Testimony on Fuel Cell Portable Power Systems

                                                            By

                                                 James D. Balcom

                                President and Chief Executive Officer

                                                       PolyFuel

                Before the Senate Committee on Energy and Natural Resources

                                                     July 17, 2006

I.          Introduction

Good afternoon, Mr. Chairman. My name is Jim Balcom, and I am the President and Chief Executive Officer of PolyFuel, a world leader in engineered membranes for fuel cells.

PolyFuel is headquartered in Mountain View, California, and our leading-edge hydrocarbon membranes enable a new generation of portable and automotive fuel cells that for the first time can satisfy the desire for long-running and cost-effective portable power, and can deliver on the long-awaited promise of clean, efficient automotive power based upon renewable energy sources. PolyFuel’s unmatched capability to rapidly translate the system-level requirements of fuel cell designers and manufacturers into engineered polymer nano-architectures has led to its introduction of best-in-class hydrocarbon membranes for both portable direct methanol fuel cells and for automotive hydrogen fuel cells. Such capability—based on PolyFuel’s more than 150 combined years of fuel cell experience, world-class polymer nano-architects, and a fundamental patent position covering more than 23 different inventions—also makes PolyFuel an essential development partner and supplier to any company seeking to advance the state of the art in fuel cells. Polymer electrolyte fuel cells built with PolyFuel membranes can be smaller, lighter, longer-running, more efficient, less expensive and more robust than those made with conventional fluorocarbon membrane materials.

PolyFuel was spun out of SRI International (formerly Stanford Research Institute), in 1999, after 14 years of applied membrane research. The company is publicly listed on the AIM stock exchange in London.

II.        Portable Power—Catalyzing the Fuel Cell Industry

Mr. Chairman, as the Committee on Energy and Natural Resources conducts oversight and evaluates the Administration’s progress in implementing the Energy Policy Act of 2005, I would like to share with the Committee two extremely important observations:

            1.   While the automotive and stationary markets will allow society to realize the environmental benefits of fuel cells, the success of fuel cells in these markets will be preceded and catalyzed by their success in the portable power market.

            2.   Companies and governments that want to have a leadership role in automotive and stationary fuel cells must play an active role in the introduction of fuel cells into the portable market.

Simply put, widespread adoption of fuel cells, and their long-term commercial viability, depends heavily on their rate of adoption in the power-hungry portable market. The U.S. government’s focus on automotive and stationary markets is based on our need to increase energy independence, reduce emissions from power generation and transportation sources, economically revitalize the automotive sector domestically, and improve the reliability of our electric grid. Unfortunately, this strategy neglects the fact that portable fuel cells will achieve widespread adoption before automotive or stationary fuel cells are commercialized, and the positive impact that commercialization of fuel cells in the portable sector will have on the introduction of automotive and stationary fuel cells. This disconnect is not limited to government policy; companies who elect to focus their energies on the more technologically challenging but less immediate market segments, such as automotive or stationary, will “miss the boat”, even in their own targeted markets. Unlike the automotive or stationary fuel cell markets, the commercialization of fuel cells into the portable market, supported by the development of high performance hydrocarbon membranes, is viable today.

Key distinctions between these three sectors are highlighted in the table below:

Market Dynamics

The global effort to commercialize fuel cells in automotive and stationary applications is primarily driven by a desire to reduce the environmental impact of combustion engines and power plants fueled by hydrocarbon based fuels such as gasoline, diesel, natural gas, and coal.  Additional drivers include a desire to reduce consumption of petroleum in the face of concerns about the stability and longevity of oil supplies, and a need to revitalize both the domestic auto industry and the aging power grid.

Unfortunately, and ironically, the dynamics of the automotive fuel cell markets resemble the pace of the environmental changes caused by global warming.  The best case scenario in the automotive market has fuel cell technology meeting commercial targets outlined by the DOE in 2015, followed by commercial introduction around 2020.  It is likely that significant environmental benefits from fuel cell vehicles will not be realized until the second half of the century.  Similar dynamics exist in the stationary market.

The portable market, on the other hand, is characterized by rapid cycles of new product introduction and technological progression as illustrated by Moore’s Law and the emergence of more and more advanced devices such as cellular phones, laptop computers, personal digital assistants, and media players.  In addition to more computing power, these latest devices are taking advantage of growing wireless connectivity to deliver to users more and more capability such as mobile TV, wireless music downloading, and GPS among others.  Unfortunately, these advanced capabilities require more power and energy than current and future battery technology can deliver.  This deficit manifests itself in decreased runtimes for the “power user” class of consumers.  Content providers, wireless carriers, portable device makers, and battery manufacturers are all feeling the pain and are urgently seeking a solution to this problem.

PolyFuel refers to the gap between the capabilities of available battery technology and the demands of power hungry portable devices as the “runtime gap”.  Recently published studies indicate that portable device power demand is increasing three times faster than the rate of battery improvement.  The Boston Consulting Group predicts that by 2010, the demand for energy is forecast to be four times that which is available using conventional technologies.  Without a better power supply such as a portable fuel cell, users of contemporary personal electronic devices will experience runtimes measured in tens of minutes versus the hours that they will demand. 

Technology Readiness

In addition to more challenging market dynamics, automotive and stationary applications have product requirements and environmental operating conditions that are much more demanding than those in the portable market.  Two of these that are particularly challenging for fuel cells are cost and durability.  As shown in the table above, the costs for today’s automotive and stationary fuel cell technology, either at today’s low volumes or when projected to commercial scale volumes, are well in excess of what is required for mass commercialization.  A similar disparity exists for durability, where to date the industry has only been able to achieve lifetimes that are 40% of what is required for automotive and stationary applications.

Portable fuel cell durability is well within the required operating lifetime of 2,500 – 5,000 hours.  PolyFuel has demonstrated lifetimes of 6,000 hours with the fuel cell membrane, the most critical and sensitive component in a portable fuel cell.

Commercial cost targets for portable power supplies, which range from $5,000 to $10,000/kW, are achievable today with Direct Methanol Fuel Cell (DMFC) technology.  DMFC, the fuel cell technology of choice at most of the leading consumer electronics companies and all of the leading rechargeable battery companies, is widely considered to be ideal for the portable fuel cell application due to methanol’s safety, energy density, low cost, ease of use, and ease of transport.

Regulatory & Infrastructure Requirements

Two other critical areas where the portable market compares favorably against the automotive and stationary markets are regulation and infrastructure.  Before any significant adoption of fuel cells can take place in the automotive market, codes and standards in diverse areas such as hydrogen storage, hydrogen sensing, refueling, car parks, garages, fire, insurance, and building construction need to be adopted.  Even more challenging will be the development of a multi-billion dollar “hydrogen infrastructure” which includes widespread compressed hydrogen gas distribution, filling stations and storage depots.  While the infrastructure issues for the stationary application are relatively simple, regulatory issues are complicated by the fact that many of the relevant codes and standards for stationary devices are different from city to city and state to state.

In contrast, the regulatory and fuel infrastructure issues in the portable market are relatively simple, particularly after the recent decisions by the United Nations and the International Civil Aviation Organization that have set the stage for the carriage and use of methanol fuel cartridges onboard commercial aircraft.  Such fuel cartridges, resembling disposable cigarette lighters, will, in the not-too-distant future, be available in every convenience store and market - which explains why companies such as BiC, Tokai, and Duracell are very active in the development of methanol fuel cartridges for fuel cells.

Portable as a Gateway to Automotive & Stationary

More than any other factor, the key variable that drives rapid technological and commercial progress is market demand.  Significant market demand driven by the “runtime gap” is going to drive portable fuel cells to mass commercialization years before automotive fuel cells become economically viable, or stationary power fuel cells become widely deployed.  Portable device manufacturers engaged in fuel cell systems development include Samsung, BYD, NEC, Sharp, LG, Sanyo, Fujitsu, Hitachi, Toshiba, and Sony; and all of these companies are well positioned to roll-out fuel cell solutions that address the “runtime gap” for multiple products before the end of the decade.

The mass adoption of portable fuel cell technology will have a catalyzing impact on the commercialization timelines for fuel cells in the automotive and stationary markets.  The three markets share many characteristics, including materials, suppliers, and manufacturing processes.  Portable fuel cell technology shares many components with fuel cells for automotive & stationary applications.  Wide and early adoption of portable technologies will provide experience to industry and consumers, develop a supply base, and drive economies of scale which will benefit commercialization of automotive and stationary fuel cells.

It is well understood that government support for research and development is critical to sustain the leadership position that the United States has achieved in the global race towards a fuel cell-based economy.  Less well understood is the importance that government investment into the portable sector will have on both speeding commercialization of fuel cells in the automotive and stationary markets and on the potential for the United States to recover its leadership position in the $5 billion portable power industry that long ago moved overseas.  In an era of a rapid decline in domestic manufacturing jobs, the importance of this potential cannot be understated.

Most of the U.S.-based companies in the portable power arena are working with foreign partners that will have prototypes available within the next 12 to 24 months.  Without sufficient attention by the U.S. government, it is possible that by the time the initial applications which integrate portable fuel cells take root here in the U.S., their design and manufacture will be firmly entrenched offshore.  This scenario is not unlike that of Lithium ion batteries, whose technologies were predominantly developed in the U.S. but commercialized first in Japan, and are now produced exclusively by foreign companies in Asia.

It should be noted that in addition to the growing consumer demand for extended-run portable power in commercial products, U.S. military forces are also actively seeking alternatives to conventional battery technology to extend the run-time of critical sensor, soldier power, communications, and auxiliary power systems. As the Defense Department continues its efforts to transform the U.S. military into a more strategically responsive “network centric” force, I believe it is critical that the Departments of Energy and Defense work more closely to jointly leverage technology development and demonstration activities, and to ensure that the U.S. maintains both the technological capability and surety of supply necessary to promote our overlapping commercial and military interests.

The Energy Policy Act of 2005 contains a variety of initiatives designed to accelerate the commercialization of fuel cell technology. Most importantly, the legislation supports new funding for research and development; it also calls for increased technology validation and establishment of a modest market transition program. This comprehensive approach will complement existing programs, improve technology, and stimulate a reliable supply base. Importantly, I believe this strategy will help deliver the key technologies that must be developed to meet the deployment timelines set forth by the President and Congress. I would urge the Committee to continue advocating full funding for the implementation of the Energy Policy Act of 2005.

III.       Conclusion

Mr. Chairman, as I have outlined in my testimony, the success of fuel cells in the automotive and stationary markets will be preceded and catalyzed by their success in the portable power market. Companies and governments that want to have a leadership role in automotive and stationary fuel cells must play an active role in the introduction of fuel cells into the portable market. Wherever possible, the U.S. Government should increase financial support for research, development, demonstration, and commercialization of portable direct methanol fuel cell technology within the Department of Energy’s broader Hydrogen, Fuel Cells, and Infrastructure program. Additionally, funding should be reinstated for competitively-awarded, cost-shared portable fuel cell programs that were deferred by the Department of Energy in early 2006 based on budget constraints.  

I appreciate this opportunity to appear before the Committee, and I look forward to your questions.

Thank you Mr. Chairman.