001 it appears that Ballard-powered vehicles and other fuel cell products will likely come to market around the world a bit sooner than was expected a year or two ago. But a lot more competition has emerged in the fuel cell industry. There have also been some important new developments in related fields, especially hydrogen storage.

The race to put the first fuel cell cars onto the market has certainly heated up. In January 2000, Ballard showed the automotive world its latest fuel cell stack, the 900 series, which puts out 30% more power than previous models of the same size. This seemed to confirm Ballard’s lead in the competition to commercialize fuel cell cars. However, only a month later General Motors announced that its own latest fuel cell stack was now "15% smaller than the nearest competitor and half the size of GM’s previous effort." And that summer a GM fuel cell vehicle served as the pace car for the Olympic marathon in Sydney, Australia.

Then, in September 2000 (with Chancellor Gerhard Schroeder in attendance), DaimlerChrysler unveiled its most advanced Ballard-powered car, the Necar 5, which runs on methanol. The corporation reaffirmed its commitment to bring its first fuel cell cars to market in 2004. But a month earlier, Honda had announced that it will begin to sell fuel cell cars as early as 2003. Honda has been experimenting with Ballard fuel cells for several years but also quietly developing its own technology. The first Honda car demonstrated in California uses Ballard cells. One Honda innovation is to use an ultracapacitor to store electricity and use it for quick starts while the fuel cell is warming up.

Other companies also seem to be serious contenders. Toyota is developing a "hybrid" fuel cell car that will use a sizable storage battery to get started and for an extra boost when accelerating or climbing hills. And International Fuel Cells (IFC) of Connecticut, which made the alkaline fuel cells for the space shuttle and marketed the first commercial stationary (phosphoric acid) fuel cells, is now competing directly with Ballard and the others. Hyundai is working already with IFC to use that company’s proton exchange membrane fuel cells in its first commercial car.

There was no more visible demonstration of the fuel cell race than the gala opening of the California Fuel Cell Partnership headquarters in Sacramento in November 2000. Fourteen vehicles, including buses as well as cars, were rolled out for the press and public. Of those, eleven were powered by Ballard fuel cells. So, despite the competition, Ballard still appears to be the world leader in automotive fuel cells.

On the down side, the California Air Resources Board, apparently bowing to pressure from the auto industry, has eased off on the regulations that are due to kick in as of 2003. Until recently, these would have required that 10% of the vehicles sold be extremely low emission types, including 4% of them true zero emission vehicles (essentially requiring them to be fuel cell or battery powered). Under the latest change, this has been cut back to only 2%.

The reduced numbers, along with the lack of movement toward establishing an alternative fuel distribution system (e.g., for methanol) in California, means that the first commercial fuel cell cars will almost certainly be sold only for fleet use, where they can be refuelled at central depots.

Fuelling the Future

What fuel or fuels the first generation of fuel cell vehicles will use remains the most significant unanswered question that overshadows the hoped-for rapid introduction of fuel cell cars. For buses, which can tank up at central depots, this will clearly be compressed hydrogen. For automobiles, though, there is not yet a consensus. DaimlerChrysler still seems committed to methanol. But General Motors and Exxon have promised that by around the end of 2002 they will demonstrate a prototype reformer that would make hydrogen from a special grade of gasoline.

Compressed hydrogen for cars is also beginning to look somewhat more attractive. The compressed hydrogen used in the Ballard and DaimlerChrysler buses is stored in relatively heavy steel tanks at pressures up to around 3000 psi (pounds per square inch). This is a relatively bulky storage system, and an acceptably sized auto tank using compressed hydrogen would limit a fuel cell car’s range to something like only 100 miles. But several companies have made great strides in developing new types of tanks out of multi-layered composite materials, such as carbon fibers and resins. These can store hydrogen at up to 5000 psi, thereby extending the car’s range by about 50%. The tanks also weigh much less than steel, and some types can be molded to fit well into oddly shaped spaces in car trunks. Where average driving distances are somewhat shorter than in North America, notably in Japan, highly compressed hydrogen could yet prove to be a practical system. The same companies are even looking ahead at tanks that could hold hydrogen at 10,000 psi, which would give more than adequate range. However, there are major safety concerns, especially in case of a crash, with so much hydrogen packed into a tank at such high pressure.

Responding to these concerns, other companies, notably Energy Conversion Devices of Michigan, have moved rapidly to develop metal hydride systems that store hydrogen in a solid and safe form. They claim that they can already pack enough hydrogen into a conventional tank size to achieve well over 300 mile range. But a hydride tank would be much heavier than a tank of gasoline. And heat is required to release the hydrogen for use in a fuel cell. However, many in the hydrogen field see hydrides as the answer, and other companies and labs are working on hydride storage as well. Still, none of them will be commercialized in time for the first fuel cell cars.

Ballard itself is giving some backing to a novel technology that derives hydrogen from a solution of sodium borohydride in the presence of a ruthenium catalyst. Sodium borohydride, a derivative of abundant borax, is a safe and environmentally friendly material for a car to carry around in its tank. Once the hydrogen has been removed, the byproduct is, sodium borate, a water-soluble salt that is a common ingredient in laundry detergent and can be recycled. In October 2000 Ballard put up $2.4 million as an advance against prospective royalties and agreed to develop the technology jointly with Millennium Cell Inc. of New Jersey. In February 2001 the two companies announced the first successful demonstration of the system at Ballard headquarters. Ballard has also begun developing a so-called direct methanol fuel cell, which would not need a reformer. This would eliminate one major piece of equipment in a car and eliminate the problem of bringing the reformer up to a relatively high temperature for cold starts. Ballard engineers have already demonstrated a small go kart-like vehicle using a prototype of this fuel cell stack.

On the Buses

Ballard retains a decisive lead in fuel cell buses. The Chicago and Vancouver prototype bus fleets performed satisfactorily for two years and then were taken out of service. But newer Ballard-built buses using the latest fuel cell stacks have been put into service in California as part of the California Fuel Cell Partnership, beginning in Oakland and Palm Springs. Another 20 or so will be put on the roads of California by the year 2003. Meanwhile, DaimlerChrysler committed itself to building its first production series of Citario buses, powered by Ballard cell stacks, for sale to European transit companies. In March 2001 DaimlerChrysler announced that the first 30 of them have been purchased at $1.13 million apiece. Ten different cities, from Madrid to Reykjavik, will each be receiving three buses, with delivery starting in late 2002 and continuing through 2003. As in North America, these will run on compressed hydrogen. The Hamburg transit authority will make hydrogen for its buses from electricity generated by wind power, thereby creating a perfectly clean and carbon dioxide-free power cycle.

Stationary Power

It is not only in transportation that fuel cell technology has moved rapidly towards commercialization. Ballard Generation Systems has continued to sell its 250 kilowatt stationary power systems, which run on natural gas, with about a half-dozen such demonstration units already installed. But serious competition has emerged for stationary power systems of comparable size, which is large enough to power a small office building. Ballard’s PEM system operates at a relatively low temperature, below the boiling point of water. The excess heat that is produced can be recaptured to a degree and used, for example, to heat water for the building. Overall efficiency is around 40 to 42%. But with higher temperature fuel cells, the excess heat can generate steam, which can in turn be used to power a turbine and achieve considerably higher efficiencies.

Two important players with high temperature technologies are challenging Ballard’s position. One is FuelCell Energy, of Connecticut, which has developed a 300 kilowatt molten carbonate fuel cell that is claimed to have an efficiency in the range of 50 to 55%. Siemens-Westinghouse has developed a 200 kilowatt solid oxide fuel cell and combined it with a small turbine. This "hybrid" system may achieve efficiencies of 65% or higher. Because Ballard’s stationary fuel cell stack uses essentially the same materials and simple sandwich-like construction as its transportation fuel cells, economies of scale from the transportation side should give Ballard an edge on the initial cost of its stationary units. However, with the price of natural gas apparently on the rise, fuel efficiency could prove to be a more decisive consideration in the long run. These large stationary systems should be available commercially by late 2002 or in 2003.

Also rapidly approaching commercialization are small stationary home fuel cell units, which Ballard is initially aiming at the Japanese market. In early 2000 Ballard announced a joint collaboration effort with Tokyo Gas and EBARA, which was already a part owner of Ballard Generation Systems. Together, they began designing a one-kilowatt generator that will operate on natural gas and provide a substantial portion of the electricity needs (plus hot water) for individual Japanese houses and apartments that also have connections to the electricity grid. And they have now demonstrated a one-kilowatt prototype of this system. EBARA showed its commitment to this joint venture by injecting $19 million in new money into Ballard Generation Systems, which boosted its ownership from 6% to 11.4%.

However, there is now intense competition in North America for stationary home fuel cells. Both H Power of New Jersey and Plug Power of New York are developing home PEM units in the three to seven kilowatt range, enough to supply sufficient electricity (plus hot water) for houses that are not on the utility grid. And in Canada, Global Thermoelectric is working on similar small stationary units that use a solid oxide fuel cell stack. All of these (including Ballard’s) should be reaching market in 2002 or 2003.

Leading the Way

But the very first Ballard-powered product to go on sale to the public is likely to be a small, portable fuel cell generator for home use in case of power failures, for camping trips and for light industrial use, such as at building sites. This is being developed in a joint effort between Ballard and the huge US company Coleman Powermate, which is already a leading manufacturer of gasoline-powered generators. Ballard and Coleman Powermate promise to have this generator on sale as soon as late 2001. It is expected to run on propane. In a separate development, Ballard entered a deal with huge Matsushita Electric Works of Japan (parent company to Panasonic) to develop a very small (250 watt) portable generator that will run on little tanks of butane. The prototype has already been demonstrated, but no date for commercial sale yet announced.

In short, Ballard remains the apparent world leader in fuel cell technology. And it is the only company that is competing in all the major application areas: transportation, large stationary, home stationary, and small portable fuel cells.

To manufacture the fuel cell stacks needed for all these projects during the next few years, Ballard has built a $40 million 9900 sq. metre (110,000 sq. ft.) manufacturing facility next to its corporate headquarters in Burnaby, B.C. It went into production in December 2000. But looking ahead to the huge expansion required to supply fuel cells for the automobile market, Ballard also raised hundreds of millions of dollars floating new shares in 2000. By the mid-2000, therefore, Ballard was sitting on $569 million in cash, most of it earmarked for construction of a much larger manufacturing facility. The likely location is somewhere in the United States.

Given all the promising news on the fuel cell front, Ballard’s share price soared in 2000, briefly quadrupling to hit dizzying new highs and averaging well over double its 1999 level. Ballard Power remained one of the darling stocks on the NASDAQ and Toronto exchanges. But then came the technology stock meltdown of latter part of 2000, which continued into early 2001. This brought Ballard’s share price back down to just a little above where it was in the later part of 1999. For investors, it has been a wild roller coaster ride, and no doubt many people have been hurt financially in the process. However, for those who placed their bets on Ballard in the mid-1990s and have held for the long term, it has still been an excellent investment. And with the needed money in hand and earmarked for its large manufacturing plant, Ballard Power appears to be in a stable, cash-rich position.

At the company itself, Firoz Rasul has now moved up to chair the Board of Directors while remaining CEO as well. And Lyle (Kip) Smith has assumed the position of President as well as COO.

Meanwhile, the founders of Ballard Power have not been content to rest on their laurels. Geoffrey Ballard and Paul Howard have formed a new company, called General Hydrogen, with Ballard as its Chair. Its aim is to channel investment money into selected companies and technologies (including, of course, fuel cells) that will be at the forefront of the coming "hydrogen age." So the Ballard saga continues. Stay tuned.

Primer PDF

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