Printed 10/19/16 Page of

FORTUNE Monday, April 14, 2003

By Stuart F. Brown

From the Apr. 28, 2003 Issue

Mobility has been a catchword in the war in Iraq, and mobility begins with fuel. Diesel fuel may be cheap, but some armored vehicles burn more than a gallon a mile, and the Army spends as much as $400 per gallon transporting diesel fuel to battlefields. So it's a no-brainer for the Army that hybrid diesel-electric engines consuming 20% less fuel would be preferable to its conventional diesels.

The gigantic fuel-hauling costs begin to make sense when you consider that the military doesn't count on finding gas stations out there; it brings all its own stuff. "One of the largest expenses we have in time, money, and resources is keeping our vehicles fueled and moving," says Brigadier General Roger Nadeau. Thus any reduction of the "logistics tail" of tanker trucks, drivers, mechanics, cooks, medics, and so forth that follows fighting forces wherever they go quickly adds up to a big deal.

General Motors built this prototype military hybrid from a beefed-up Chevy Silverado pickup equipped with hybrid components, which were developed by its Allison Transmission division for use in city buses. In addition to saving fuel, a hybrid powertrain enables the truck to drive silently for short distances on battery power, which can provide a tactical benefit. Silence isn't the only advantage: A hybrid truck running on its electric motor is hard to spot through an infrared scope, once its diesel engine has cooled off.

The Army's Tank-automotive and Armaments Command (a.k.a. TACOM) will be testing the prototype under its commercially based tactical truck (that's Combatt) program, as it considers investing in a fleet of as many as 30,000 hybrids by the end of the decade.

In a box on the back is a mast-mounted infrared night-vision device and a prototype fuel-cell stationary generator that can silently produce a household's worth of electricity for up to five hours. That could come in handy down the pike, when the Army may field exotica like electromagnetic railgun weapons.
http://www.planetark.org/dailynewsstory.cfm/newsid/20496/story.htm

INTERVIEW - Ballard CEO sees hydrogen cars commercial by 2013

USA: April 17, 2003

NEW YORK - Vehicles powered by hydrogen fuel cells could be competitive with conventional combustion engine powered cars within 10 years, the CEO of fuel cell developer Ballard Power Systems Inc. (BLD.TO) (BLDP.O) said.
At the moment, cars powered by fuel cells are almost entirely crafted by hand and come with sky-high price tags of up to $2 million each.

But Ballard President and Chief Executive Officer Dennis Campbell said soon the price will drop.

Ballard plans to unveil its next generation of fuel cell engines by 2008 and a more advanced engine a few years after that.

"The next generation we will demonstrate what it will take to become competitive, and the generation after that we will execute what it will take to become competitive," said Campbell in an interview in New York.

He said future generations of fuel cell vehicles will be simpler, have fewer parts, and use less of costly materials such as platinum.

An increased volume of sales and making the switch from hand-crafting to production line manufacturing will cut costs, he said.

In the next two to three years, Ballard expects to have built 180 more fuel cell engines for cars, in addition to the 50 already built, Campbell said.

He said Ford Motor Co. (F.N) is expected to have bought 60 Ballard engines, DaimlerChrysler AG (DCX.N) (DCXGn.DE) should also take 60, Honda Motor Co. Ltd. (7267.T) is expected to buy30, and a European Union program should buy 30 buses powered with fuel cells. Next month, Spain, the first country to receive the buses, is scheduled to unveil one of them, which would operate as a regular city bus in Madrid.

Fuel cells combine hydrogen and oxygen to create energy, emitting only water as a byproduct. But first, hydrogen must be separated from either water or fossil fuels such as natural gas - by methods that use energy from conventional sources or alternative sources such as wind, solar and hydro-power. For this reason, hydrogen is known to many as a currency of fuel, but not a fuel itself.

Campbell said stripping hydrogen from natural gas is the most efficient way to build a supply. But that creates greenhouse gas carbon dioxide, which would then have to be captured to make the method environmentally friendly. In other cases, nuclear power can separate hydrogen from water, which creates no greenhouse gases.

"The menu of solutions is quite broad and going to depend on regional needs and economics," said Campbell. Hydropower in the Pacific Northwest would be a solution there, he said, particularly since hydropower can be much cheaper in off-peak hours.

Although Ballard has yet to turn a profit, Campbell said the company forecasts earnings before interest, taxes, depreciation and amortization to be positive by the end of 2007. EBITDA is a key measure of cash flow. Last year revenues totaled about $120 million, up nearly a third from the year before.

"We are a company that two years ago had no commercial products for sale; today we have six commercial products in the market place," said Campbell. Those products include backup power systems and carbon fibers.

REUTERS NEWS SERVICE

By Phil Yost

BEHIND the wheel of a fuel cell car on Earth Day, I'm driving the squeaky clean vehicle of the future. Hydrogen goes into the tank, electricity goes into the motor, only water vapor comes out the tailpipe.

Or maybe I'm driving into a technological dead end. A future of affordable fuel cell cars is far from assured. But at least the prototypes work. The car I drove looked and felt like a regular car.

The fuel cell car is certainly the vehicle of the future in one sense. It's the basket into which all the eggs have been put in the quest for a zero-emission car. The battery-powered electric car, the darling of a decade ago, has been parked in the back lot.

Outside the Capitol on Tuesday, six fuel cell cars served as a backdrop for, and the subject of, Gov. Gray Davis' Earth Day message.

In his State of the Union Message in January, President Bush vowed to boost federal funding for fuel cell vehicles to $1.2 billion over five years, replacing a program for a super-efficient gasoline car.

And two days after Earth Day, the California Air Resources Board adopted new standards for zero-emission vehicles. Gone was the mandate for all-electric cars. In its place -- in addition to a lot of encouragement for gasoline-electric hybrids and other ultra low-emission vehicles -- was a target of 250 fuel cell vehicles on the road by 2008.

West Sacramento is fuel cell central, the home of the California Fuel Cell Partnership. It consists of eight automakers, four oil companies (since hydrogen is the fuel, they're called energy providers), two fuel cell makers, and six state and federal environmental and transportation agencies.

A fuel cell car is propelled by an electric motor. Instead of importing electricity through a cord into batteries, it carries an on-board generator, the fuel cell. Fuel cells turn hydrogen into electricity through a chemical process.

Fuel cell technology has come this far: It fits into normal-sized cars that perform with the acceleration and speed Americans are accustomed to.

Even so, fuel cell cars are a long way from a cinch to be the next big thing.

Fuel cells are much more expensive than engines, and they are not yet reliable enough. The cars' range of 150 to 180 miles between refuelings is only about 50 percent greater than that of a battery-electric car. The good news is that hydrogen cars can be refueled quickly. The bad news is that a hydrogen distribution system would have to be created.

Also, the pollution story is more complicated than the harmless water vapor coming out the tailpipe. Hydrogen doesn't occur by itself in nature. It has to be separated from something else -- generally water or a fossil fuel -- and separation requires energy. If a solar panel creates the electricity to divide water into hydrogen and oxygen, we've got a pollution-free, renewable system. If a coal-fired power plant creates the electricity to make hydrogen, we're not so far ahead.

Fuel cell research is easy to deride as yet another government pipe dream. Right now it probably pencils out as an investment only under the standards that applied for funding pet food dot-coms. In the short term, the increasing use of gasoline-electric hybrids will provide much quicker gains against pollution.

But I like the fuel cell pipe dream. A pollution-free car would be a great boon. Government is a logical funder of basic research in areas that offer potential benefits to all of society. I'd much rather have my tax dollars chasing this dream than, say, an orbiting space station.

If they spend a couple billion here, a couple billion there, it's just barely over the threshold for real money.

Phil Yost is chief editorial writer of the Mercury News.

by Paul A. Eisenstein       4/28/2003 paul@thecarconnection.com

It’s the first day of Iceland’s summer, all but the odd mound of snow having melted away. But a cold drizzle begins to fall as Jon Bjorn Skulason steps up to the microphone, his audience shivering visibly.

Not to worry, he asserts, clearly intent on seizing the moment, it’s just “a little bit of energy pouring from the sky.”

Energy is one thing Iceland has a lot of, either roaring down from melting glaciers or bubbling up from the volcanic cauldron beneath this island nation. Together, Iceland generates 72 percent of its power from hydroelectric or geothermal sources. But petroleum imports still fuel its fishing fleet, the world’s largest, as well as its automobiles –Iceland’s affluent citizens owning more of them, per capita, than anywhere but the United States.

Like many countries hooked on oil, Iceland desperately yearns to kick its habit, but few nations are in such a good a position to pull it off. And the first step, suggests Skulason, starts today. Well, actually, not quite. It’s been two years since Icelandic New Energy, or INE, began developing a grand transition, but on this first day of Iceland's all-too-brief summer, plans are ready to go into action.

Hydrogen milestone

It’s easy to miss Iceland’s first hydrogen fueling station, a few miles from downtown Reykjavik, along the coast road. Drive by, and it looks like just another outbuilding attached to a conventional Shell service station. But pull alongside and you’ll discover a maze of pipes, hardware and electrical lines leading to a single pump with a curiously shaped nozzle.

“We’ve heard countless stories about drivers who run out of gas with no pump in site,” laughs Benedikt Johnnesson, chairman of Shell’s Icelandic subsidiary. “This is probably the only pump in the world with no customer in sight.”

Not for long, though. INE will soon take delivery of three new buses developed by one of its partners, DaimlerChrysler AG. When they go into operation, they’ll replace four percent of the entire country’s mass transit system. The Citaro bus looks like any other but for the large tanks designed to hold hydrogen compressed to 5000 pounds per square inch. That feeds a fuel cell stack that replaces the diesel engine normally found in a city bus.

Fuel cells are fundamentally simple devices. Hydrogen pumped into one side of the stack passes through a membrane coated with platinum and other catalytic metals. The hydrogen combines with oxygen from the air creating, in this case, 250 kilowatts of current for the bus’s electric motor, enough to perform like a regular diesel.

But unlike a conventional bus, there will be no harmful emissions flowing out the tailpipe, no smog-causing chemicals, no lung-choking particulates, no global warming carbon dioxide, just pure water vapor.

The Reykjavik service station is by no means the first hydrogen pump. There are a number of them in Europe, Japan and the U.S., including several set up to support the California Fuel Cell Partnership, an industry/government consortium currently field-testing dozens of fuel cell-powered automobiles.

Perhaps the most noteworthy difference in the Iceland project is the way hydrogen is generated at the $1 million Shell station. Though it’s the most abundant element in the universe, the lightweight gas isn’t readily available, and needs to be generated from some other source. Most commonly, that’s done by reforming some conventional fossil fuel, such as natural gas, methanol, even petroleum.

Iceland, with its abundant, clean and renewable electricity, is using electrolysis, applying a high-voltage charge to plain water. That splits water into two parts hydrogen, which is stored in tanks, and one part oxygen, which is vented into the air.

Independence date

Energy “independence,” asserts Skulason, “is the key issue.”

There are plenty of places where hydro and geothermal power can be tapped, along with solar, wind and even wave energy, or so proclaim hydrogen’s most vocal proponents. Indeed, some envision a green, mini-OPEC comprising Iceland and other volcanic islands, such as the Big Island of Hawaii, or Lanzarote, in the Canary Islands.

But few expect to see a complete switch to renewables, and certainly not immediately. “You have to have a business equation that makes sense in each market,” cautions Jeroen van der Veer, CEO of Royal Dutch Shell.

That’s why DaimlerChrysler, like most of its competitors, is “pursuing a parallel path,” explains Walter Rau, Senior Manager of DCX’s Fuel Cell Bus Project. “If you have energy like Iceland, why not use it (for electrolysis)? But for the rest of the world, and much of the rest of Europe, it’s a different story.”

Even if electrolysis becomes the hydrogen production process of choice, France might use electricity generated by one of its many nuclear plants. Along the American East Coast, it could be power from a coal plant.

That worries some observers, including some in the environmental movement who had been strong, early fuel cell proponents. “We’re seeing a bit of a backlash,” admits a senior executive at Honda Motor Co. involved in that automaker’s environmental research program.

Cracking debate

The cause wasn’t helped by a recent MIT study questioning whether hydrogen really is the best path to energy independence, or to at least reduce petroleum dependence. The study focused on a concept known as wells-to-wheels – how much energy actually is needed to drive a given distance, and how much pollution is created in the process.

The prestigious institute declared that if hydrogen isn’t generated by renewable power, gasoline/electric hybrids, such as the Toyota Prius or new Ford Escape HEV, would do a better job.

The study has kicked off plenty of debate, complicated by a variety of other challenges standing in the way of a so-called “hydrogen economy.”

Even with an abundant source of energy, such as that found in Iceland, it’s not clear where best to produce hydrogen: at a central refinery like those now producing gasoline and diesel fuel, or at the source, the countless service stations dotting the globe. It’s also unclear how to transport large amounts of hydrogen.

Storing hydrogen onboard a vehicle is an equal challenge. Compressed to 5000 psi, a passenger car, like Honda’s FCX prototype, could get around 150-200 miles on a fill-up. Efforts are underway to double pressures – and range. Liquid hydrogen is denser, but must be cooled to just above absolute zero, itself an energy-intensive process. Researchers also are working on “solid” hydrogen storage technology.

Part of DaimlerChrysler’s parallel path strategy is to develop an onboard reformer using more conventional liquid fuels, such as methanol. General Motors prefers gasoline, extracting its hydrogen as you’re driving.

Abundant costs

One thing is clear: replacing today’s petroleum-powered vehicles and the existing infrastructure will be neither quick, nor cheap, warns Shell’s van der Veer. “It will cost billions over decades,” he believes.

Recognizing the challenge to their existing product line, major refiners are investing hundreds of millions of dollars, with automakers and their suppliers kicking in significantly more. DaimlerChrysler alone has a five-year, $1 billion hydrogen budget.

Fuel cell proponents were heartened when President George W. Bush unexpectedly mentioned hydrogen power in his January State of the Union address. The president promised to “overcome obstacles to taking these cars from laboratory to showroom so that the first car driven by a child born today could be powered by hydrogen, and pollution-free.”

A new Department of Energy program, dubbed “Freedom Car,” will invest $1.2 billion to fund the transition to hydrogen. “That is not enough,” says van der Veer “but it gets us going.”

Most experts predict the first commercial fuel cell vehicles, or FCVs won’t go on sale to the general public before 2010, and GM CEO Rick Wagoner has suggested it will be 2020 before they make a serious dent in the market.

“My personal opinion is that we will need 30 to 40 years” for the technology to become dominant, chimes in DCX Vice President Dr. Herbert Kohler. But while he is “convinced hydrogen is the fuel of the future,” it must still pass public muster.

“If there is no customer acceptance of hydrogen vehicles, no one will buy them,” Skulason warns.

Spooking the customer

Just the mention spooks some consumers. There is the image of the fireball bursting from the German zeppelin, the Hindenburg – even though it is now believed that the hydrogen used to keep the dirigible afloat did not cause the fire. 

In Amsterdam, where another fuel cell project is being readied, many urban bus drivers are refusing to participate. But there’s been far more positive interest in Iceland, Skulason insists, noting the fueling station has been placed in clear public view, rather than in a private bus depot, in order to make people feel more confident.

Simply feeling safe is not enough, though.

Battery-powered electric vehicles, or EVs, failed largely because they couldn’t deliver the range, performance, versatility and price motorists expect from the cars of today. Industry officials know they can’t make the same mistake with fuel cell vehicles.

Price is the big challenge, and automakers are likely to subsidize FCVs initially – Honda is leasing its FCX to the City of Los Angeles for $500 a month, only a small fraction of what it actually costs the automaker.

As to the fuel itself, Skulason says INE can provide hydrogen at a cost comparable to that of the gasoline the Reykjavik service station also sells. But that’s a bit misleading, since the government won’t charge tax on hydrogen, which in Europe accounts for roughly 75 percent of what a consumer pays for petroleum products.

Considering the large portion of their budgets most European nations fund through fuel taxes, Skulason acknowledges they will eventually have to tax hydrogen, too. So there’ll be heavy pressure to drive down hydrogen production costs in the coming years.

It’s this combination of factors that makes the Iceland experiment so compelling, and so critical, experts stress. “The world is watching,” says Shell’s van der Veer. The project is a critical test bed that needs to succed if not just Iceland, but the whole world, will ever switch to a green, hydrogen economy.

by James Amend       4/28/2003

The dilemmas that automakers must solve in order to eventually mass-produce hydrogen fuel cell vehicles are many, and it’s no secret that chief among them is cost.

And solutions to making the environmentally-friendly vehicles affordable to consumers come at premium for automakers themselves. General Motors Corp. reportedly spends more than $500 million annually on hydrogen fuel cell research, but the component that could eventually break the bank might come as a surprise. Right now the fuel cell stack — where in one of nature’s great wonders, hydrogen unites with oxygen to create electricity and power experimental vehicles — costs about 10 times that of an internal combustion engine. Platinum, a key ingredient in a fuel cell stack, trades at roughly $700 an ounce, or about twice the rate of gold.

The biggest challenge

According to a top fuel cell scientist at GM, creating an affordable on-board hydrogen storage system is the number-one challenge looming over researchers.

“The fuel cell is most expensive right now,” said Dr. Christopher Borroni-Bird, director of GM’s Autonomy and HyWire vehicle programs. “But if we get the cost down there, compressed tanks will be the most expensive part,” Borroni-Bird said in an interview before a recent sustainable fuel conference at Detroit’s Wayne State University.

Borroni-Bird won’t say how much the automaker spends on its compressed hydrogen storage systems – a fancy way of referring to tomorrow’s gas tanks – but mass-produced compressed natural gas tanks in today’s automotive applications account for upwards of $2,000 -$3,000 of a vehicle’s entire cost.

And the most recent data available from the U.S. Department of Energy estimates that one carbon fiber-lined, 5000-psi tank will probably cost $640 to manufacture, but that’s only if they’re mass-produced at a rate of 500,000 units annually.

Right now, some experimental tank systems can cost upwards of $50,000.

What’s driving on-board hydrogen storage costs so high, however, shouldn’t be surprising in the least. For starters, to achieve a range that would make hydrogen fuel cell vehicles practical – the industry benchmark is about 300 miles – a compressed hydrogen storage system of at least 10,000 psi is necessary.

That’s a lot of volatile gas under high pressure, so researchers think they’ll need to over-engineer the systems to alleviate safety concerns. In other words, they need a bullet-proof fuel tank.

That’s the approach Irvine, Calif.-based Quantum Technologies  Inc. is taking. The company provides GM with a pair of 10,000-psi tanks that are basically wrapped in Kevlar, the same carbon fiber material found in bullet-proof vests. GM used them on its Hydro-Gen3 mule a month ago to set a new fuel cell driving range record, and Borroni-Bird said the system is actually safer than the fuel tanks on today’s cars and trucks.

But talk to the average Joe about a hydrogen-powered car, and odds are visions of mushroom clouds will come to mind.

Which might be why Borroni-Bird says, rather tongue in cheek, “I think it would help to make them even safer.”

Packaging cost

Packaging issues are driving research cost, too.

The tanks of today’s hydrogen storage systems are bulky, so on GM’s long-distance mules – Opel Zafira vans that have been converted over for quick research on the cheap – the short, fat tanks are stuck in the rear of the vehicle.

Put them in a more convenient spot, as automakers will have to do when mass production comes, and they have to be shrunk to the point where vehicle range is compromised.

GM’s vision for the future is its $10 million HyWire hydrogen fuel cell proof of concept, which it calls a complete reinvention of the automobile. Its center-mounted tanks, however, limit the range to just 18 miles.

On the next-generation HyWire, GM is hoping for a longer, slimmer tank that will improve range. They think weight compromises can be achieved, too.

But it doesn’t solve either dilemma, so like many auto company researchers, Borroni-Bird is looking forward to President Bush’s five-year, $1.2 billion Freedom Fuel proposal. A key element of the president’s program, which experts say will make auto company accounts happy, is investigating on-board hydrogen storage solutions.

“If I were a vehicle manufacturer, it would certainly help my bottom line if someone else built a sub-assembly storage system for the vehicle,” said Tony Androsky, deputy executive director of the U.S. Fuel Cell Council in Washington, D.C., and director of Fuel Cell Initiatives for the Society Automotive Engineers.Between his two roles, Androsky is working to help devise the standards and specifications automakers will have to follow if and when hydrogen fuel cell vehicles become a reality.

Androsky says the progress researchers have made in the last 10 years is “incredible,” but significant work lies ahead in all areas. When it comes to on-board storage in particular, he admits that safety concerns persist.

“There’s a lot of scuttlebutt out there right now as to whether it’s smart to have a [10,000-psi] hydrogen storage tank on-board,” he said.

As for manufacturing costs, Androsky sounded a note of frustration.

“For 10 years we’ve been throwing around the chicken and egg scenario…a high volume market is necessary to keep costs down, but you have to have an infrastructure established in order for high volume to be successful,” he said.

In other words, why debate how it’s going to be stored on a vehicle when it’s still unclear how it’ll be delivered?

That’s yet another dilemma for the DOE, which has already earmarked $39.9 million for hydrogen fuel cell research in 2003. On May 19 it will host an important conference in Berkeley, Calif., to discuss the merit of current research.

Automakers, no doubt, will be watching the developments closely.