Portable Fuel Cell

Portable fuel cell

Commercialisation –catalysing the industry. Electricity is becoming as much a problem in the 21st century as it was a solution in the 19th and 20th centuries. Global demand for electrical energy is increasing, in areas as diverse as mobile phones and household lighting, driven by the basic power needs of emerging economies and ever increasing consumer demand for electronics. We are using more power than ever, and our existing sources are starting to feel the strain. Fuel cells should be the answer to some of these power problems, providing effectively limitless run-times at a reasonable price. Recent technological advances have brought this 1830s power technology into the spotlight once more with reduced costs, better performance and higher reliability.

As a result, the number of UK quoted fuel cell companies has increased rapidly in the past twelve months, with distinct groups emerging around domestic power, portable electronics, stationary and backup power. Investors can now gain exposure to companies delivering fuel cells for specific consumer markets, as well as firms providing key materials across a range of fuel cell markets.

Portable fuel cells are widely considered the technology closest to commercialisation, owing to a combination of consumer demand and technological readiness. This seminar is intended to draw the attention of investors to opportunities in this market, being direct investments in fuel cell firms and in the broader supply-chain.

We trust you will find this event useful and welcome your feedback. Investment opportunities

With rising demand for micropower sources and fuel cell technology transitioning to commercially viable products, as opposed to scientific curiosities and technology “demonstrators”, we expect significant revenue growth in this market for the period between 2007 and 2010. As a result, the investor universe itself has vastly expanded beyond SRI, clean-tech and alternative energy funds to now include generalist small cap and hedge funds. Investors can gain exposure to this high growth area by investing directly in the enabling technology companies or across the broader value-chain: upstream in raw material and fuel suppliers and downstream in manufacturers of portable

electronics, or wireless service providers.

There are several reasons to invest in the portable fuel cell industry:

• Portable electronics markets are large and growing rapidly and the number of features on these devices are increasing day by day

• The “run-time gap” is a significant problem

• Strong support for fuel cells in the area of portable electronics

• Portable fuel cells could catalyse the rest of the fuel cell industry

Portable device markets: The markets for portable electronics are large and growing rapidly. Collins Stewart estimates that the combined military, industrial and consumer portable device markets was close to one billion units in 2005. Mobile handsets are the largest market constituent, reaching 815 million units globally in 2005 (an increase of 21% over the previous year) and forecasts from Strategy Analytics suggest handset sales will exceed 1 billion units by 2007. High-end “powereater”

3G and convergence handset segments are a growing proportion of the whole, with Nokia recently sizing the latter market at 100 million units in 2006 and over 250 million in 2008. In Japan the 3G-phone market share increased from 10% to 36% in only three years; indeed, recent reports suggest that more than 80% of the 3.5 million phones shipped in Japan during the month of January were 3G handsets.

The laptop market offers similar opportunities for fuel cell companies, with approximately 65 million units sold worldwide in 2005, circa 30% growth over 2004. With the trend towards mobility gathering pace, this double digit laptop sales growth is projected to continue for several years. Business users, considered the consumer group most willing to pay for

extended battery life, own approximately 60% of the world’s laptops.

Besides laptops and mobile handsets, there are numerous applications in the medical,

military and industrial electronics markets, where price-sensitivity is less of an issue and the need for long run-times are compelling. The “run-time gap” Consumers always want portable electronics to be compact and lightweight, but they also expect manufacturers to pack in plenty of new power-hungry features such as video-conferencing, wireless communications, camera flashes and MP3 players. This causes a considerable problem for device designers, who struggle to supply sufficient electrical power and energy without increasing the size of the batteries or device.

Batteries have thus become the number one issue for manufacturers of portable electronics. Although adequate from a power perspective, contemporary battery technology has reached a ceiling in terms of the energy they can store in the available space. A gap is emerging between energy supply and energy demand.

As a result, manufacturers must either hold back on included features or dramatically compromise run run-time, a core consumer requirement. The “run-time gap” has become a significant problem and both consumers and manufacturers are willing to pay for a viable solution.

Portable fuel cells: The support for fuel cells is arguably strongest in the area of portable electronics, where manufacturers, consumers and after-market service providers would all benefit from an improved energy solution. Portable fuel cells are intended for use in consumer, industrial and military electronics, complementing batteries in a hybrid solution to give a longer-lasting energy supply. OEM’s anecdotally project adoption rates at between 10% and 30% of portable device purchasers, somewhat biased towards military, business and industrial users at first.

Portable devices are best served by liquid fuels such as methanol – cheap, convenient to use and store; and produced in volume. In recent years, direct methanol fuel cell (DMFC) technology has dominated the development programmes of the major OEMs. Regulatory support is evident, with safety standards set for micro-fuel cells and provisions in place to allow air passengers to carry methanol fuel cartridges from January 2007.

As with portable electronics in general, portable fuel cells will benefit from rapid innovation. Fast-moving consumer goods, such as laptops and mobile phones, have a relatively short shelf life, enjoy rapid development cycles and thus allow manufacturers to reach operating scale economies rapidly. The relatively low cost will encourage consumers to experiment with fuel cells and drive adoption.

Catalysing the industry: With portable devices likely to reach production scale before other fuel cell technologies, these fuel cells are likely to set the standards and drive availability of fuels for other applications, while consumer acceptance of fuel-cell technology will be bolstered by the rapid innovation and blue chip companies involved.

It is fair to say that most fuel cell companies are still in a product development and testing phase – even those in the portable fuel cell group – and significant challenges remain in bringing a new technology to the mass market. However, many OEMs are targeting the 2007/8 timeframe for commercial product launches and fuel cell companies are arranging their affairs accordingly. The next two years will see many newsworthy developments.