The Canadian Fuel Cell Industry — A Profile: Canadian Fuel Cell Commercialization Roadmap

• The Canadian Industry
• Industry Clusters
• International Competitors

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Interest in fuel cells is growing rapidly as more businesses, investors and countries recognize the opportunities and benefits. This is accelerating the rate at which the fuel cell industry will commercialize globally. It is also creating a far more competitive environment.

Canada is recognized as a fuel cell industry leader, along with the US, Germany and Japan. However, many more countries are beginning to make strategic investments to create domestic fuel cell industries.

The Canadian Industry

Canada's leadership in the development and commercialization of fuel cell and related technologies covers most fuel cell types, components and systems supply, systems integration, fueling systems, and fuel storage, along with engineering and financial services.

Employment

As of October 2001, an estimated 1 800 people were directly employed by the Canadian fuel cell industry (companies whose core business is focused on fuel cell and hydrogen activities), with additional jobs supported in sectors that supply and service the industry.⁴ Of the 2001 total, 76 percent were employed in Western Canada (the area west of Ontario). Employment numbers have remained relatively constant in 2002–03, reflecting a trend toward consolidation in the industry.

The Canadian workforce in the fuel cell and hydrogen sector is well educated: 78 percent of the 2001 workforce had a post-secondary education. Of that total, 55 percent held a university degree and 22 percent held a community college education.⁵

Revenues

Revenues reached $96.9 million in 2001. Eighty-two percent of these revenues were based on exports, with sales of equipment (77 percent) being the mainstay of the growing industry. Western Canada was responsible for 70 percent of all revenues. Total revenues for the Canadian industry are projected to reach $165.2 million by 2003 (70 percent growth).⁶

Research and Development

Continued research and development is critical to the development and commercialization of fuel cell and hydrogen products and systems. In 2001 research and development expenditures were significantly higher than revenues reaching $179 million, and representing almost $100 000 per employee. Key sources for capital research activities have come from development alliance partners. The sector is a significant player in the Canadian innovation scene. In 2001, research and development expenditures in the fuel cell and hydrogen sector were similar to that in the Canadian auto industry despite the latter's $92 billion in sales and 132 000 employees. Western Canada was responsible for 87 percent of research and development expenditures in 2001.⁷

Traditionally, much of the research and development has been carried out at the corporate level, often with support from the federal or provincial governments. Ongoing institutional research activities have been carried out at CANMET (Natural Resources Canada), the Canadian Hydrogen Institute in Trois-Rivières and more recently at the National Research Council's Institute for Fuel Cell Innovation in Vancouver. Over the years, a small number of Canadian universities have carried out research projects in fuel cell and hydrogen related topics. This activity is expected to increase over the next few years.

Industry Structure

Worldwide, the fuel cell and hydrogen industry is at the nascent stage. The structure of the industry reflects this early stage of development, as does the lack of statistical information and analyses of this new industry. The Sypher Mueller/NRCan study found that the major activities of respondent firms could be divided into the following areas: 

• Engineering services — 36 percent
• Hydrogen production equipment — 29 percent
• Testing equipment — 25 percent
• Fuel cell stacks — 25 percent
• Electrical components — 21 percent⁸

In Canada and elsewhere, the industry is characterized by a relatively low number of small (mostly under 500 employees) companies engaged exclusively (over 50 percent of revenues derived from the fuel cell and hydrogen related activities) in the sector, with a much larger range of companies involved to a much smaller degree in the supply of parts, systems and services.

This profile builds on the analysis developed by PricewaterhouseCoopers.⁹

The several interrelated layers in the Canadian fuel cell industry can be described as follows: 

• Companies, whose primary focus or goal is fuel cell production and/or system integration, many of which have formed strategic international alliances or are pursuing such alliances
• Major suppliers to the fuel cell producers, a number of which are selling to both foreign and Canadian companies
• Companies that are focused on fueling infrastructure
• Providers of services to the fuel cell industry

There is a symbiotic relationship among the various players and layers of the industry. The number and intensity of the inter-relationships are growing as the industry grows in scope and scale. Of significant interest is the increasing number of large domestic and international corporations that are beginning to participate in the sector. The entry of these stakeholders confirms the long-term growth potential for the sector, and provides the manufacturing, marketing and management experience needed for the industry to successfully mature.

It has already been noted that most Canadian fuel cell industry revenues are derived from export sales. While this reflects the realities of the large overseas markets and their support for new technology adoption, it is important to note that foreign market opportunities are directly related to targeted government support for the introduction and early purchase of these new technologies. In recent years, the same degree of support has not been available in Canada.

Fuel Cell Producers and Systems Integrators

There are 17 companies in Canada whose primary market focus or goal is fuel cell production and/or system integration.

Figure 3. Fuel Cell Producers and Systems Integrators

Company	City	Province	Applications
Source: Fuel Cells Canada, January 2003
Aluminum Power	Toronto	Ontario	Mobile
Angstrom Power	North Vancouver	British Columbia	Portable
Astris Energi	Mississauga	Ontario	Mobile
Ballard Power Systems	Burnaby	British Columbia	Stationary; Portable; Mobile
Cellex Power Products	Richmond	British Columbia	Stationary
DuPont Canada	Kingston	Ontario	Stationary; Portable; Mobile
Energy Visions	Mississauga/Calgary	Ontario / Alberta	Stationary; Portable; Mobile
Fuel Cell Technologies	Kingston	Ontario	Stationary
Global Thermoelectric	Calgary	Alberta	Stationary; Mobile
GreenVOLT Power	Orillia	Ontario	Stationary
Hydrogenics	Mississauga	Ontario	Stationary; Portable; Mobile
Kinectrics	Toronto	Ontario	Stationary
MagPower Systems	Delta	British Columbia	Stationary; Portable
Palcan Fuel Cells	Burnaby	British Columbia	Portable; Mobile
PEM Technologies	Vancouver	British Columbia	Portable; Mobile
PowerDisc Development	Chilliwack	British Columbia	Mobile
Siemens Canada	Mississauga	Ontario	Stationary; Portable

Reflecting the current situation throughout the world, most of these companies are relatively small, falling into the Canadian definition of small and medium sized enterprises as having under 500 employees. The larger companies usually have fewer than 500 employees engaged in fuel cell and related activities. The exception to this situation is Ballard Power Systems. Most of its approximately 1 100 employees are directly employed in activities related to fuel cells and/or systems development and integration.

Many of these producers have formed domestic and international strategic alliances with companies in other industries that will be users of fuel cell technology. These alliances and partnerships provide actual (or potential) access to the financial resources, and the technical, manufacturing and marketing skills required as the industry moves into the commercialization of products and systems.

Figure 4. Suppliers, Service Providers and Fueling Infrastructure^*

Parts and Systems Suppliers

• Advanced Measurement Systems
• Agile Systems
• Azure Dynamics
• Cimtex Industries
• FuelMaker
• Greenlight Power Technologies
• Kinectrics
• NORAM
• Pathway Design & Manufacturing
• Pivotal Power
• Precision H2
• QuestAir Technologies
• SatCon Power Systems Canada
• SMC Pneumatics (Canada)
• SRE Controls
• Technologies M4
• TeleflexGFI Control Systems
• Teleflex (Canada)
• Transformix Engineering
• Turbo Genset
• Tyco Electronics
• Universal Dynamics
• Westaim Ambeon
• Xantrex Technology
• Zetacon

Fuel Cell Service Providers

• Alberta Research Council
• Auto21 Networks of Centres of Excellence (NCE)
• Automotive Parts Manufacturers' Association
• BC Ministry of Competition, Science & Enterprise
• Business Development Bank of Canada
• Canadian Hydrogen Association
• Centre for Automotive Materials andManufacturing (CAMM)
• Chrysalix Energy Management
• Colliers International
• Dundee Securities
• Environment Canada
• Fuel Cells Canada
• Gowlings
• GrowthWorks
• Heating, Refrigeration and Air Conditioning
• Institute of Canada
• Heliocentris Energy Systems
• HSBC Bank Canada
• Human Resource Development Canada
• Hydrogen Research Institute
• Hydro-Québec CapiTech
• Industry Canada (Energy & Marine Branch)
• Institute for Integrated Energy Systems
• Ipsos-Reid (North American Energy Division)
• James Hoggan and Associates
• Korn/Ferry International
• KPMG
  
• Marsh Canada
• McCarthy Tétrault
• National Bank Financial
• National Defence
• National Research Council Canada
• Natural Resources Canada; TEAM and CANMET Energy Technology Centre
• Ontario Ministry of Enterprise, Opportunity & Innovation
• PricewaterhouseCoopers
• Public Works & Government Services Canada
• TD Securities
• Technology Partnerships Canada
• TISEC
• Transport Canada
• University College of the Fraser Valley
• Ventures West Management
• Western Economic Diversification

Fueling Infrastructure

• BC Hydro
• Duke Energy
• Dynetek Industries
• Enbridge Gas Distribution
• ENRG
• General Hydrogen
• HERA Hydrogen Storage Systems
• Kraus Group
• Methanex
• Ontario Power
• Praxair
• Stuart Energy Systems
• Vandenborre Hydrogen Systems

^* Some companies are involved in more than one area.

Suppliers, Service Providers and Fueling Infrastructure

Many more firms and organizations in Canada besides fuel cell producers are involved in the fuel cell industry. This includes a number of companies focused on developing the fueling infrastructure.

Some of these firms are closely aligned with one or two of the producers, but most are involved with many of the industry' players. Many of these companies also provide parts, systems and/or services to foreign as well as domestic stakeholders.

A brief profile of the companies and organizations listed above is contained in Appendix IV.

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Industry Clusters

Michael Porter, a leading authority on industry cluster theory, has described clusters as "critical masses in one location with unusual competitive success in specific fields."¹⁰ Successful clusters usually include a wide range of organizations and agencies, and include, among other characteristics:

• The presence of at least one anchor tenant or player
• Linkages among firms and their supporting technological infrastructure
• Proximity to supportive educational, financial, business and institutional resources
• Self-sufficiency in key inputs, including skilled employees, components and systems, engineering, marketing and financial resources
• Access to government institutions and resources

Fuel cell and hydrogen industry clusters are at an early stage (mature industry clusters are often considered to have at least 15,000 employees). However, it is clear that such clusters are indeed growing in Canada, and that these clusters provide a core capability that can, with aggressive policy and program support from government and accelerated participation by industry, continue to ensure Canada's leading role in this developing industry.

Clusters of fuel cell companies, suppliers, infrastructure developers and service providers exist in the Vancouver area, and are growing in the Calgary, Toronto, Kingston and Montreal areas. All have localized fuel cell and infrastructure developments with considerable growth potential.

Vancouver

British Columbia, specifically the lower mainland around Vancouver, is home to the earliest corporate fuel cell development activities in Canada. With more than 1 200 workers directly employed in the fuel cell and hydrogen industries, the area has arguably the largest concentration of fuel cell expertise in the world. It is also an excellent example of the dynamics of cluster building, whereby the existence of core capabilities can enhance growth in a new industry.

The Vancouver cluster developed from the early activities of Ballard Power Systems. Founded in 1982, the company now has approximately 1 100 employees, 300 of which are located outside the province. Ballard has established relationships with a variety of local suppliers and customers, who themselves have established relationships with others in the region. Some employees from Ballard Power Systems have moved on to found new corporations, while others now work for other companies and organizations in the area.

Ballard Power Systems, and the region, remain largely focussed on PEMFC technology, however other complementary core competencies are focussed increasingly important. These include: parts and systems development, systems integration, fueling infrastructure systems development, engineering, consulting and financial services.

Demonstration projects allowed significant progress to be made in data collection, knowledge of product performance, and in testing the robustness of products as they were prepared for commercial production.

Government support was critical to the early success of the Vancouver cluster. Recognizing the long-term benefits of fuel cell technology, both the federal and provincial governments provided early financial support to the industry. Critically, support was extended not just for research and technology development, but also for demonstration projects. These demonstration projects allowed significant progress to be made in data collection, knowledge of product performance, and in testing the robustness of products as they were prepared for commercial production. Although the region continues to benefit from some limited support for demonstration activities, this support ends in 2003 and there is no currently agreed replacement or continuation.

As the industry has grown, it has attracted services to the region. Local venture capital companies have increased their interest and commitment to the industry and specialized financial institutions have been established. Given the size of the industry in the Vancouver region, it was an appropriate site for the headquarters of Fuel Cells Canada, as well as the headquarters of the National Research Council's Institute for Fuel Cell Innovation. As national institutions, both of these organizations provide services and support industry stakeholders across the country.

University activity has been a part of the cluster development in the region. For many years, the major activities occurred at the Institute for Integrated Energy Systems (IESVic) at the University of Victoria, which has a graduate program in fuel cell technology and core research facilities. Research activities are also carried out at Simon Fraser University in Burnaby. Recently, the University of British Columbia has joined the industry, establishing a small facility and hiring staff recently graduated from the University of Victoria.

Critical activities in BC include:¹¹

• Focus on PEMFC technology
• Core technology developers/integrators: Ballard Power Systems, Palcan Fuel Cell Company, Cellex Power Products, Angstrom Power, PEM Fuel Cells
• Suppliers of specialized products and systems: QuestAir Technology, Pathway Design and Manufacturing, Greenlight Power Technologies, Cimtex Industries, Xantrex Technology, Azure Dynamics
• Fueling infrastructure and storage: General Hydrogen, Methanex, BC Hydro (Powertech), ENRG (PFC eFuels)
• Government institutions: Western Economic Diversification, Industry Canada, National Research Council, BC Ministry of Competition, Science and Enterprise
• Universities: University of Victoria (IESVic), University of British Columbia, Simon Fraser University, University College of the Fraser Valley
• Specialized services: NORAM Engineering and Constructors, Keen Engineering, Fuel Cells Canada, Chrysalix Energy Management, Ventures West Management, GrowthWorks
• Testing facilities:  BC Hydro (Powertech), National Research Council's Institute for Fuel Cell Innovation
• Research and development organizations: National Research Council's Institute for Fuel Cell Innovation, British Columbia Research Inc. (BCRI)

Many of these companies and institutions also have significant relationships with other domestic and international stakeholders.

Calgary

The Calgary area also has the potential to build a fuel cell cluster. Anchor capabilities include Global Thermoelectric, a leading developer of small (5 kW) solid oxide fuel cells, and Dynetek Industries, a leading supplier of cylinders for compressed hydrogen. In addition, Advanced Measurement Systems supplies testing units for Global Thermoelectric. The University of Calgary has respected capabilities in research, as does the Alberta Research Council, where Energy Visions is developing its direct methanol fuel cells.

Toronto

Core fuel cell technology and commercialization capabilities in the Toronto area include Hydrogenics (PEMFC) and Kinectrics (fuel cell integration). The area is also home to Stuart Energy Systems, a major developer and supplier of hydrogen infrastructure systems. As important is the huge potential in the supply industry, both present suppliers (Agile Systems, FuelMaker, SatCon Power Systems Canada, SRE Controls, TeleflexGFI Control Systems, Zetacon), and the many volume manufacturers of parts and components to allied industry sectors, such as automotive, aerospace and defence, white goods, electrical supply and information technology. Local universities have excellent research capabilities. The University of Toronto, McMaster University and others have small but long-standing programs related to fuel cells and hydrogen supply development. Enbridge Gas Distribution has extensive experience in HVAC systems and is able to provide recommendations in product integration.

Kingston

Kingston is the home of Fuel Cell Technologies, a leading integrator of small scale (5 kW) SOFC systems. The company has also developed proprietary aluminium air fuel cell technology. Kingston is the centre of DuPont Canada's fuel cell development. DuPont has a global mandate to develop flowfield plates and membrane electrode assemblies for PEMFC and direct methanol fuel cells. Transformix Engineering develops and supplies power electronics for fuel cells. The city also has long-standing research and testing capabilities at the Royal Military College and is developing research capabilities at the Centre for Automotive Materials Manufacturing (CAMM) which is connected to Queen's University. It provides university-level automotive engineering education as well as considerable investment in automotive research and development, including fuel cells and hydrogen technology. Industry stakeholders have recently organized and incorporated an alternative energy industry organization to foster growth of a fuel cell industry cluster in the area.

Montréal

Montreal has significant activities related to hydrogen fueling and storage. This developing capability originated in the 1980s with the interest of Hydro-Québec in the huge potential for supplying Europe with hydrogen. While Hydro-Québec remains interested in the industry, companies such as HERA Hydrogen Storage Systems, Vandenborre Hydrogen Systems and Hydro-Québec CapiTech now carry the flag for the hydrogen supply industry. Nearby, the Canadian Hydrogen Institute at the Université du Québec à Trois-Riviéres provides world-renowned research facilities and capabilities for the industry. The region has benefited from support by the provincial and the federal governments — especially for research in hydrogen storage technologies.

The Importance of Clusters

Clusters provide the critical mass needed to sustain the fuel cell industry in Canada. As other countries and regions try to lure producers and suppliers to their jurisdictions, clusters will become even more important as the "glue" that keeps the Canadian industry together. Clusters will also accelerate technology and commercialization development due to their potential to pool skills and talents and to focus efforts. In Canada, many stakeholders integral to the various clusters have considerable relationships with one or more industry players in the other regions, as well as relationships with alliance partners and suppliers in other parts of the world. Considerable scope exists within the larger Canadian fuel cell and hydrogen industry for the kind of dynamic relationships that will support industry acceleration across the country. The early evidence from demonstration programs in British Columbia indicates that these inter-regional relationships may be an integral part of the developing industry across the country.

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International Competitors

Other jurisdictions are challenging Canada's leadership position in fuel cell development and commercialization. Recognizing the substantial benefits to be gained from success, government and industry stakeholders in other countries have developed policies and programs that aggressively support fuel cell development and market access for their own companies and institutions.

United States

The U.S. government proposes spending $2.7 billion over the next five years for hydrogen and fuel cell research and development and advanced automotive technologies.

• Freedom Fuel Initiative will develop technologies for hydrogen production and the distribution infrastructure needed to power fuel cell vehicles and stationary fuel cell power sources.
• FreedomCAR Initiative is a partnership with automakers to develop technologies needed for mass production of safe and affordable hydrogen-powered fuel cell vehicles.

In addition, individual states have established their own incentive programs to promote alternate energy sources: 

• California: Incentives, emission targets and demonstration activities
• Michigan: NextEnergy program will provide funding of $79 million over next three years, plus a 700-acre tax-free research zone
• Ohio: Fuel cell initiatives totalling $162 million over three years
• Connecticut: Clean Energy Fund provided approximately $15 million in 2002

Japan

The government provided over $275 million in 2002 to support fuel cell research, development and commercialization. This spending is expected to exceed $380 million per year beginning in 2003.

European Community

European Community will spend $3.3 billion from 2003–2006 on renewable energy, mostly hydrogen and fuel cells. This is a significant increase from the 1999–2002 period, when the average annual spending on fuel cell research, development and demonstration was $140 million.

The European Economic Union's 6th Framework Program (2002–2006) identifies the following research, technological development and demonstration activities pertaining to sustainable development: 

• Estimated $2.5 billion will be dedicated to fuel cells and hydrogen initiatives
• Target of five percent of European Community road transport to be hydrogen-powered by 2020
• Targets for fuel cell cost reductions in stationary power of less than $1 650/kW
• Focus on identifying actions necessary for vibrant fuel cell industry and sustainable hydrogen economy, with ability to target additional expenditures of up to $4.3 billion

Germany

Current annual funding for fuel cell and hydrogen initiatives totals approximately $58 million. Germany's Investing into the Future Program (ZIP) has committed $99 million during the next three years to help fund 44 R&D projects involving fuel cells for stationary and mobile applications.

Singapore

The government has established the Singapore Initiative in Energy Technology Program (SINERGY), which aims to make Singapore a leading player in the development of alternative energy technology. SINERGY is part of the government's effort to promote more clean energy R&D and test-bedding activities for automotive and stationary power applications.

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⁴ PricewaterhouseCoopers and Sypher Mueller. The information compiled in this "Profile" has been obtained from three sources:

1. The PricewaterhouseCoopers Study, Fuel Cells – The Opportunity for Canada, June 2002.
2. The Sypher Mueller/Natural Resources Canada Survey and Report, Economic Impact of Industrial Hydrogen Activity in Canada, June 2002.
3. Information collected by Fuel Cells Canada. Information for Sypher Mueller and for PricewaterhouseCoopers was collected in 2001 and reflects the state of the industry at that time. It is important to note that there is limited statistical information available on the Canadian fuel cell industry, and virtually none on similar activities outside of the country. return

⁵ Sypher Mueller/Natural Resources Canada page 14. return
⁶ Sypher Mueller/Natural Resources Canada pp. 7–11 return
⁷ Ibid., page 12 return
⁸ Ibid., page 6 return
⁹ PricewaterhouseCoopers pp.25–29 return
¹⁰ Porter, Michael, Clusters and the New Economics of Competition, Harvard Business Review (November–December 1998) p. 80.return
¹¹ For a list of some critical cluster activities see: Vancouver's Key Private Sector Industries for Clustering, Vancouver Economic Development Commission, July 2002. page 13. return