It's been a bumpy road for fuel cell makers
While alternative energy companies have taken a beating on the stock market, Global Thermoelectric CEO Peter Garrett believes fuel cell technology is on its way to becoming a commercially viable product
Tamara Gignac
Calgary Herald
Monday, August 19, 2002
Calgary Herald
Global Thermoelectric CEO Peter Garrett.
Calgary Herald
Global Thermoelectric Inc. CEO Peter Garrett says fuel cells are loaded with potential.
Fuel cells -- like any revolutionary technology -- require time and patience to develop before they can be considered a viable energy source, capable of powering automobiles and home heating systems.
It's a message Peter Garrett, the newly appointed chief executive of Global Thermoelectric Inc., is trying to tell shareholders.
Global's stock -- which once traded as high as $49 -- today languishes at about $2, despite the fact Global has an impressive list of allies, including energy giant Enbridge Inc.
The company, one of a dozen in North America developing new technology that produces energy through electrochemical reaction, rather than traditional internal combustion, has fallen out of favour with investors looking to buy shares in companies with proven earnings and cash flow.
When markets imploded after the Sept. 11 terrorist attacks, the biggest losers were telecom firms, alternative energy players and unproven tech and biotech stocks. Companies in these areas saw their share prices halved.
By Garrett's reckoning, the market's bearish sentiment toward Global, Ballard Power Systems and other alternative energy firms begs a review of how such companies are valued.
"We want to change the way the investment community views our progress. Today, the only meter investors have to go by is a date -- sometime down the road -- when we believe we will have a commercially viable product. There's no immediate milestones that show progress relative to that date," Garrett says.
"Global is trading below cash value, which to me clearly indicates the market doesn't understand the value proposition we are delivering."
While Ballard is spending millions of dollars to develop an alternative to the gasoline-powered engine, Global -- along with General Motors, Plug Power and FuelCell Energy -- has its eyes on fuel cells for buildings.
In the race to build a commercially viable product, he believes it would be disastrous to release a new power unit before it's ready.
The potential for fuel cells remains huge, and while timelines for their commercialization are vague, when it does happen, companies with the right technology will reap lucrative rewards, Garrett says.
"Whichever fuel cell company around the world gets the technology right first will be able to sweep through field trials and definitive agreements very quickly. I think Global is on par or ahead of anyone else in terms of getting to a true, mass-produced product."
For fuel cells to go mainstream, however, two things must occur: the technology must continue to improve and mass production must begin, in a cost-effective method.
Fuel cells -- first invented in 1839 -- took flight in the 1960s, when NASA began using the battery-like devices as a power source for spacecraft.
Since that time, environmentalists have been touting fuel cells as the wave of the future, an energy-saving way to produce electrical power for homes and vehicles without the emission of so-called greenhouse gases.
Besides having environmental benefits, fuel cell-powered motors also might be less expensive to make than the usual internal combustion engine.
The majority of alternative energy companies -- including Ballard -- support proton exchange membrane, or PEM fuel cells. It creates electricity through a chemical process using hydrogen and oxygen, and is particularly suited to automobiles because it operates at low temperatures.
By contrast, Global uses solid oxide fuel cell technology. Like the PEM system, Global's products convert chemical energy from fuel into electrical energy, producing power with no noise or exhaust fumes.
However, solid oxide fuel cells run at very high temperatures and aren't as troubled by fuel impurities as is Ballard's PEM cell, making the technology an ideal power source to heat homes. Global's stationary power units also enjoy a cost advantage: PEM cells run on hydrogen, extracted from natural gas, methanol or gasoline. But unlike solid oxide cells, it is necessary to expel carbon monoxide -- an expensive and complicated process.
As with many technology stocks, Global represents a bet on the future. Its chief products, fuel cells for single-family homes, are years away from widespread application.
Currently, the technology is not cheap enough to compete with electric utilities, but eventually Global hopes the fuel cell will supplement or bypass the public power grid as a clean, economic alternative.
Consumers could avoid power blackouts by using fuel cells, which aren't connected to utilities' grids and don't make noise like traditional generators.
"In general, the grid is highly dependable with certain exception during severe weather. So in terms of getting into the residential marketplace, it's about size and weight, but probably the two overriding factors are cost and dependability," Garrett said.
Global's fuel cell stacks -- about the size of a freezer -- generate heat and electricity and are designed to replace household furnaces.
Three such units run day and night at the firm's 32,000-square-foot manufacturing facility in southeast Calgary. Once the equipment is shown to be reliable, it will be shipped to Enbridge in Toronto for further testing.
In 2000, Global signed a partnership with Enbridge, owner of Canada's largest pipeline network and a natural gas distributor to millions of customers in Ontario.
As part of the deal, Enbridge will provide input into design and development and receive Canadian distribution rights.
"Enbridge has been a really good partner for Global," said Garrett. "We just had a meeting with their executive team and they are one hundred per cent on board with how we're moving forward."
But some say investors are impatient waiting for signs of progress.
"The market would probably be more comfortable seeing field trials operating because it provides third-party verification of Global technology," said Raymond James analyst Andrew Bradford.
"We know that Ford is running cars on Ballard's fuel cells, but with Global we have no direct evidence of progress. I think it would be helpful to Global to have product in the field," he said.
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