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Readers: Here is ITM Power's recent press release and some excerpts from an academic paper about the company's technology. The excerpts are fairly extensive so as to provide a feel for what ITM is claiming, and also because they provide an excellent general background on the cost issues with current PEM fuel cells. H2FC's view below. 3/26/04 ITM Power Makes Major Breakthroughs in Fuel Cell Technology [3/26/04 - London - UK] ITM Power Ltd, believes that it has developed and patented the keys to unlock the hydrogen economy and become a leading innovator and market leader in alternative energy sources. The Company, backed by experts with over 30 years experience in polymer technology, is developing low cost materials and unique production methods to produce low cost fuel cells and electrolysers, giving them the ability to realise the commercial potential of the hydrogen economy. ITM believes that the fuel cell market will be the fastest growing segment of the energy sector. With its unique advances in materials and production techniques, the company has the ability to produce low cost fuel cells designed to meet the energy demands of a wide range of industries and specialist technologies including military, automotive fuel cell market, stationary fuel cell market and micro fuel cell market. Fuel cells and related technologies will be able to power everyday products from laptops and mobile phones to domestic appliances; but at present they are excluded by price and the supply of a suitable clean fuel. ITM’s materials used in the production of fuel cells are a unique family of ionically conducting polymers, which are cheap to produce, offer high conductivity, hydration control and the ability to recycle the platinum catalyst. Furthermore and importantly, they are also available in alkaline chemistries, which opens the route to the use of low cost catalysts. ITM has also patented a revolutionary “one-step” manufacturing process which allows a fuel cell or an entire stack to be made in a single process. By employing its unique polymer membrane at the heart of the fuel cell, cells and stacks are not only flexible in shape and design, but more importantly have the potential to be produced at or below the $50-$100 per kW. This must be achieved to be directly price competitive with petrol engines. The Company’s new advances also help solve the fuel supply problem. The same technology that makes a low cost fuel cell has been applied to the development of a low cost electrolyser. This is able to convert carbon free energy (wind/wave/solar) into clean hydrogen fuel on site and on demand wherever there is access to electric power. ITM’s technology has recently been reviewed by leading industry specialists, Future Energy Solutions and the Electrochemical Consultancy. They have validated and reinforced the potential of the Company’s IP and recognise the previously un-chartered avenues being pursued. Background: ITM Power was set up in April 2000 to acquire the intellectual property rights resulting from a nine year Government backed university research programme. This was directed to the study of new electrically conductive polymer materials for use in the manufacture of fuel cells. The first round of commercial funding was completed in September 2001 while the technology received patent rights in September 2003. Core Technology: Revolutionary patented low cost, cross-linked hydrocarbon polymer materials, which already perform competitively with industry standard materials including Nafion. Cost reductions of 90% compared with Nafion based systems. A “one shot” manufacturing method enabling low cost production, improved cell architecture leading to a reduction in components, plus shaped and flexible cells for bespoke applications. Compatibility with low pollution production and reclamation lifecycles, in particular allowing for the recycling of expensive catalyst materials such as platinum. Cells designed to use a variety of fuels including hydrogen and alcohol. ITM’s Opportunity: The future energy market is measured in $trillions and therefore the potential for a winning technology is immense. However, during the next 20 years the successful technologies in future energy applications will have to be competitive with conventional systems. For example, the PEM fuel cell is generally thought to be the most practical system for many applications. However, due to complexity of design and high cost of materials, the estimated cost of existing PEM fuel cells is $1,500-$3,000 per kW. Industry developments to date are far too costly to be commercially viable compared, for example, with a conventional automotive engine at $50-$100 per kW. ITM is uniquely positioned by virtue of its technology. By simplifying the design and using its cheap but highly effective materials, the Company is re-writing the rules of fuel cell and electrolyser production, so that: The core developments within ITM technology will enable the Company to be on track to produce PEM fuel cells at or below this $50-$100 per kW target. ITM technology has been applied to electrolysers allowing ITM to match hydrogen production as a fuel for its accompanying fuel cell, and photo electrics (solar), giving the Company a spread of opportunities throughout the entire future energy sector. The Company can utilise its intellectual property rights to produce hydrogen/oxygen fuel cells, direct alcohol fuel cells, electrolysers and photo-augmented electrolysis. The main aims are: To develop the core technology so it can be applied in all parts of the future energy matrix – renewables, hydrogen production and fuel cell power delivery To improve output and efficiency levels in its existing fuel cells and fuel cell stacks To build income streams from a variety of sources as the advantages of ITM systems are recognised in the new hydrogen economy To maximise the potential of the renewable energy market and realise the hydrogen economy Management: The Company has assembled a highly focused team with in depth knowledge and experience in chemical engineering and power generation as well as business and financial management. Research Donald Highgate BSc, MPhil, PhD heads the research division and is one of the world's leading experts in hydrophilic polymers and Visiting Director of Studies at Cranfield University. Engineering Director Dr Jon Lloyd who began collaborating in 1995 with Donald Highgate at Cranfield University, is a mechanical engineer with considerable industrial and consultancy experience with Babcock, Vickers and Perkins Engines. Commercial: Chairman Stephen Massey has extensive corporate experience having formerly been Chairman and CEO of Prudential-Bache International Ltd. and a founding Director of Harvington Properties Ltd. He is also currently Chairman of stockbocker Eden Group Plc. CEO Jim Heathcote is a chartered accountant with extensive experience of global capital markets and the hydrogen economy. He was a senior vice president of Drexel Burnham Lambert and executive vice president of Prudential Bache, before moving into fund management and founding the Katalyst Hydrogen Fund, which specialized in all emergent hydrogen technologies. For further information please contact: Jim Heathcote CEO ITM Power Ltd Tel: 01799 531 198 Hugo de Salis St Brides Media & Finance Ltd Tel: 020 7242 4477 From a "white paper" on ITM's technology provided by the company to H2FC (Full paper: "A Report On Electrolysers, Future Markets And The Prospects For ITM Power Ltd’s Electrolyser Technology A report produced by Professor Marcus Newborough" (MS Word format, 174 kb) The report is focused on applying PEM technology to electrolyzers, but the argument made in favor of ITM's tech in the paper are all equally applicable to PEM fuel cells. H2FC Ed.): ITM Power Ltd has recently developed polymer electrolyte materials (ionomers) of much lower cost than the fluorocarbon-based membranes (e.g. Nafion) employed by conventional PEM electrolysers, and these have enabled an entirely different manufacturing route for PEM technology. The ITM method is to introduce a liquid monomer mix to a mould, and produce an MEA or complete stack in situ by gamma-radiation polymerisation. There are three intrinsic benefits of this approach, when compared with the conventional manufacture of PEM electrolysers: the ionomers are very much cheaper; the production process is less stringent and does not involve thin polymer membranes; and there are fewer individual components per stack to assemble. ITM have developed ionomers suitable for electrolysers employing either acid-based chemistries (i.e. PEM technology) or alkaline-based chemistries (i.e. a solid polymer equivalent of the conventional liquid alkaline electrolyte). Both offer considerable cost advantages relative to conventional electrolysers and the alkaline ionomers potentially provide a route to designing out the expensive Platinum-based catalyst of the PEM electrolyser. Unit costs of about 50$/kW have been estimated for volume production of a PEM electrolyser stack based on the ITM approach. * * * Because ITM’s materials and production approach relates to both polymer fuel cells and electrolysers, some caution is needed to avoid inappropriate comparisons between the unit costs of fuel cells and electrolysers. By convention each technology is judged on a unit cost basis ($/kW), but for fuel cells, unit costs are expressed in $ per kW output, while those for electrolysers (whose operation is characterised by substantially higher current densities and voltages per stack) are expressed in $ per kW input. Thus ITM MEAs of given physical size and catalyst loading could be used to construct an electrolyser stack which has a much lower numerical value of unit cost (in $/kWinput) than applies if it were used to construct a fuel cell stack (in $/kWoutput). Fluorinated and non-fluorinated polymers are of distinctly different cost. For example, the major component of Nafion (a 50:50 mixture of poly-tetrafluoroethylene and perfluoro-vinylether) costs about 17 $/kg [2], while the methyl-methacrylate monomer employed by ITM costs 1.5 $/kg [3]. A 100 micron thick sheet of Nafion costs about 600 $/m2 [4], which equates to around 3000 $/kg. For its existing prototypes, ITM quotes a finished product cost of 20 $/kg (allowing for water, sulphonic acid and polymerisation costs). Theoretically, if ITM ionomers were to be processed into membranes of 100 micron thickness, it is estimated that the equivalent cost would be around 2.5 $/m2. Thus, the unit costs for ionomers made from the ITM hydrocarbon-based materials are less than one percent of the fluorocarbons ionomers underpinning conventional PEM technology. Although the ionomer thicknesses in ITM MEAs are currently about four times greater than Nafion membranes (which increases the quantity of polymers consumed and hence the unit cost per MEA), the polymer cost benefit remains extremely large. The level of radiation used in trials by ITM is typically around 2.5 MRad from a Cobalt 60 source. This is the normal radiation level applied commercially and ITM quote approximate costs for processing a box of around 0.03 m3 as about $7.5. ITM has constructed trial electrolyser stacks consisting of ITM MEAs contained within a conventional rigid manifold system and undertaken preliminary testing for single test periods not exceeding 3 hours. Operation of a 7 cell stack (of 112cm2 total active area and 10 mg Pt /cm2 catalyst loading) has been demonstrated at a current density of 1.2 A/cm2 and power input of 70W. The associated component cost breakdown can be estimated approximately as follows:- monomers ($3), carbon cloth electrodes ($5), radiation polymerisation ($7.5), catalyst ($24.6). Hence the total cost is $40.1 for a 70W electrolyser, or a unit cost of 573 $/kW. Development work at ITM is aimed at reducing catalyst loadings (e.g. to 1 mg/cm2 to meet conventional manufacturing norms); maximising the use of container volume for radiation processing; buying monomers in bulk rather than laboratory quantities and reducing electrode material cost by bulk purchasing and/or moving to uni-axial carbon fibres. Further reductions in units costs should be achievable by reducing the void space between MEAs within prototype composite stacks; using thinner layers of ionomer within the MEAs; and reducing the valueless cast material within the unit. This suggests an ultimate cost breakdown for the above stack of:- monomers ($1), electrodes ($0.5), radiation polymerisation ($0.75), catalyst ($2.46). Hence the total cost would then amount to $4.71 for a 70W electrolyser, or a unit cost of ~ 67$/kW. In large scale production, it is considered that electrolyser unit costs would lie below this value, probably in the region of 50 $/kW. * * * ITM has manufactured and characterised several alkaline ionomers, which have been tested for electrical conductivity and shown ionic conductivities of up to three times that measured for Nafion under the same conditions. These enable ion transfer via OH- ions (as opposed to protons) and so offer a route to using much cheaper catalysts (e.g. Rainey Nickel) rather than Platinum. The materials are expected to be compatible with the production route applied for ITM’s acid-based ionomers. These alkaline ionomers offer a potential route to achieving (i) independence from Platinum-based catalysts and proton-exchange chemistries, and (ii) independence from the liquid alkaline electrolytes of conventional alkaline electrolysers. Hence ITM polymer-based electrolyser technology may emerge that is of even lower unit cost than that indicated above. Further engineering development will be required to build and test an electrolyser stack based on these alkaline ionomers, so as to quantify the cost/performance benefits. A further interesting possibility is that of recycling catalysts once an electrolyser unit is spent. Because the catalyst is a high proportion of the cost of an ITM MEA while the polymer is of low cost (unlike a conventional MEA), it becomes possible to consider destroying the polymer matrix (e.g. by pyrolysis) to recover the platinum. This would mean accounting for only the recycling costs and any incurred losses, rather than the full replacement cost of the catalyst. [footnotes omitted, see full paper here (MS Word DOC file] This is the kind of development we have been hoping for in low temperature fuel cell technology: a radical improvement in basic materials that promises to slash costs, improve performance and durability, and move fuel cells much closer to broad commercial viability. H2FC has talked to ITM's CEO a few times over the past year or so and has been favorably impressed with his apparent straightforwardness and careful, deliberate approach to moving the company forward. Especially impressive was his and his company's overriding emphasis on the need for greatly improved basic fuel cell materials and manufacturing processes (as opposed to just building incrementally more advanced prototypes based on the same old chemistry) - views remarkably similar to H2FC's own. The huge advantages in materials cost claimed by ITM speak for themselves in the excerpts above. From the point of view of manufacturing costs, the ITM approach reminds H2FC of the stack sealing technology developed by Hydrogenics and Dow, a "process that injects Dow Corning's proprietary silicone materials into an unsealed assembled stack". Instead of having to seal the edges of each cell in multi-cell stack individually, the Hydrogenics-Dow process allows the manufacturer to completely assemble the stack, then seal all of the cell edges in a single operation. This obviously saves labor and reduces opportunities for manufacturing errors. ITM takes this kind of approach much further, injecting the electrolyte itself into an otherwise complete stack and then polymerizing it in place ("in situ"). It even seems conceivable that the same inexpensive material serving as the electrolyte could also serve as the seal: the "hollow" stack consisting of the electrodes, gas diffusion layers and separator plates is placed in a container with clearance between the stack and the bottom of the container, the polymer precursor is poured in so that it fills the gaps between the stack cells and between the stack and the container, the whole thing is irradiated, and the result is one continuous piece of material serving as both electrolyte and cell seals. Another manufacturing benefit is that if the polymer precursor is non-viscous ("thin", "runny") enough, it can be relied on to completely fill all of the spaces within the stack, thus assuring complete and permanent contact between the electrolyte and all of the electrode surfaces. (Compare to a Nafion stack where the cell components are mechanically stacked up and bolts running through the entire stack must be precisely fastened at the correct torque to mechanically keep all of the internal surfaces in contact without being so tight that the brittle graphite plates are damaged, and where separation of the electrolyte membranes from the electrodes can be a problem.) No worries about wrinkled membranes or a mechanical means of keeping the stack together at ITM: polymerizing the electrolyte (and maybe the seals as well) in situ should result in the entire stack being much better integrated as a single object than could ever be achieved with mechanical stacking and fastening. H2FC is obviously not in a position to do real due diligence on the veracity of ITM's claims. Nor does H2FC have the knowledge of polymeric chemistry needed to be confident that ITM's claimed technology can work at all. What H2FC can say is that the technology is the product of a long line of work on polymers in biomedical applications (contact lenses), that the technology as applied to fuel cells does seem to be plausible, that the approach to both fuel cell chemistry and fabrication being pursued by ITM is elegant, and that the cost reductions being claimed, under the totality of the circumstances, are much too significant to be ignored or resisted by the industry. Perhaps the biggest problem ITM will now have to face: breaking through the Nafion PEM monoculture and getting the major PEM players to even look at the ITM technology. The PEMFC scientists at Ballard, PLUG, UTC, GM, Toyota, etc. are probably not going to be in any hurry to admit that they have painted themselves into a technological corner and need brand new technology from an upstart like ITM to make much more progress. It is easy to picture some prima donna chief scientist hearing about ITM, proclaiming it will never work (because if it did it would threaten his position and credibility) and thereby preventing his company from doing any due diligence on the ITM chemistry and process. Expect the PEM "establishment" to try to ignore ITM for as long as it can, then try to talk it down. Much remains unknown about ITM, both in terms of its technology and its approach to eventually commercializing that technology. ITM has built only the most rudimentary prototypes so far, and there appears to be no way to really know yet what kind of power densities ITM's chemistry can provide, how durable and poison tolerant the chemistry will be, and how much balance of plant it will require compared to traditional PEM. We don't even know yet whether ITM is primarily interested in licensing its technology to others or in trying to commercialize the technology on its own (although it is hard to imagine that ITM wouldn't license its tech for a fair price). What H2FC would hope to see is the PEM companies investigating ITM and doing some serious due diligence on the technology, doing so quickly, and then rapidly mainstreaming the technology if that due diligence pans out. The fuel cell industry simply cannot afford to ignore a new approach that could have so much potential, and cannot afford to wait to incorporate new, superior materials and processes. ITM is a private company. An IPO is pending. 4/16/04 ITM Power IPO Within 2 Months, To Raise GBP15M - Sources Dow Jones via morningstar.com -ITM Power home page

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