Archived - Canadian Fuel Cell Commercialization Roadmap Update:
Executive Summary

Since 2003, the concept of the Hydrogen Economy has evolved. Over the past five years, technology advances have provided many viable alternative energy and transportation options. Today, a more inclusive vision recognizes a significant contribution of hydrogen and fuel cells towards a cleaner, more diversified energy and transportation mix.

The mass market potential of hydrogen and fuel cell solutions retains its lure for government and others seeking enhanced security, diversity of energy supply and the reduction of pollution and greenhouse gas emissions. National governments around the world, including the U.S., Germany and Japan, are taking an active role in developing technology of benefit to society and the environment. In their policy context, a technology push approach to achieve mass market deployment in the longer term is justified by these "common good" benefits. While they remain committed to developing hydrogen and fuel cell solutions, governments are hedging their investments across a mix of technologies.

This wider vision has moved beyond the long-term commercialization of fuel cell automobiles to encompass commercialization in near-term markets where products can be deployed using current technology and which require a much simpler fuelling infrastructure. The automotive original equipment manufacturers (OEMs) have demonstrated their commitment to the development of fuel cell vehicles through their collective investment of billions of dollars in research and development. They do however, remain dependant on the roll-out of the hydrogen fuelling infrastructure which to date has not received the same level of investment from energy companies. The most promising near-term market applications include materials handling, backup power, transit buses, and portable electronics.

These near-term markets play an important role in paving the way for the commercial fuel cell automobile by providing an early build-out of hydrogen infrastructure while addressing factors such as cost, durability and reliability. They will also provide early gains in the reduction of greenhouse gas (GHG) emissions. The total reduction in GHG emissions anticipated from these near-term markets is estimated to be equivalent to removing up to one million gasoline passenger vehicles from the road over the next ten years. The 20 hybrid fuel cell buses to be deployed in British Columbia alone will provide a 62 percent reduction in greenhouse gas emissions relative to their diesel equivalents based on a fuelling solution with liquid hydrogen supplied from Quebec.

For the past 20 years, Canada has led the way in the global hydrogen and fuel cell sector. Today, the Canadian industry is comprised of 80 relatively small, knowledge-based enterprises. Over the past five years, these companies have made average annual R&D investments of approximately $200 million – a level of investment equivalent to one third of the total industry energy R&D expenditure in Canada. While the industry continues to make significant technical and commercial progress, competition in both investment and end-user markets is becoming increasingly fierce. Large, well financed multinationals operating in the energy, automotive and electronics sectors are active across all fuel cell markets. Canadian public funding of fuel cell programs falls far below many other countries, including the United States, the European Union and Japan.

In light of these considerations, many Canadian companies have restructured their operations and refocused their research and development investments away from the fuel cell passenger car towards product sales in near-term markets. These products include fuel cell forklifts, backup power systems, portable electronics and urban transit fuel cell buses. This strategy has enabled firms to concentrate on refining and marketing applications that will generate early revenue streams, cultivate investor confidence and provide a platform to build consumer awareness and acceptance.

Refocusing their efforts on near-term markets has allowed Canadian fuel cell and hydrogen companies to make significant progress towards cost, performance and reliability targets and infrastructure development. The cost and performance of fuel cells, for example, have improved seven fold over the past five years. The industry is also working with government to create the world's first large scale, integrated demonstration projects – the Hydrogen Highway and the Hydrogen Village.

The Canadian industry continues to maintain its enviable international position. Fuel cells produced by Canadian companies are being rigorously tested and commercially deployed in residential cogeneration (co-gen), backup power, portable electronics, materials handling, and transit bus applications. Canada is a key contributor to the global industry's annual growth rate of 59 percent in fuel cell units. Ballard alone accounted for almost 10 percent of the total 2007 North American production of fuel cells and 22 percent of the residential co-gen and backup power units shipped globally in 2007.

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A Near-term Market Approach

Materials Handling

Canada has been a pioneer in the fuel cell materials handling sector and today, Plug Power and Hydrogenics together, are deploying hundreds of fuel cell lift trucks to Wal-Mart's 24 hour, three-shift warehouses and to GM's assembly plant operations. As sales volumes increase, significant reductions in cost are expected. The market is expected to evolve from battery replacement to purpose built lift trucks as demonstrated by The Raymond Corporation's partnership with Ballard Power Systems to co-develop a new generation of fuel cell lift trucks.

Backup Power

In the domain of backup power, the battery costs required to comply with new government regulations anticipated in many jurisdictions mandating eight hours of backup operation time for emergency communication services are making fuel cell technology more competitive. with existing international partnerships with companies including Dantherm, India based ACME Tele Power Ltd. and American Power Conversion, Canadian fuel cell companies are well positioned for the backup power expected to support demand for 75 000 units by 2010.

Residential Cogeneration

In Japan, a competitive and well coordinated government-assisted program is underway to validate the viability of a one kilowatt (kW) residential cogeneration fuel cell system powered by natural gas, LPG and kerosene. This program includes many multinational companies such as Sanyo, Toyota and Matsushita (Panasonic), as well as the huge Japanese energy companies like Tokyo Gas, Osaka Gas and Nippon Oil. Canadian-based Hyteon and Ballard Power Systems have gained a foothold in this highly competitive near-term market through strategic partnerships with large Japanese utilities. Products from these Canadian companies account for close to one quarter of the total number of units installed.

Portable Electronics

Canadian companies like Angstrom and Tekion are working on alternatives to direct methanol micro fuel cells for handheld and laptop electronic devices. They are addressing the escalating demand for energy density and extended run times that are challenging traditional batteries. Canadian players were instrumental in the International Civil Aviation Organization (ICAO) Dangerous Goods Panel approval of regulatory proposals for aircraft passenger cabin exception for fuel cell cartridges containing formic acid as a direct fuel, and hydrogen in metal hydride storage solutions.

Buses

BC Transit, with funding assistance from the Province and the Public Transit Capital Trust, is leading a project to deploy 20 hybrid fuel cell buses into commercial operation. These buses will be showcased in Whistler during the 2010 Olympic Games. Many Canadian transit authorities are supportive of a broader deployment of fuel cell technology into the community shuttle bus network that exists in many urban areas. Canadian bus manufacturer, New Flyer, recently signed an exclusive agreement with Ballard Power to develop fuel cell shuttle buses for the NorThAmerican market. Internationally, interest in using Canadian expertise is high, including a new project with London (UK) to purchase five hybrid fuel cell buses powered by Ballard fuel cells. Through the formation of numerous consortia and the support of government and transport authorities, there are a growing number of fuel cell bus deployment programs in the pipeline.

Infrastructure

Over the short to medium term, it is expected that the existing industrial hydrogen infrastructure is sufficient to service niche fuel cell markets. Gaseous compressed, cryogenic hydrogen, and waste streams will be sufficient to meet the fuelling needs for materials handling, backup power and buses. with a diverse energy base, Canada has multiple hydrogen production pathways, including renewables, hydro-electricity, and natural gas and coal with carbon capture and sequestration. While Canada produces most of its hydrogen in the chemical and refining industry, it also produces roughly 200 000 tons of waste hydrogen every year. This amount of hydrogen is equivalent to approximately 800 million litres of gasoline. Air Liquide is slated to build the world's largest hydrogen refuelling station in Whistler, British Columbia, dispensing 1000 kg of renewable and waste hydrogen daily. With key players like Air Liquide, Hydrogenics, Sacré-Davey, Dynetek, QuestAir, and in its partnerships with Linde, Canada is a leader in electrolytic production of hydrogen from renewable energy sources, natural gas, compressed gas storage solutions, as well as in the capture of waste hydrogen sources and production and distribution of cryogenic hydrogen. Over the longer term, renewable energy, biomass and nuclear power are expected to be key sources of hydrogen production. Hydrogen produced for the oil and gas industry, which could be potentially redirected to meet the needs of mass fuel cell markets, is also expected to be a source of fuel.

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The Path Forward

While the opportunity for commercial growth has improved significantly since 2003, there are still end-user concerns around cost and reliability. Adopting a new technology into an existing, highly efficient operating system such as a warehouse, telecommunications network or public transportation system, is accompanied with risks for the end-user. There are infrastructure challenges with new fuel systems, different types of safety issues and staff training requirements, among other things. In virtually all applications, fuel cell technology is required to replace well-established, mature, well-supported and cost effective incumbents such as Internal Combustion Engine (ICE) and battery technology. While many end-users see value in the "clean" aspect of fuel cell technology, they do not tend to assign a significant economic value to this attribute, and focus more on the standard value propositions of price, performance and reliability. For mass market applications like the passenger vehicle, traditional cost assessments that examine the economic costs and not the full societal and environmental costs of a product, prevent hydrogen and fuel cell technologies from being competitive with current commercial offerings. However, even in light of these barriers, the market growThfor fuel cell technology into near-term markets has never looked so promising.

It is important to highlight that the fuel cell development driven by the automotive sector is a critical part of the overall development of fuel cells for commercialization. There is significant synergy between automotive and non-automotive fuel cell developments, especially in the areas of fundamental understanding and development of fuel cell components in the supply base. While there are some differences in the requirements from each application, for example only the automotive application requires fast and robust freezestart capability, there are many areas that are synergistic, such as lower cost materials, lower catalyst loadings, and designs that are capable of high volume manufacturing. Ford and Daimler now have their fuel cells developed by Automotive Fuel Cell Cooperation (AFCC), the Vancouver, Canada based successor of the automotive division of Ballard Power Systems. AFCC is one of the world leaders in automotive fuel cell development, and is one of the largest fuel cell development centres in the world.

Fuel cell technology and, perhaps even more importantly, the demonstration and validation of the technology in near-term commercial applications has advanced considerably over the last five years. Canadian stakeholders estimate (2010) global near-term markets demand at 1.1 million units. Further, they expect to achieve durability measures of between 10 000 and 40 000 operating hours, depending on the application, and reliability measures of between 95 percent and 99 percent. Effective commercialization of near-term markets will achieve significant value for longer-term mass markets including keeping existing companies in business, generating profits and renewed investor confidence and interest; continued expansion of employment and training of key skills for future mass markets; building business for component suppliers to develop better materials; and developing a total systems understanding of hybridization technologies, controls strategies and software that could be of direct use in mass market applications. Sustained success in these near-term markets will be critical to building the capacity for Canadian companies required to participate in the longer term mass markets. Key aspects of this capacity building will be the further expansion of the base of skilled technical and manufacturing personnel, increased production capacity and associated university and government research activities. Streamlined and focused R&D programs for commercialization, support to expand global value chains, the efficient local adoption of codes and standards, as well as cost effective product deployments will also help Canada maintain its position as a key player in the global hydrogen and fuel cell industry.

As the hydrogen and fuel cell mass markets in portable electronics, residential cogeneration, and electric mobility open up, this Canadian capability proven in the near-term markets will be sought out by automotive OEMs and other strategic partners needing access to competitive hydrogen and fuel cell technology and know-how. Canada has an opportunity to bolster the commercialization of these home grown technologies to help reduce greenhouse gas emissions and air pollution to mitigate the effects of climate change, and benefit many sectors, including transportation, manufacturing and telecommunications.

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