Garth, Andy, Nic: Was out of town without my laptop, or would have answered sooner. First, I agree with Kathy - I thought Garth's intro was funny, not offensive. And I am delighted that the three of you (and others) want to discuss the issues in an intelligent way. I actually enjoy sarcasm and cheap shots aimed at me, as long as they are in notes that are content rich. That is part of what makes this forum so much fun.
Now, let me explain why all of you are wrong. (Just kidding - we won't know for years who is right or wrong.) But obviously, I disagree on a number of points, starting with Garth's post:
1. "don't forget that ERC (and Ballard) are still only talking about niche stationary power markets, such as remote areas, need for reliable, clean signal power, etc."
No, ERC is not aiming at a niche market. It is aiming at mainstream utility power applications, and hopes some day that its molten carbonate fuel cells will supplant all forms of burning fossil fuel, including gas, coal, and oil. Its 2 megawatt design is aimed to be big enough, efficient enough, and cheap enough that it will make sense for utilities (and large users) to buy them to generate power. Ballard's 250 kilowatt design will be too small, too expensive per amount of power generated, and, since it runs too cool to make use of cogeneration, not efficient enough to be of interest for any but niche markets, at best.
What percentage of the multi-billion dollar utility market ERC might achieve depends on a number of variables:
A) Capital cost - This is a big hurdle, since fuel cells will be more expensive to buy than conventional power plants for quite some time, probably forever. That is not inherently a showstopper, because of the next point:
B) Operating costs - ERC's design should have much lower operating costs than a conventional plant, because it can run unattended and is vastly more efficient in its use of fuel, getting twice or more as much energy out of a given fuel than a conventional fuel burning plant. This is the trade off with capital costs, and how it shakes out depends largely on energy costs. If gas and oil stay cheap, utilities may not want to pay higher capital costs to gain efficiency. Let there be some instability in the Middle East and energy prices soar, then efficiency becomes worth a lot.
C) Environmental considerations: ERC and Ballard are in the same boat on this one, since fuel cells are so clean. Both would benefit from strict clean air regulations. I think ERC has a slight edge here, because it is politically easier for a government to force a few corporations (in this case, electric utilities and large industrial organizations) to do something they may not like, than to force unwanted change on the car driving public (i.e., voters) at large.
So if ERC can meet its cost targets, the price of energy rises, and fear of global warming prompts pollution restrictions, then there is no reason why ERC can't have sales in the billions five years from now, years before the first DB car hits the street.
If energy prices don't rise, the clean air laws don't change, and ERC's costs are higher than expected, it still can have a market potential in the hundreds of millions of dollars. In that event a coal burning plant might make sense for Wyoming, but a fuel cell would still pay in California, where the smog is worse. In any event, due to deregulation uncertainty there are no big plants going up now and the nukes are being closed down left and right. When there are electricity shortages it will be too late to start the multi-year process of building a large conventional plant. An off the shelf fuel cell plant, that can be plugged into the grid anywhere, would face a healthy demand.
2. "BLD has a commercial product in trial right now - the buses."
Have any been delivered yet? Ballard appears to be behind schedule here. Let's see if they work. The market is not a big one - I remember a figure of around 5000 as the total number ordered by everybody in North America.
3. "Old info. I asked Firoz Razul this question directly at the last AGM. He made it very clear - the 100 to 1 reduction was based on the inital cost of the BLD fuel cell. They have already reduced it to 1/10th original cost. They must reduce costs another factor of 10, not 100."
Ballard may say things like that, but DB doesn't. To quote once again from the Hydrogen & Fuel Cell letter, one month ago DB stated that "internal combustion engines typically cost about DM25-30 (US$13.90-16.70) per kWh. With fuel cells, he added, we're talking in the range of DM10,000 ($5,555) per kWh." That is more than 300 times.
Again, like ERC in the stationary market, there is room for fc engines to be more expensive and still find a big market, but how much more expensive? Let us say a car engine costs $4000 in today's dollars (I am guessing; please correct me, someone). A fc car engine can't be too many times more expensive before it loses the mass market.
4. "[gas station] owners won't need to invest - Methanex will do it. My guess is they will either lend the equipment for free - like oil co's building pipelines to open up new markets - and use a royalty arrangement, so the station will not be at risk financially, or else negotiate directly with the parent oil co. for a blanket deal."
I say Methanex can't and Methanex won't. It can't, because it just doesn't have anywhere enough money. Each station could cost (I'm guessing again) $30,000 or so, assuming that it involves adding another underground tank plus dispensing equipment. Methanex is not that big and is already loaded with debt. On it's own, it can't create enough stations to make a potential fc car buyer feel comfortable there will be fuel supply every place he may want to drive.
Even if Methanex had the money, it wouldn't, because it would destroy the company's earnings, which aren't that great as is. Until there were a swarm of fc cars on the road, the average gas station wouldn't sell enough methanol for Methanex to earn any acceptable return on investment. Perhaps if Methanex sold the product for the equivalent of maybe $10 per gallon to the station owners, who would resell it to the lucky fc car owners at $15, then there might be enough profit to cover the capital costs. But what is the advantage to the potential buyer of the supposedly highly efficient fc car, if the price of its fuel is outrageous?
This infrastructure issue is an extremely non-trivial chicken and egg problem. It is solvable only if someone is willing to lose lots of money subsidizing the buildout. The only reasonable candidates for that unenviable position are DB and Ballard, not Methanex. This is another reason why I think autos won't bring in a nickel of profit for Ballard for at least ten years, even assuming that they get introduced in 7-8 years.
5. Publicity in Wired vs. publicity in Power Engineering: Let's call a truce and forget about this issue. I was responding to Blindeye's post in which he was gloating about the Wired article, as if it meant anything. Both ERC and Ballard have a lot of work to do before they are commercially successful, and even the world's best article writers aren't going to do either of them much good.
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Believe it or not, I still have more to say, but this post is long enough as is. More later. |
