Micro fuel cells headed to market, and a showdown

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NEW YORK, May 27, 2004 – “Buy a micro fuel cell and get a free laptop computer,” runs the insider’s joke.

Efforts to miniaturize fuel cells for notebook computers have been beset by cost and performance problems that have delayed debuts and inspired the industry’s black humorists. But two small companies in New York intend to have the last laugh in what is shaping up to be a market showdown. Early success could translate into sales of up to 120-million units by 2012, according to a study released this month.

Medis Technologies, with offices in New York City and Israel, expects to deliver devices toward the year’s end that are smaller than a pager with enough power for 12 to 15 hours of mobile phone talk time or half a dozen recharges of a digital camera. Competitor MTI Micro Fuel Cells Inc. of Albany also plans to ship first-generation products for radios and RFID tag readers in 2004.

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Chief Executive Robert Lifton said that he expects Medis to send about 1,000 disposable units costing around $15 to distribution partner Kensington Technology Group, a division of ACCO Brands Inc. that makes computer accessories and cases. Products should be available to consumers in the first quarter of 2005. The company also works with General Dynamics on micro fuel cells to run military handheld computers.

MTI will supply fuel cells to Harris Corp. for military radios and to Intermec Technologies Inc. for industrial handheld RFID tag readers. Those customers can control the refueling of power cells in a warehouse or military setting. But Chief Executive William Acker said the company is aiming for the broader consumer market through its investor Gillette Inc. and its Duracell subsidiary.

MTI is developing a prototype small enough to work in portable consumer electronic devices. It is also partnering with Flextronics, an electronics manufacturing services firm, to facilitate its product launch and marketing.

The two startups rely on different technologies. MTI’s system runs on 100-percent methanol fuel, while the Medis Power Pack operates on a proprietary glycerol liquid. MTI’s device is built around proton exchange membrane (PEM) architecture using a polymer membrane material developed by DuPont. DuPont owns a 3.7-percent stake in the company. DuPont Fuel Cell is part of a supply-chain team MTI unveiled in mid-May.

David Redstone, editor of the Hydrogen and Fuel Cell Investor, gives Medis the edge. “The combination of their fuel, proprietary electrolyte and catalyst materials adds up to unmatched power density,” he said. He said Medis allowed its devices to be tested and measured independently, and reported what they will cost.

Large corporations such as NEC, Samsung, Motorola and Hitachi have announced, and delayed in Toshiba’s case, micro fuel cell plans and prototypes.

An analysis released May 19 by the Asian Technology Information Program said Japanese manufacturers would begin incorporating small fuel cells into notebook computers in 2005. ABI Research reported in mid-May that micro fuel cells would appear in a small number of laptops in 2005, and more than 13 percent of laptops would be powered by fuel cells by 2012.

Atakan Ozbek, director of energy research at ABI, said one of the Asian companies could make a breakthrough with a nanomaterial or engineering trick that could improve the commercial prospects of micro fuel cells. But “there are still more questions than answers” on how the field will unfold, he said.

Redstone remains skeptical until fuel cell companies provide products and set costs. “Micro fuel cells are not going to replace laptop batteries anytime soon,” he said.

Several analysts noted that electronics giants have been tight-lipped about the progress and timing of micro fuel cell products. But big companies can afford to remain silent while they nurture R&D programs and get performance data from internal field tests before making any product announcements.

Jerry Hallmark, manager of Motorola’s Energy Technology Lab, said the company continues to work on a micro fuel cell prototype that could power police and emergency radios Motorola makes. But he said Motorola would likely outsource the manufacturing of a micro fuel cell. Doing in-house research, he explained, helps ensure that Motorola will “know the right questions” to ask of a prospective manufacturing partner.

Walter Nasdeo, an analyst for the investment firm Ardour Capital Partners, noted that the cost of early devices is a concern. But he said that it was more important for companies like MTI and Medis to get products out the door “to show that they work, and give people the opportunity to touch, feel and get familiar” with such a promising new technology.

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