Canadas Hydrogen and Fuel Cell Industry: Global Partnering for SuccessAlison Grigg, on behalf of Chris Curtis Fuel Cells Canada August 27, 2005Santa Fe, New Mexico

Fuel Cells CanadaNational not-for-profit industry association

Founded in October 2001

Our Mission is to promote the development and commercialization of Canadian hydrogen and fuel cell technologies, products and services

Prime source of services and support to companies, educational institutions and business alliances promoting, developing and demonstrating fuel cell and related products and services in Canada

67 member companies and organizations across Canada

Drivers for Hydrogen and Fuel Cell CommercializationAn energy platform that enables other technologies to achieve goals of reliability, security, efficiency and sustainability.

Greenhouse Gas ReductionImproved efficiency in converting energy. Zero GHG emissions when based on renewable sources.

Urban Pollution ReductionZero emissions from tail pipe of fuel cell vehicles.Energy Reliability/SecurityKey enabler to meet growing need for clean, distributed powerEconomic DevelopmentSignificant export opportunities and global economic value.

Global Market ProjectionsData from Fuel Cell Industry Competitive Analysis - Assessment of Major Players, Global Markets, and Technologies 2003 Allied Business Intelligence Inc., Courtesy Industry CanadaMobile Fuel Cells - $7.5 billion Stationary Fuel Cells - $7.5 billion Automotive Fuel Cells - $3.6 billion

Markets for Fuel Cell Products101001,00010,00020042015Capital cost $/kWLift trucks, industrial equipment, residential applications, off-grid and back-up power, military applicationsEarly niche marketsDistributed power Majormarket increases

AutosBuses70060Micro-applications (laptop computers, digital cameras, cell phones)Remote sites (off-grid)Source: adapted from Methanex, September 2002Increasing: manpower + capital + production + capacity

Supply Chain Opportunities

The Canadian Hydrogen and Fuel Cell Sector: Overview

Activities began in 1982 with first contract for Ballard Power SystemsTotal Canadian industry revenue has grown 40% from $134 million in 2002 to $188 million in 2003Industry R&D expenditures over $290 million since 2000 an average of $100,000 per employee per yearOver 80 companies across Canada are focused on fuel cell and hydrogen technology and associated services, employing over 2,600 peoplePatent holdings were up 34% to 581 in 2003.

Geographic Profile

International Involvement IndustryAbout 33% of Canadian industry activity is outside of North AmericaActive in 262 demonstration projects (2003); 70% outside of CanadaIndustry Associations: California Fuel Cell Partnership, US Fuel Cell CouncilNetworking with industry groups and participation in trade missionsCorporate partnerships and joint development examples:Ballard with Ford/Daimler ChryslerGeneral Hydrogen with General MotorsHydrogenics with GM, John Deere, American Power Conversion, US Army

International Involvement Canadian GovernmentInternational Partnership for the Hydrogen Economy (IPHE)International Energy Agency (IEA) Implementing Agreements:Production and Utilization of HydrogenAdvanced Fuel CellsAdvanced Motor FuelsInternational Safety Organization TC197Asia Pacific Economic Cooperation (APEC)Natural Resources Canada/US Department of Energy (treaty negotiation)Natural Resources Canada/California Air Resources Board MOUGovernment led trade missions

Commercialization Challenges for Hydrogen and Fuel CellsMicro-level:Improved fuel cell reliability and durabilityReduced cost

Macro-level:Stimulating early market demandImproving product quality while reducing costsFinancing for R&D, commercializationCreating supporting infrastructureCodes and standards

Technology Development: On Track for CommercializationCompanies are meeting technology development timelines:

Ballard Power Systems has reduced costs of fuel cells by 80% since 1999, while achieving a ten-fold increase in lifetime

Fuel Cell Technologies has accumulated over 1500 hours of operation on its second generation 5 kW system

Hydrogenics HyPM 10 kW power module has achieved over 5000 hours of operation & over 6500 stop-start cycles on a single unit

Dynetek Industries has 10,000 psi (750 bar) hydrogen tanks on the market

BC Hydro/Powertech is a 10,000 psi operational fueling stationUS companies attaining commercial sales contracts

Hydrogen HighwayProvince of British Columbia Lower Mainland and Vancouver Island

Coordinated market demonstration program designed to accelerate commercialization

Framed around the 2010 Winter Olympic and Paralympic Games

Showcase and demonstrate the environmental, economic and social benefits of this technology to the world

First phase by 2007 is focused on seven highly visible locations

Mobile, stationary and micro fuel cell applications and infrastructure

Multi-agency effort

Hydrogen HighwayExamples of Activities:

Hydrogen Fueling Stations: Surrey (10,000 psi)Vancouver (5,000 psi)Victoria (5,000 psi)Hydrogen Technology Environmental ChamberPhotovoltaic panels, electrolyser and hydrogen storage at the NRC Institute for Fuel Cell InnovationIntegration with Vancouver Fuel Cell Vehicle Program

Vancouver Fuel Cell Vehicle ProgramPartnership between Government and IndustryDemonstration of sustainable, zero-emission based transportation technologies5 Ford Focus vehicles to be evaluated for three years in Vancouvers Lower MainlandTechnology: Ballard Fuel Cell Systems, Dynetek Hydrogen storageOpportunity to test, demonstrate, deploy and evaluate proprietary systems for H2 production

Hydrogen VillageThe Hydrogen Village is located in the Greater Toronto Area in the Province ofOntario.

The intent of the H2V is to:Create a plan and platform for the deployment of hydrogen and fuel cell technologies to the benefit of the local community.Develop the necessary supply, service, and knowledge infrastructure needed to create a sustainable market. Ensure technology deployments (stationary, mobile and transportation) fit within the context of existing community infrastructure and activity.Aid in the complementary growth of other centers across Southern Ontario thereby developing a hydrogen Corridor.

Hydrogen VillageExamples of Activities:Hydrogen powered delivery trucks for Purolator courier fleetFueling infrastructure and hydrogen powered forklifts for General Motors plant in OshawaResidential heating and power generation using four solid oxide fuel cells at a townhouse-style student residence at the University of Toronto at MississaugaBack-up power for computer network serversFuel cell-based back-up power system at a telecommunications switching station Hydrogen fuel cell powered utility vehicles in conjunction with hydrogen production and refueling at the Canadian National Exhibition

The Path Forward Partnership OpportunitiesDemonstration ProjectsHydrogen Highway conceptually, a Hydrogen Highway from Baja, California to British Columbia, Canada (BC to BC)Funding programs that encourage North America wide participationSharing lessons from past Olympic Games and preparing to showcase NA capabilities/expertise in the 2010 Olympic GamesJoint DevelopmentProviding enhanced access to R&D programs in all jurisdictions at the institutional/corporate levelJoint education and outreach programs Identify and set objectives to support core competencies in each country to ensure complimentarity rather than duplicationGovernment SupportState/Provincial governments encouraging transborder activitiesInvolvement of US, Canada and potentially Mexico in IPHE activity

Fuel Cells Canada Sponsoring Members

Fuel Cells Canada MembersAdvanced Measurements Inc.Alberta Research CouncilAlternate Energy CorporationAngstrom Power Inc.Astris Energi Inc.Azure Dynamics Corp.Ballard Power Systems Inc.BC HydroBC TransitBOC GasesBusiness Development Bank of CanadaCanadian Hydrogen AssociationCanadian Hydrogen Energy CorporationCellex Power Products Inc.ChevronTexaco Technology VenturesChrysalix Energy Limited PartnershipClean Energy Canada Conduit Ventures Ltd.Deloitte & Touch LLPDynetek Industries Ltd.Enbridge Gas DistributionEnergix ResearchEnergy QBD Inc.Ford Motor Company

FTI International Inc. Fuel Cell Technologies Ltd.FuelCon Systems Inc.General Hydrogen CorporationGowling Lafleur Henderson LLPGreater Vancouver Regional DistrictGrowthWorks LtdHeliocentris Energy Systems Inc.HERA, Hydrogen Storage Systems Inc.HSBC Bank of CanadaH3 EnergyHydrogenics CorporationIESVicInco Special ProductsKeen EngineeringKinectrics Inc.KPMG LLPMarcon-DDMMarsh Canada Ltd.McCarthy Tetrault LLPMembrane Reactor Technologies Ltd.Methanex CorporationNational Bank FinancialNational Research CouncilNORAM Engineering and Constructors Ltd.Palcan Power Systems Inc.Pathway Design & Manufacturing Inc.PEM Engineers Inc.PricewaterhouseCoopers LLPPropane Gas Association of Canada Inc.Province of OntarioQuebecs Fuel Cells and Hydrogen NetworkQueens RMC Fuel Cell Research CentreQuestAir Technologies Inc.Sacr-Davey EngineeringSarnia-Lambton Economic PartnershipTD Securities Inc.Tekion Solutions Inc.Teleflex Canada Inc.University College of the Fraser ValleyWestport Innovations Inc.Zongshen PEM Power Systems

Thank youAlison Grigg, on behalf of Chris CurtisFuel Cells Canada August 27, 2005Santa Fe, New Mexico

FCC also provides contract services, international business development support and manages the Hydrogen Highway, the Hydrogen Village and the Vancouver Fuel Cell Vehicle projects with the support of our partners in Government.FCC publishes the Canadian Hydrogen and Fuel Cell Capabilities Guide which has information on most Canadian companies and organizations active in the sector.FCC publishes the annual Profile of Hydrogen and Fuel Cells Activity which provides annual data on the Canadian hydrogen and fuel cells sector.

Climate ChangeIn terms of greenhouse gas (GHG) emissions, fuel cells offer a significant improvement over internal combustion engines. If fuel cells run on hydrogen, they produce no GHG emissions. Even on a wells-to-wheels basis, the impact on GHG emissions is expected to be up to 45 percent less than internal combustion engine technology, when reforming natural gas, and essentially 100 percent less when using zero emission energy sources (see Module 4).Through the export of fuel cell technology, products and applications, Canada's fuel cell and hydrogen sector can play a critical role in reducing greenhouse gas emissions and urban pollution for the world. The Kyoto Protocol to the UN Convention on Climate Change was an important step, not least because it created a worldwide incentive to use fuel cells.Efficient and reliable powerEfficiency means less fuel consumption, which effectively extends our fossil fuel reserves. It's an important short-term driver to secure enough time to change our energy economy to a sustainable one. It does not only mean saving energy by choosing an efficient fluorescent lamp or by insulating your house, but also means efficient production of electricity in a fuel cell.Reliability of power is another driver for fuel cells, especially in North America where the economy relies on continuously-available power, and will favour the most reliable technology.Health and environmentFuel cell technology is seen as a viable 'clean air' alternative to all applications of the ICE and other conventional power supply technologies. The virtual elimination of urban pollutants and emissions will lower health care costs and improve quality of life in Canada's major cities. Health and environment are very strong drivers for Canada and many EU countries.Energy security and independenceThe freedom from dependence on imported oil is a strong driver for the development of fuel cells, and for that matter, for new energy technologies in general. The need to develop a secure energy supply, especially in the shadow of looming conflict in the Middle East at the beginning of 2003, may have prompted the US administration to announce a $1.2 billion US "Freedom Fuel Initiative", a plan to reduce the country's rising dependence on foreign oil, by replacing oil products with home-grown hydrogen.In the longer term, security and independence implies consuming less fossil fuel as well as shifting to sustainable energy production methods. This is a very strong driver for some countries.Demand for distributed powerDistributed power demand will increase in the future for many reasons including:1. Efficiency: the residual heat from electricity generation can be used for heating rather than being wasted.2. Increasing worldwide demand on electricity: many countries need energy to power their cities and industries where infrastructure and a reliable power grid is limited. In these cases, it is easier and more cost effective to build distributed power stations.It is expected that the market for fuel cell technology will develop first in regions such as Europe, North America and Japan, where early adopters will seek the environmental and energy security benefits. Longer-term uses, particularly for stationary and portable power, could be extensive in underdeveloped countries with less access to conventional energy infrastructure and sources. The point at which pricing for fuel cell systems will meet incumbent pricing is estimated to be in 20081. At this point, the market would begin to shift from early adopter to mass-market.The market development of portable fuel cells is difficult to predict. Applications are numerous, but the many companies focused on this segment closely guard information about their R&D activity. Cellular phones and notebook computers are likely applications where longer runtime will result in a greater market share for the manufacturer. The market will likely accelerate after 2006, with a projected global value of almost $2 billion in 2007.Large stationary fuel cells have been produced and sold for over a decade and are expected to be the first application to be commercialized since they do not require a new fuel infrastructure. They are expected to reach significant commercial production by 2006/07 with a global value of $2.7 billion. To reach full market potential, stationary fuel cell costs and performance will need to be similar to or better than incumbent technologies. The present cost of $5250 per kW is projected to decline to a competitive $1500 per kW by this time.Mobile fuel cells focused on automotive applications will only begin to gain a broader acceptance by 2010/11. Analysts are projecting a penetration of less than two percent of the new vehicle market by 2011. Significant production cost reductions are required before the transportation sector will embrace fuel cells. Automotive fuel cell systems are now in a cost range of $400 to $450 per kW. This likely needs to come down to less than $75 per kW. The industry expects to meet this target around 2008; by 2009 sales should rise to almost $2 billion.

Another view of developing commercial activities illustrates the potential applications in terms of the costs per kW.

The entry of fuel cells into industrial markets will spur on benefits for companies in the fuel cell supply chain, including components suppliers and companies from the automotive parts and advanced manufacturing sectors. On all levels of a typical value chain (tier levels), there will be opportunities for well-established industries to develop new business opportunities within the fuel cell field. Some businesses will rely exclusively on the Canadian fuel cell producers as their market, while others also have an export component, selling to fuel cell producers in other countries.Canadian companies cover many of the possible fields of the fuel cell industry. Companies that build fuel cells or integrate components to build complete fuel cell solutions for OEMs and the end customer have always been in the public view. Some deal in components and subsystems, that is, they supply the parts that will be assembled into complete systems. Other companies are concerned with infrastructure solutions to supply, store and transport hydrogen or methanol. The makers of test equipment are in another category that includes production technology, methods of maintenance and recycling methods for fuel cell materials. Around the core industry are grouped many service providers in infrastructure, education, marketing, e-business and finance.The amount spent on R&D is of particular importance it signifies not only the amount of money that the private sector is investing on an annual basis but also the innovation intensity of the industry compared to other sectors in the economy.

This innovative intensity is further illustrated by the number of patents held.

The private sector provides over 80% of the annual investment in R&D with the rest coming from government contributions.

Innovation in the fuel cells and hydrogen sector is primarily in the private sector. Academic institutions are now developing core R&D activities.

Note the dominance of the Vancouver area which has over 40 companies and organisations involved in the technology as well as over 60% of total employees and over 60% of total investments (see Profile).

Depending on sensitivity of audience may wish to note growing clusters of activity in Alberta, and Ontario latter in Toronto and in the Kingston area.Example of recent demo: July 25 2005 Cellex successfully completes hydrogen fuel cell field trials at Wal-Mart. Cellex Power Products, Inc. announced today the successful completion of its Alpha hydrogen fuel cell product field trials at the logistics subsidiary of Wal-Mart Stores, Inc. The highlight of the trial came with Wal-Mart deciding to lead the material handling industry by agreeing to support Cellexs Beta field trials and commercialization process of fuel cell power systems for electric lift trucks. Cellex had four fuel cell power units in operation for two weeks at a Wal-Mart food distribution center in Missouri demonstrating the operational benefits to Wal-Mart when powering their fleet of pallet trucks. The power units ran without safety incident and refueled with compressed hydrogen in one minute. Cellexs Vice President Sales and Marketing, Tom Hoying commented, This is a significant event as Wal-Marts continued support of Cellex will be a key driver in moving fuel cells from a demonstration technology to a commercial product in the material handling industry. Wal-Marts Executive Vice President of Logistics and Supply Chain, Rollin Ford said, Cellexs fuel cell power units provided us the opportunity to gain insight into the potential of fuel cell power. We were impressed with the operational benefits. Ford added, Working with Cellex enables Wal-Mart to forge ahead on its environmental leadership by embracing new technologies such as fuel cells.

Emphasis here is on partnership with government depending on audience may want to mention specific things:Positive support for HH, HV, VFCVP and the projects at the federal level as well as recent moves by Provinces to support industry.Neutral too many programs spread over too many agencies at federal level combined with slowness in flowing money especially from targeted programs SDTC and H2EA.

The price of hydrogen and fuel cells are currently higher than conventionaltechnologies. Products will become more competitive as:

Technologies advanceEconomies of scale increaseExternalities are included in pricingAvailability of resources change

Stimulating Early Market DemandHigher production costs associated with small production volumes are translated into high prices of fuel cell technologies. This poses a large prohibitive barrier to potential purchasers. Production costs, and hence prices, will come down as demand stimulates increased production volumes. The sooner this demand is generated, the faster industry will be able to reduce costs and access new markets.Improving Product Quality while Reducing CostsAn enhancement of product quality and reduction in production costs must be realized by the fuel cell industry and their products in order for them to compete with incumbent technologies. Product quality includes performance, reliability and durability. The reduction of product costs will be centered around the creation of an effective supply chain and product standardization.FinancingThe pathway to commercialization requires a significant amount of financial resources. Industry, faced with financial limitations, must develop innovative approaches to securing this capital in order to be successful in bringing their products to the commercialization stage.Creating Supporting InfrastructureTogether, the availability of sufficient skilled personnel, the presence of codes and standards, and the development of a fueling infrastructure, create a supporting infrastructure for the fuel cell industry.

See April Communique for more information on this. I believe that it is important to note the progress being shown.

FC and H2 developers are meeting international (DOE) targets for improved performance and reduced costs and this provides clear evidence of ability to commercialize technology over next few years.

partnership with government (NRCan, BC, NRC-IFCI and FCC) and the fact that this is the first of Fords activity to put vehicles in hands of typical users.Expect 15,000 km per year from vehicles.Vehicles used by Ballard, City of Vancouver, BC Government, BC Hydro/Powertech, BC Transit and FCC with Government agenciesThe Vancouver Fuel Cell Vehicle ProgramInformation SummaryThe Program:The Vancouver Fuel Cell Vehicle Program (VFCVP) is a five-year project that includes a three-year demonstration initiative to test Ford Focus FCVs under real-world conditions in Vancouver and Victoria, British Columbia. The project is an important step in the evolution of fuel cell technology for automobiles and the development of a hydrogen economy in Canada. VFCVP is a collaboration between Government of Canada, Ford Motor Company, Province of British Columbia, and Fuel Cells Canada. * * *Program Partners:Ford Motor CompanyFuel Cells Canada (Program Management)Government of Canada (NRCan, NRC-IFCI, TEAM)Government of British ColumbiaVehicle Operators:Ballard Power SystemsBC HydroBC Transit (Victoria)City of VancouverFuel Cells Canada (with Government of Canada & Province of BC)Program Funding:Program cost $8.7 million CDN over 5 yearsGovernment of Canada contribution $4.5 million CDN Other funding from Ford Motor Company, Government of British Columbia, and Fuel Cells CanadaThe Vehicles:Vehicles are 3rd generation Ford Focus fuel cell hybrid-electric Vehicles will be driven for 3 years from April 2005 to March 2008 under real world conditions by employees of the vehicle operators First fleet demonstration of fuel cell vehicles in CanadaFirst vehicles to utilize BCs Hydrogen Highway fueling infrastructure Canadian Technology Featured: Ballard Mark 902 series fuel-cell engine Ballard Integrated Power TrainDynetek 5000 psi (350 bar) compressed hydrogen storage systemProgram Goals:Evaluation of vehicle performance, durability, and reliabilityAssessment of any fueling issues and solutionsEvaluation of GHG emissions Awareness building through public outreach and education

There is a need to have more involvement and partnering in all the activities if we are going to have successful commercialisation in north America. Steps that can be taken to enhance joint activities and ensure complimentarity rather than duplication of efforts include: Opening up demonstration projects (and project funding) to participants from both countries (are any Mexicans at this event? If so will need to include them) this would include the HH in BC the HH in California etcProviding enhanced access to R&D programs in each jurisdiction at the institutional/corporate level;Joint education and outreach programs to ensure messaging to the general and the investing communities is supportive of integrated activities.Setting clear objectives regarding the support of core competencies in each country to ensure complimentarity rather than duplication.Formalising these activities the IPHE is for all countries what about a more effective version that just looks at Cda/US (plus Mexico).Governments at the state/province level can play a larger role by supporting/ensouraging transborder activities at this level. (steve Brydon may have some ideas on this and can give you some of the activities on-going Shannon Miles also may know) Great opportunity to bring in joint activities that can be targeted to the Olympic Games showcase NA capabilities/expertise in the technology to the rest of the world.You may wish to mention that the HH is open to all participants and that you are encouraging active participation by all also as you have planned, the eventual HH to connect with California etc.