Tens of Thousands of Fuel Cell Cars in 2015: Take That, Dr. Chu

Two years ago, when he first slashed hydrogen funding in his proposed 2010 budget, Energy Secretary Steven Chu said fuel cells were still tomorrow's technology, requiring "four miracles" to be economically viable. "Saints only need three miracles," he said.

But miracles happen, and despite all the odds fuel cells are finding customers, and automakers are planning to introduce tens of thousands of cars powered by them in 2015. That hasn't stopped Chu (whose 2009 cuts were reversed by Congress) from proposing a further 41 percent cut to the 2012 hydrogen budget (to $100 million) yet again, or sending out negative signals that hurt the industry.

Chu did scored some reasonable points. No, there aren't nearly enough hydrogen stations (only about 60, with perhaps 25 having public access). Yes, it's hard to store hydrogen at high density, and the liquid form presents all sorts of challenges. Yes, sourcing hydrogen from natural gas (the most popular method) "gives away" some of the energy content of a very valuable fuel. Transporting hydrogen is a huge headache.

The hydrogen bomb
But hydrogen development isn't standing still, and it's arguably moving forward faster than the batteries in electric cars. As more than a few experts pointed out at the "Hydrogen + Fuel Cells 2011" conference in Vancouver this week, fuel-cell stacks are getting smaller and their output bigger. The theme was the industry's growing commercialization, which is why a 40 percent DOE cut didn't matter as much as it might have a few years ago.

According to Andreas Truckenbrodt, CEO of the Automotive Fuel Cell Cooperation company that combines the hydrogen research of Ford and Daimler, automakers are very committed, and planning on ramping up volumes quickly. Mercedes, Honda, Hyundai-Kia and Toyota are all planning on introducing fuel-cell cars in 2015, with what he said was "tens of thousands of cars per manufacturer," moving to as many as 100,000 per company by 2020.

Some key quotes

• Christian Mohrdieck, director, fuel cell and battery development, Daimler: "Hydrogen is a core technology and we're totally committed to commercialization...We don't have final numbers, but there will be serious production volume from 2015 onward. We expect to see hundreds of thousands of vehicles from all manufacturers worldwide. Our price target is parity with a diesel hybrid."
• Joshua Mermelstein, senior fuel cell engineer, Hyundai-Kia: "Pre-production volumes between 2012 and 2014 will be in the hundreds, and in the tens of thousands in 2015 and after. We would like to see fuel-cell cars priced at less than $50,000, which is achievable through mass production of the fuel-cell stacks."
• Charlie Freese, executive director, fuel cell activities, GM: We have no current production plan, but we've already built fleets in the hundreds -- the next step is in the thousands. The economies of scale only come in high volumes."

Dan Carter, manager of Fuel Cells Today trade journal, said he sees big growth ahead for hydrogen cars. "It has the potential to grow into a very large market," he said.

Having the cars on the ground in volume should spur development of hydrogen stations, and it really helps when a steady stream of government funding is assured. Nilguen Parker, who oversees fuel-cell funding at the German Ministry of Transport, told me that her country has only 22 stations now, but a major $2.1 billion public-private partnership that runs through 2016 is planning to put many more in place by the 2015 introduction of the cars:

In Germany, hydrogen funding is no longer an annual political competition -- we are committed. It's important to have collaboration. We believe in a portfolio approach. Batteries alone can't meet all our transportation needs.

Fuel cells beyond transportation
It's not all about the cars. Most of the exhibitors at the Vancouver show were offering large stationary fuel cells that since 2007 have found a niche as back-up or off-grid power for the telecoms, cable TV operators, hospitals and many other applications.

United Technologies' UTC Power, for instance, sold hundreds of its now-discontinued PureCell 200 units (up to 400 kilowatts), two of which are pumping out power at a Connecticut casino. There's a market because they save money, up to $2 million annually, said Bob Byron, UTC's director of business development.

A company called ReliOn has 3.7 megawatts of installed stationary fuel-cell capacity, 100 customers in 28 countries, and tens of millions of operating hours. Of course, volume isn't profit and some of these companies aren't making money yet. One of Canada's biggest players, Ballard Power Systems, isn't profitable yet, but it's seeing a path to profitability.

Hydrogen forklifts?
Probably the biggest volume in hydrogen vehicles right now is in, believe it or not, forklifts. Walmart (WMT) is using them in a giant distribution center in Canada. A Bridgestone-Firestone plant in South Carolina has an all-hydrogen fleet. Another market is portable power. A German company, Smart Fuel Cell, has found a niche -- selling 20,000 EFOY generators in Europe and Canada, and soon the U.S. It's partnered with RV manufacturers so people can plug in their microwaves and watch TV at remote campsites. The generators are more expensive than gasoline alternatives, but they're also quiet and zero emission.

There's money to be made selling fuel cells, though it's an industry still dependent on a lot of research to move forward with profitable products. DOE's cuts hurt. "It's a blow, no doubt about it," said Robert Rose, executive director of the hydrogen-supporting Breakthrough Technologies Institute.

Rose isn't optimistic that Chu's cuts can be reversed, though advocates persuaded a dozen Senators to send a letter asking that the budget be restored. That's unlikely at this point. To get their federal money back, the fuel-cell folks will to have to prove their case with dramatic successes in the marketplace. But by then they probably won't need government handouts.

Related:

• Carmakers Still Committed to Fuel Cell Vehicles
• The EV vs. Fuel-Cell Wars Heat Up as the Cars Head to Market