Photos by Morris Richardson II / The Detroit News
Robert C. Stempel, chairman and chief executive officer of Energy Conversion Devices Inc., shows off a product. Although ECD has been unprofitable, growing demand for alternative energy has driven its stock price up.
Firm's prospects bright in alternative energy field
Higher fuel prices drive demand for Energy Conversion Devices technology.
By Nick Bunkley / The Detroit News
Photos by Morris Richardson II / The Detroit News
ECD uses nickel metal to make hydrogen-based batteries, solar panels and other energy sources. Its batteries are used in the Toyota Prius hybird car.
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ROCHESTER HILLS - Environmentalists have long pushed alternative energy as a means of cutting pollution, conserving resources and reducing dependence on foreign countries, but their arguments never quite worked financially.
However, with heavy demand for oil and other fossil fuels sending prices to record levels, alternative energy companies are quickly gaining favor with investors and consumers. Futuristic visions laid out decades ago by inventors like Stanford Ovshinsky suddenly seem close to reality, and so do their once-dubious prospects for turning a profit.
Energy Conversion Devices Inc., the Rochester Hills-based company that Ovshinsky founded in 1960, has seen its stock value soar even faster than gasoline prices have been rising.
Shares of ECD are up nearly 150 percent since March, jumping from $7 to almost $17.
"We're entering into a perfect storm for those of us that work in the alternative energy field," said James Croce, executive director of NextEnergy, Michigan's alternative energy research group. "By all accounts this is a sustained supply shortfall. ... We just don't see this as a temporary phenomenon."
The success of Toyota Motor Co.'s Prius - a gas-and-electric hybrid built with technology developed by Ovshinsky - has other automakers looking to jump on board as well. Ford Motor Co. has begun selling the Escape Hybrid SUV this year and demand has been strong.
About 20 companies are evaluating ECD's nickel-metal hydride battery systems, said ECD Chairman and CEO Robert Stempel. A new plant in Springboro, Ohio, is already churning out samples and can be put into high gear whenever orders begin pouring in.
"People are starting to understand that we have some products that are really meeting the needs of the country right now," said Stempel, who came to ECD in 1995 after retiring as chairman of General Motors Corp. "It used to be environmentalists and greener-than-thee people. Now you're talking to people who commute to work and don't want to pay $2 a gallon for gas."
So far, however, ECD's innovations have not translated into profits. It lost $51.4 million during the fiscal year that ended in June, up from $36.2 million in 2003.
In recent months, Stempel said, the company has cut about 10 percent of its payroll, narrowed its focus to four core product lines and begun seeing positive cash flow. It has committed to reaching "sustained profitability" by July 2006.
ECD also got a financial boost from a recent settlement with Toyota and two Japanese battery makers. ECD sued those companies because it hadn't licensed its technology for use in the Prius.
The settlement gave ECD and its battery-making subsidiary, Cobasys, $30 million in licensing fees plus future royalties. It prohibits the Japanese companies from supplying batteries for North America vehicles. .
Hydrogen is seen as one of the most promising future energy sources. Although experts say the era when fuel-cell vehicles replace today's internal-combustion engines is not approaching anytime soon, ECD and other companies have shown that hydrogen already is proving useful.
Earlier this month, DTE Energy Co. dedicated its Hydrogen Technology Park in Southfield, which will be used for at least four years to test the feasibility of hydrogen power. The $3 million facility, paid for jointly by DTE and the U.S. Department of Energy, will extract hydrogen from water to produce 100,000 kilowatt-hours of electricity annually, enough to power a small office complex, DTE spokesman Scott Simons said.
"We're exploring how to make hydrogen a commercially viable product," Simons said. "We're quite a few years away from the commercialization of hydrogen as a fuel for automobiles and residences and businesses, but we certainly know more than we did last year and far more than we did two years ago."
DTE, through its DTE Energy Technologies subsidiary, is helping NextEnergy build a "microgrid power pavilion" at the organization's new headquarters near Wayne State University. When it opens next spring, the power pavilion will serve as a storage and distribution station for hydrogen, natural gas and bio-synthetic fuels.
ECD has overcome one of the biggest obstacles to using hydrogen in vehicles with its solid storage system. Other attempts at hydrogen-powered cars have used compressed or liquid hydrogen, whichare very explosive and run out faster.
While commercialization of that product line is further behind the rest of its products, ECD's work in this area is seen by many in the industry as a huge step forward.
"They now have developed technology that is still rather expensive," said NextEnergy's Croce, "but it's really cracking through some of these barriers in terms of having greater storage capacities."
Stempel notes that ECD is not looking to totally replace current fuel sources. In fact, one of its subsidiaries is actually helping ChevronTexaco Corp. increase oil production.
Flexible photovoltaic panels made by United Solar Ovonic Corp.'s 2-year-old plant across from The Palace of Auburn Hills power a six-acre facility near Bakersfield, Calif. Previously, ChevronTexaco had to use one out of every four barrels of crude just to make the electricity it uses there.
"By using the sun," Stempel said, "we've been able to save that extra barrel."
ECD is perhaps best known for the nickel-metal hydride batteries it introduced in the 1980s and licensed to manufacturers. Most mid-priced cell phones and laptop computers run on nickel-metal hydride. |
