Fuel cell membrane/MEA market dynamics

The core technology in PEM fuel cells remains the MEA and membrane. Stack technology is becoming a commodity. But the solution to a low cost long term durable high performance membrane is elusive. The major player Dupont still owns this market with their nafion category of products. Several challengers have risen to try their hand, but really have ben unable to make a major dent in Dupont’s nafion, or the industry need. By my guess the challengers still have only in the very low double digit millions in revenue.

As an example, rapid growing Hoku Scientific, the latest craze for investors, is on a run rate of c. $5 mm in revenue. It is even making a bit of money. However with a market cap of $150 mm, a bit aggressive.

Take note: That market cap is close to the total volumes of commercial PEM fuel cell sales for Hoku’s entire target customer base.

Polyfuel, another membrane producer, took the AIM route, and is of a similar size.

The problem for the membrane and MEA producers is 3 fold:

With the advent of the challengers, their is not a big enough near term market for any of them to grow profitably (the whole PEM fuel cell market in terms of cost for total pilot and commercial units shipped is well less than $200 mm/year)

  • PEM fuel cells are being supplanted in R&D spending by SOFC and DMFC or microPEMs (which either do not need membranes like these, or need far less square footage of membrane).
  • The prices and performance are still not where the fuel cell industry needs them to be to commercialize, even if it can get the rest of its act together.
Not an easy challenge.

Publicly traded MEA Companies:
Polyfuel (LSE:PYF.L)
Hoku Scientific (NASDAQNM:HOKU)

Privately held or divisions:

Getting Serious About Efficiency

You know there’s a real opportunity to cost-effectively reduce energy consumption when the CEO of a supermajor oil company (David O’Reilly of Chevron) argues in national advertisements that improvements in efficiency must become an increasingly significant factor in meeting future energy needs.

As additional evidence, consider the following recent letter to President Bush from Robert Lowe (Chairman of the Real Estate Roundtable, an industry association for real estate interests), arguing for greater federal push for additional energy efficiency measures.

Letter to President Bush from Real Estate Roundtable

It’s easy for all of us in the cleantech community to be seduced by improvements and breakthroughs in clean energy supplies — solar, wind, fuel cells, etc. However, it serves us well to remind ourselves occasionally that the greenest unit of energy is the unit of energy not consumed. While not letting up on developing renewable energy supplies, we should pay at least as much attention (and frankly probably more) to the demand-side of the equation.

Oil prices continue slide – Impact on Cleantech?

Oil prices continue a downward spiral. Oil has dropped to $58 from a high of $70. We have been saying on Cleantechblog for sometime that the oil market was overheated.

Big questions of the day – how does this impact cleantech? A couple of quick thoughts.

– Can a prolonged slide in oil prices and gasoline (I’m now back down to $2.25/gal in California) take the edge off of the hot California hybrid car market?

– Part of the slide is due to warmer weather in key markets. If natural gas prices (still holding up well) follow suit in the US, will that impact solar system demand?

A Must-Read

Even though I daily read many items of professional interest, very rarely do I come across a piece so important and cogently written that I forward it to a long list of friends and family in an effort to educate and shape opinions among a broader public.

This week, I encountered a superb synopsis of the pervasive economic and geopolitical crises that we face as a result of our dependence on oil. It is written by two people who are hardly known for their expertise in energy/environmental issues, but whose voices should nevertheless be heeded: James Woolsey (ex-Director of CIA) and George Schulz (ex-Secretary of State).

Woolsey/Schulz on Oil and Security

The paper makes it abundantly clear that every gallon of oil we consume not only harms our environment, but reduces our national security. It also suggests that the environmental community can and should form a coalition with the security community to capitalize on their deep influence in setting the nation’s priorities, and thereby bring the environmental community closer to (or even inside) the circles of strongest power in DC.

I urge you readers, who are committed to the cleantech community, to spread this Woolsey/Schulz paper to a wider audience.

Rising Solar Prices Threaten the Industry

One of the most disturbing things about the solar industry, the rising star of cleantech, has been its recent rising prices. According to the SolarBuzz.com survey, module prices are up close to 7% in the US this last year, after years of falling.

The main culprits according to most solar watchers are a combination of:

  • High demand driven in large part by the US state and German subsidy programs
  • Tight supply on module capacity
  • Tight supply on silicon capacity

The first issue here is that rising solar module prices threaten the viability of the industry, at a time when it is gaining momentum and trying to reach critical mass. Worse, almost every manufacturer of solar modules is increasing capacity trying to take advantage of the industry growth. As a result, we think the industry may be in for a rude awakening if that capacity increase begins to outstrip demand, or if key subsidy programs underpinning growth falter for political reasons.

The businesses most at risk are the young technology developers, who are spending significant equity dollars on technology development and building to a critical manufacturing and sales base. These are the businesses that the VC community is funding at a tremendous rate. These aren’t businesses that are throwing off tremendous amounts of cashflow to weather a storm.
One concern, if the market does turn down, the major Japanese, European, and oil company solar manufacturers are likely to lower prices to keep their factories full, and really hurt the smaller businesses. Keep in mind, if you launched a solar business 5-10 years ago, reaching a 20 MW plant would put you in the top 20 manufacturers. With that same launch today, looking ahead five years to when your technology is commercialized, you will have to hit perhaps 50-100 MW of capacity to be an elite player. That’s a big difference that I don’t think the investment community has understood yet.

Dawnbreaker Conference Recap

I just returned from the Dawnbreaker technology commercialization conference. The conference is supported by the DOE, and is one of the oldest cleantech technology forums around.
Dawnbreaker had over 50 companies and 100+ strategics in attendance, and a number of very interesting technologies.
Among the more interesting in energy technology:
Alzeta Corporation was there showing a very interesting high efficiency burner. www.alzeta.com

A little company called InvenTek was showing off a unique battery structure, it was a ribbon Li-ion battery with a pancake coil design that exhibits very high power density. www.inventekcorp.com

CeraMem was showing off a restart of a very interesting technology in ceramic membranes for water purification. www.ceramem.com

Renewable Energy and Big Business

A new report from a group with a horrifically unwieldy name — the Renewable Energy Policy Network for the 21st Century (REN21) — indicates a record level of investment in renewable energy worldwide.

REN21 Report “Renewables 2005: A Global Status Report”

The lead author of the report Eric Montinot claims that “Renewable energy has become big business.” What am I missing here? Why do I find it difficult to agree with this assessment?

True, there are a lot of big corporations with a non-trivial involvement in renewables: BP, Shell, GE, FPL, ADM, and so on. And, there is no doubt that the renewable sector is growing rapidly and has grown tremendously from its earliest days. But, it strikes me that claiming renewables as “big business” is hype, premature at best. For the above firms, renewables represent a significant growth opportunity and an excellent PR position, but don’t represent a very large portion of their core business. Furthermore, there’s still an awful lot of “mom-and-pop” in the renewables sector, and an awful lot of green idealism or green policy rather than green money driving activity in renewables.

In any event, what does it really mean anyway for renewables to be “big business”? If it means being like Dell or Wal-Mart — improving the economics and delivery of products/services so that more customers purchase them because they represent truly valuable offers — then that (in my opinion) would be a good thing for the advancement of renewables. If “big business” means being like the average U.S. oil company, utility or auto manufacturer, those are the last role models I would like to see for the renewable energy sector.

A Rant on ExxonMobil

ExxonMobil was the subject of a none-too-flattering profile recently in USA Today, which documented the company’s long-standing opposition to investing in renewable energy technology development:

USA Today Article

Subsequent to running the article, letters to the USA Today editors indicated at least some citizen outrage at ExxonMobil for their shortsighted view. No doubt as a response to this, ExxonMobil late last week was running full-page color ads in local newspapers, touting statistics on how much the company invests annually in new (albeit conventional) energy resource and technology development.

For those who dislike ExxonMobil’s anti-renewables stance as much as I do, I suggest an alternative tactic to writing angry letters to editors: stop buying gasoline from ExxonMobil stations. Whenever possible, I buy gasoline from either BP or Shell stations, because of these corporations’ more progressive position and demonstrated commitment to building businesses in renewables. As a fallback position, I buy from Chevron or ConocoPhillips stations, as the parent companies are at least investing in new alternative energy R&D. ExxonMobil stations, for me, are a last resort.

Maybe if millions of people stopped buying ExxonMobil branded gasoline, the corporate honchos in Texas might take notice. It will be interesting to see if ExxonMobil’s philosophy against renewables changes after the year-end retirement of Chairman/CEO Lee Raymond. Mr. Raymond has long had what seems to be an almost personal animosity against renewables. As a leading candidate for being the poster child for the anti-renewable camp, his is a face (below) that I will not regret seeing move off of the energy stage.

Renewable Energy’s Investment Hockey Stick

Global investments in renewable energy seem to be growing faster than any of us thought. If current trends continue, we’ll soon be seeing the hockey-stick-shaped growth curves that have become iconic shorthand in technology sectors for hyper-paced growth.

According to a report released today (Download – PDF) by the Renewable Energy Policy Network for the 21st Century, or REN21, global investment in renewable energy set a new record of $30 billion in 2004. That’s a far, far bigger number than others have projected, such as the Cleantech Venture Network, which just ten days ago projected that investments in clean technology — a broader category than just renewable energy — would total $10 billion between 2005 and 2009.

(My firm, Clean Edge, projected earlier this year that markets for just three technologies — solar photovoltaics (PV), wind power, and fuel cells — would grow to $15 billion annually by 2014, but that measures purchases of these technologies, not investments in them.)

REN21 is remarkable not just for its large numbers. The report has an impressive pedigree: REN21 was sponsored by the German Federal Ministry for Economic Cooperation and Development and the German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety. Formally established in Copenhagen in June, REN21 is now supported by a steering committee of 11 governments, 5 intergovernmental organizations, 5 nongovernmental organizations, and several regional, local, and private organizations.

The report is one of the most thorough accountings I’ve seen of the state of renewables worldwide. According to its findings:

Renewable energy supplies 17 percent of the world’s primary energy, counting traditional biomass, large hydropower, and “new” renewables (small hydro, modern biomass, wind, solar, geothermal, and biofuels). Traditional biomass, primarily for cooking and heating, represents about 9 percent and is growing slowly or even declining in some regions as biomass is used more efficiently or replaced by more modern energy forms. Large hydropower is slightly less than 6 percent and growing slowly, primarily in developing countries. New renewables are 2 percent and growing very rapidly in developed countries and in some developing countries.

The fastest growing energy technology in the world has been grid-connected solar PV, with total existing capacity increasing from 0.16 gigawatts (GW) at the start of 2000 to 1.8 GW by the end of 2004, for a 60 percent average annual growth rate during the five-year period.

During the same period, other renewable energy technologies grew rapidly as well, says REN21:

  • wind power: 28 percent
  • biodiesel: 25 percent
  • solar hot water/heating: 17 percent
  • off-grid solar PV: 17 percent
  • geothermal heat capacity: 13 percent
  • ethanol: 11 percent

These compare with annual growth rates of fossil fuel-based electric power capacity of typically 3-4 percent (higher in some developing countries), a 2 percent annual growth rate for large hydropower, and a 1.6 percent annual growth rate for nuclear capacity during the three-year period 2000-2002.

Renewable energy investments now come from a highly diverse range of public and private sources, says the report, “aided by technology standardization and growing acceptance and familiarity by financiers at all scales, from commercial finance of hundred-million-dollar wind farms to household-scale micro-financing.” One recent investment trend is that large commercial banks and stodgy energy utilities are starting to notice renewable energy investment opportunities.

Examples of large banks that are “mainstreaming” renewable energy investments are HypoVereins Bank, Fortis, Dexia, Citigroup, ANZ Bank, Royal Bank of Canada, and Triodos Bank, all of which are very active in financing renewable energy. Investments by traditional utility companies, which historically as a group have been slow to consider renewables investments, are also becoming more “mainstreamed.” Examples of utilities active in renewable energy include Electricité de France, Florida Power and Light (USA), Scottish Power, and Endesa (Spain).

All told, it’s an upbeat and encouraging assessment that renewable energy around the world is being embraced by an audience far more important than environmentalists, technologists, or even high-ranking government leaders: the big-bucks investors capable of growing the kinds of large-scale, sustainable markets we’ll need to create a renewable-energy future.

Ford is pushing Ethanol

Ford Motor Company recently announced a partnership to push new fueling stations for its ethanol-ready fleet of 1 million vehicles. Ford Ethanol Article. The actual fuel is E85, a blend of 85% ethanol, 15% gasoline.

I view this as a major win for cleantech. The future for clean fuels is not hydrogen, electric, or gasoline electric hybrids, but likely some liquid fuel blend running in hybrid configurations. And hopefully with a Plug-in hybrid options. These vehicles can run on gasoline, allowing us to deal with the fuel infrastructure problem in an incremental way.

Think plug-in hybrids running on a switchable fuel mix of ethanol and gasoline. That would not only slaughter emissions, and dramatically increase fuel efficieny, but allow our transportation sector to cheaply and easily fuel switch between fuel sources as diverse as grain ethanol, crude oil, natural gas (if GTL ever occurs in a big way), syncrudes, as well as electricity sources: coal, natural gas, hydro and wind.

That is a very viable plan to solve our energy independence problem. In contrast, additional drilling in ANWR and supporting OPEC is only a short term solution.

EDF is Going Public

The French government has announced plans to spin-off 15% of Electricité de France, one of the largest utilities in the world, to the public markets.

As IPOs go, this is going to be a big one. With over US$50 Bil in revenues, EDF is larger than American heavyweights Duke and AEP combined. As these types of companis typically trade at a bit better than 1x revenues, this could be a massive $7-$10 Billion IPO. IPO Article.

The question for investors is how well a sleepy state owned utility can compete in the EU electric industry for the next 50 years.

$450 Bil Phantom Bid to Acquire ExxonMobil

I couldn’t resist reporting on this one. A little one man Chinese investment company registered in New Zealand announced a takeover bid for ExxonMobil at at 25% premium to its current shareprice.

Article on Takeover. The company is called King Win Laurel International Ltd, is basically a guy in his house, and previously made offers for Telstra and the New Zealand Yum Brands franchisee. Those were rebuffed too.
You see these tenders every once in a while, often times they are part of larger investment scams. One typical scam (which this does not appear to be), is to issue a microtender for a small number of shares at below the current share price, and try to get gullible investors to sell into it. Others are just straight-up hoaxes. Article on Telstra Offer.

Competition Is Our Friend

I have long been an advocate of true, effective deregulation of the electricity industry. Of course, when typically uttered in the context of the power sector, the word “deregulation” conjures up images of the California experience of the 1998-2002 era — which was an abomination involving government intervention against market forces at many levels, and thus should not be termed “deregulation” by any thoughtful observer.

Instead, there are several examples of much more workable approaches to electricity deregulation — such as Texas and PJM — that should be examined when weighing the possibility of competition in the power sector. The consulting firm CERA has just recently issued a report assessing the U.S. deregulation experience, and generally concludes that the pros outweigh the cons.

CERA Press Release on Deregulation Study

As CERA’s Lawrence Makovich pointed out in announcing the report: “The expectation embodied in the conventional wisdom — that for deregulatino to be considered a success, power prices in nominal terms should have decreased continuously over the period under consideration — is inappropriate. Power prices needed to fluctuate in order to convey the appropriate signal for economic efficiency.”

Not only do I wholeheartedly agree with this statement, I contend that when considered more broadly, it has significant implications for those of us with environmental interests. Power prices need to fluctuate by time in order to provide clear price signals that enable consumers to capture the true economic value offered by on-peak renewables (most notably, solar) and demand-altering measures. When true economics are masked by regulation or badly-botched deregulation, many environmentally-beneficial energy technologies are hobbled.

Of course, competitive forces in electricity would also work better if subsidies on conventional energy were eliminated (as argued in a previous posting), and if externality costs imposed by energy production/use (most notably, CO2 emissions) were fully and appropriately captured into energy prices. But, one step at a time. Let’s get energy market structures and rules right first, and we can tackle those issues subsequently.