Proton Exchange Membrane Fuel Cells: Is This The Most Power Efficient Alternative Energy Source For Transportation?

• On 10:49 am EDT, Wednesday October 7, 2009

67 WALL STREET, New York - October 7, 2009 - The Wall Street Transcript has just published its Alternative Energy/Clean Energy/Power Generation/Utilities Report offering a timely review of the sector to serious investors and industry executives. This 83 page feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Long Term Perspective on Alternative Energy Industry -- Leading Indicators for Alternative Energy Components Companies -- Mergers and Acquisitions in the Alternative Energy Industry -- Break Even Business Fundamentals for Carbon Free Energy Providers -- Development of Carbon Free Energy Production Infrastructure -- NAT GAS Act -- New Players in the Alternative Energy Industry -- Solar Power Cell Manufacturers Market Strategy -- Demand Response for Raw Materials for Solar Cell Production -- Alternative Energy Investment Opportunities -- Multiple Stock Winners in Carbon Free Production Industry -- Government Funding of Alternative Energy Power Providers -- Chinese Solar Energy Companies -- Alternative Energy Hedge Fund Investors -- Commodity Cycles -- Determinants of Market Valuations in the Alternative Energy Production Industry -- Carbon Emissions Statistics -- Energy Efficiency Statistics -- Innovations in Solar and Wind Power Generation -- Business Economics for Methane Based Power Generation -- Electric Vehicles Projections and Statistics-- Cap and Trade Projections and Statistics -- Development of Battery Technology -- Regulatory Environment Developments for Solar, Wind, and Alternative Energy -- Hybrid Vehicles Development and Sales Projections

Companies include: Tanfield (TAN.L); Smith Electric Vehicles U.S.; Valence (VLNC); Spire (SPIR); Newport (NEWP); MYR Group (MYRG); Primoris (PRIM); Tetra Tech (TTEK); EnerNOC (ENOC); Comverge (COMV); EnergyConnect (ECNG.OB); Calgon Carbon (CCC); and Ener1 (HEV); Westport Innovations (WPRT); Clean Energy Fuels (CLNE); Fuel Systems Solutions (FSYS); FuelCell Energy (FCEL); FEI Company (FEIC); Veeco (VECO); ATT (T); Landi Renzo (LR.MI); Teleflex (TFX); Royal Dutch Shell (RDS.A); Wal-Mart (WMT); Pepsico (PEP); FuelMaker; Chevrolet; GM; Honda (HMC); Itron (ITRI); Siemens (SI); American Superconductor (AMSC); GE (GE); and ABB (ABB);

In the following brief excerpt from just one of the 23 interviews in the 83 page report, an industry experts on fuel cell technologies discusses the outlook for the sector and for investors.

Brian Piccioni is a Toronto-based Analyst with BMO Capital Markets, where he primarily covers hardware stocks. Prior to joining BMO Capital Markets in 1998, he was an Analyst with another investment dealer, which specialized in researching and financing Canadian technology companies. Mr. Piccioni was previously a Hardware Manager at Eicon Technology, a data communications firm in Quebec. He holds a B.S. in biology from McGill University and an MBA from Concordia University.

TWST: So you don't consider Ballard an alternative energy company?

Mr. Piccioni: I do not consider it an alternative energy company.

TWST: What is your advice to investors who are looking at getting into investing in companies that label themselves "alternative energy" companies?

Mr. Piccioni: Well, the first thing I would do is I would very carefully analyze what's going to happen if government subsidies go down. This is a major problem for the solar sector right now because as we had predicted sometime ago, it's basically held afloat by government subsidies. And as governments run into deficits, those are subsidies that are fairly easy to trim. So you have got to sit back, and you've got to look at these companies and say, "Which ones are viable on their own merits, which ones are targeting market segments that the application of the alternative energy, in and of itself, provides a viable commercial model?" Now people say, "Oh well, we'll get the government subsidies. We just sell solar cells, or we just sell windmills, or whatever." But the overwhelming majority of installations are subsidized through one mechanism or another. So that's what you've got to do is you've got to look at any investment and say, "Okay, if we take away government money - because political decisions can be made on the basis of different reasons, like frugality, for example - so if you take away the government money, is this a viable business?" Many of these can't pass that test. There is also, quite frankly, a number of companies, and I'm obviously not going to name names, who are essentially running scams. They are talking about technology that people who are very knowledgeable in physics and in chemistry will tell you that just cannot ever come to fruition. So how do you get around those? If you know somebody who is a professor at a university who teaches physical chemistry or something like that, you might bounce a few ideas off of them. And don't expect an analyst or journalist to do that for you. Like I said, most people don't understand this stuff. But at the end of it, I would say, in particular now, be very cautious because if government spending pulls back, which it should - I mean look at the deficit in the U.S. alone, and that's repeated in countries all over the world, including many countries that have been firm proponents of alternative energy - well, the sector is going to get under enormous pressure. My overwhelming comment is: Be very, very careful.

TWST: Turning back to Ballard, what needs to happen to create a significant commercial demand for their PEM fuel cells?

Mr. Piccioni: Interestingly enough, if you would have asked me that five years ago, I would have talked about things like durability, cost of materials, stuff like that. But now it's almost there. I've spoken with significant companies who are partnering with Ballard, and they talk about dramatic improvements in the business outlook over the past year or so. Take electric grid backup in the developing world for cellular base stations. That's a situation where in many countries of the world, you have electricity eight to 14 hours a day, and the rest of the day you don't have electricity. It's very difficult to believe from where we sit, but as a consumer there, you sort of accommodate that. If you are a mobile operator, you have got to be able to deliver service to your customers 24 hours a day. So a sizable proportion of these cell sites have diesel generators, which are running at very high-duty cycles. So they are running eight, 14, 16 and in some places in Africa, literally 24 hours a day. Now diesel generators are reasonably energy efficient, provided you are running them near their rated load. But you can't make a diesel generator, practically speaking, that runs efficiently with only a 5,000-watt load. So as a result, these things are not running at anywhere near optimal efficiency. And the other thing is the diesel fuel is relatively expensive. It's fairly easy to convert natural gas or propane to hydrogen. And I say easy, I mean there are complications that will be impractical for doing that in an automobile. But it's doable when you are dealing with a relatively modest amount of hydrogen, and you have to have a fuel cell that can deal with that type of fuel, which is called reformate. It works out that because fuel cells are so efficient, even if you use this inefficient mechanism to use natural gas - because natural gas is so inexpensive - when you do the math, there is a huge payback for using a fuel cell. Remember we are using a 5,000-watt fuel cell running off natural gas reformate instead of 15,000-watt diesel generator to give 5,000 watts. It turns out you are paying for the system and in a very short time. I have gone over and crosschecked those calculations from a base level; I have verified everything, I have spoken with people involved in the project, and so on and so forth. This is here and now, and it's a tremendously compelling solution. So there are a huge number of base stations being deployed in the developing world in places where the grid is unreliable, and here is an opportunity to say, "Forget about the green aspects and all the rest of it. Yes, yes, it's green and everything else, but here is how we save your money from the minute we switch the system on."

TWST: What is the competitive landscape like? What portion of that market can Ballard capture?

Mr. Piccioni: Well, it's hard to say. There's bound to be some push-back, companies trying to come up with more power-efficient generating systems and stuff like that. There is bound to be some resistance because of the new technology. But I would say that in those type of applications, fuel cells could probably end up, over a long period of time, being held or basically being sort of 100% duty cycle, at least in areas where natural gas and/or propane are at least as available as diesel fuel. If you have got some sort of weird situation where for some reason there is no availability of natural gas or propane, where you can truck in diesel, well that might be a different situation. There are many companies that claim to be in the PEM fuel cell business but only a very small number of those actually have products for sale commercially. So I assume that Ballard could have a fairly significant market share of the market as it evolves. But this is a thing that will evolve over probably a decade, not over the next two years or so.

The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This 83 page special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online .

The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations.

For Information on subscribing to The Wall Street Transcript, please call 800/246-7673

Buzz up!