They probably did not realize it when this was written, but what a great article in favour of VRB power<g>
With mass-market use at least a decade away, fuel-cell makers find a niche; Fuel-cell makers see industrial vehicles as a stepping stone to hydrogen cars; Powering forklifts just might help investors keep the faith
Toronto Star March 22
With hydrogen-powered minivans, sport-utility vehicles and compact cars still 10 to 20 years away from mass production, some players in the fuel-cell industry are turning to less mainstream markets for a near-term lift. Forklifts, to be precise. At least three Canadian fuel-cell companies see forklifts, stackers and other heavy industrial vehicles as a natural fit for non-polluting fuel cells, well before hydrogen-powered cars will be ready to hit the streets in significant numbers and at a reasonable cost. They believe forklifts could be an important stepping stone to the broader commercial introduction of clean-burning hydrogen cars, which will ultimately reduce reliance on oil and production of gases blamed for global warming. General Hydrogen Corp. and Cellex Power Products Inc., both of Vancouver, and publicly traded Hydrogenics Corp. of Mississauga, are betting that within a couple of years forklifts and similar industrial-purpose vehicles will be cost-competitive with electric models that run on batteries.
"If you decide you can't just go for the big win, which is mass-market transportation, you've got to go for the niche markets," said MacMurray Whale, an energy technology analyst with National Bank Financial in Toronto.
"You have to match the technology to a market that can accept it, and the first one a lot of them are focusing on is the forklift market."
Others have already dabbled. The U.S. army developed a fuel-cell forklift in the late 1960s. Germany's Siemens AG demonstrated a forklift in the mid-1990s that was powered by its own fuel-cell technology. In the United States, two of the largest electric forklift manufacturers in the world- Crown Equipment Corp. and NACCO Industries Inc., both based in Ohio- have partnered with Canadian fuel-cell developers in hopes of unlocking the potential of hydrogen power. Not to suggest the push toward hydrogen-powered cars is losing speed. General Motors Corp. continues to spend $100 million (U.S.) a year towards its goal of mass-producing fuel-cell cars by 2010. It wants to have more than a million of the vehicles on city streets and highways within a few years after that.
But optimists aside, the general belief is that fuel-cell automobiles are likely to arrive in car dealerships between 2015 and 2025- if ever. Costs must fall dramatically to compete against the internal combustion engine, safety and storage standards need to be developed, and the hydrogen-fuelling infrastructure must be seeded and nurtured before the dream becomes a working reality. The gap between now and then is a wide one, and fuel-cell companies looking to stick around during that period need some short-term strategies that will build revenue today and keep the faith of shareholders. Tackling the electric forklift market- a U.S. stronghold- is a way to bridge that gap.
"It's a fascinating thing hearing about three Canadian companies trying to dominate an American market," said Michael Brown, chairman of Vancouver-based Chrysalix Energy Management Inc., which invests in early-stage companies focused on hydrogen and fuel-cell technologies. Brown is on the board of many Canadian fuel-cell ventures, including Cellex, which he also co-founded.
So what's the attraction of electric forklifts? For one thing, they represent a surprisingly significant market that can serve as a stepping stone up the vehicle hierarchy. An estimated 260,000 battery-powered forklifts will be sold in 2005, rising to 350,000 by 2010, according to a British government study on niche fuel-cell markets. The market for just forklift batteries is worth between $2 billion and $3 billion a year. Second, the cost of powering a vehicle with lead batteries is higher than with internal combustion engines, making it easier for fuel cells to compete on value. There are forklifts based on combustion engines, but they can't be used indoors because their toxic emissions would poison workers.
"It's a fairly large market potential where the incumbent (battery) technology is not that good," said Whale. "When you look at total cost of ownership, you can bring fuel cells to within striking distance ... What makes sense in general is to go after any market that uses lead-acid batteries."
An electric forklift working three shifts over a 24-hour period typically comes with three lead-acid batteries- one that's in use, one that's charging and one that's cooling. Charging a battery is a slow mechanical process. Batteries must be removed at the end of every shift and replaced with batteries that were previously charged. It's a time-consuming process that affects productivity and increases costs. Companies need workers to charge, maintain and physically transfer the heavy batteries between the charger, the storage racks and the forklifts. Each switchover can last 20 minutes, meaning downtime for the forklift itself.
"Swapping these things is very labour-intensive," said Pierre Rivard, chief executive of Hydrogenics.
There's another downside to the battery model. Each battery, when fully charged, is supposed to keep the forklift productive for as long as eight hours. But like a tape recorder working on AA batteries, the machine becomes sluggish as the battery runs down. For an electric forklift, this drop in power is noticeable within five or six hours and reduces productivity before the end of a normal shift.
A fuel-cell system, such as a hybrid arrangement in which a steady flow of hydrogen keeps a single battery charged, largely overcomes these issues. It takes less than five minutes to fill an onboard storage container with hydrogen gas- or natural gas, if it's used as a source of hydrogen- so there's no need to switch batteries as part of a charging process that can last hours.
A decline in battery performance just doesn't happen with a fuel-cell system. Like a car running on gasoline, a fuel cell delivers a consistent amount of power until the tank is empty. "The driver is simply getting more done," said Brown.
The cost of a fuel-cell forklift might be more than a battery-powered version. But, said Rivard, it's important to consider productivity gains, the reduction in other operating costs, and environmental improvements.
Applied to a larger operation, the economics of fuel cells becomes compelling, he said. But, he added, the technology would be more attractive for new warehouses where costly retrofitting isn't needed. "Just General Motors alone, one customer worldwide, would have 13,000 NACCO (Hyster) forklifts," he said.
General Motors, which owns 19 per cent of Hydrogenics, is working with Hydrogenics and NACCO as part of a government-funded project to demonstrate two electric forklifts powered by a 10-kilowatt Hydrogenics fuel cell. One of the forklifts will be tested at GM's Oshawa plant. Federal Express Canada Ltd. will use the other at its Toronto distribution centre. Cellex Power and General Hydrogen are conducting or arranging similar trials, though, of the two, General Hydrogen- which did not respond to an interview request- is less forthcoming about its plans. Word on the street is that Cellex's forklift partner is Crown Equipment, the largest lift-truck maker in North America. The two companies are targeting customers in food distribution and mass retailing, businesses with large distribution centres that operate around the clock.
Cellex has conducted field trials since 2002, and plans in late 2005 or early 2006 to put commercial fuel-cell forklifts into the hands of its first customer. After that, the company would make the technology available to the wider market.
"2006 would be playing for real," said Tom Hoying, vice-president of sales and marketing. Cellex, he added, would "go full commercial in 2007."
Cellex doesn't own very much of its own intellectual property. Rather, it assesses a customer's needs and builds a product using parts from outside suppliers. General Hydrogen operates in a similar fashion, and last year bought six fuel-cell power modules from Hydrogenics. It was supposed to be part of the government-funded forklift demonstration, but backed out. General Hydrogen's founder and chairman is Geoffrey Ballard, known for founding Ballard Power Systems, the world's most recognized fuel-cell company. Ballard has made known he thinks the forklift market holds the key to the fuel-cell car.
"From material-handling equipment (like forklifts) the fuel-cell engine can migrate into delivery trucks and then to the retail outlets, and from there to the parking lots to bring in customers," Ballard wrote in an essay in Fueling The Future: How The Battle Over Energy Is Changing Everything.
"As sales and production increase, the price will slowly come down the cost curve. At each price break, new markets will open up, until the price and volumes are suitable for the automobile."
This evolving view of the market is supported by management at Hydrogenics, which, unlike General Hydrogen and Cellex, has its own fuel-cell stacks and hydrogen-fuelling dispensers, among other patented technologies. Hydrogenics also differs from its rivals because instead of focusing on forklifts, it hopes to fit its 10-kilowatt power module into different niche markets, including light mobility equipment from John Deere, airport tuggers, lawn mowers and marine applications.
By using the same product set that, with minor tinkering, can work in a variety of applications, the company hopes to sell enough power modules that the price will continue to fall. Lower prices result in more volume, resulting again in lower prices. Hydrogenics generates revenue, maybe will make a profit, and eventually the fuel cell might be cheap enough to put in your car. Like Cellex, Hydrogenics believes it can be competitive with battery-powered forklifts within a year or two.
"Our approach is a fill-the-bases kind of game," said Rivard, using a baseball analogy. "Once you cover the bases you're ready to score. We don't need to hit the ball out of the field to win."
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