US boost to fuel cells research puts pressure on Canadian government to follow suit

Emerging cluster on the line

For the second time in one year, the US government has unveiled a major fuel cells research initiative and is proposing R&D spending of US$1.7 billion over the next five years. The announcement is raising concerns that the emerging Canadian fuel cells industry and early lead Canada enjoys in several technologies underpinning fuel cells development could be lost without federal support. Although the fuel cells sector holds considerable promise for Canada, efforts to create a national cluster have been hampered by lack of coordination and federal funding that has not kept pace with industry requirements.

Fuel Cells Canada (FCC) — a BC-based association representing the Canadian industry — issued a statement the day after the new Freedom Fuel initiative was announced by president George Bush in his State of the Union address. FCC is calling upon Ottawa to “adopt a similar strong commitment” to ensure that the Canadian lead is not squandered.

“(The US announcement) is good for the industry but it puts the focus on a lack of a major initiative in Canada,” says Ron Britton, FCC’s president and CEO. “There is fear in some that start-up companies starved for cash may go where the money is. We may start losing them over time.”

The Freedom Fuel initiative is currently a budget request to the US Congress. But if approved, it will see $720 million in new spending pumped into R&D for technology required to produce commercially viable hydrogen-powered fuel cells for automobiles. The funding adds to the Freedom CAR (Cooperative Automotive Research) initiative, which Bush announced in January 2001. The sheer magnitude of the research effort could put the US in a leadership position in a few short years.

The stated aim of the combined initiatives is to dramatically reduce US dependence on foreign oil and lower the cost of hydrogen-powered fuel cells to make them cost competitive with conventional gas-powered cars by 2010. The FY04 budget request for both programs totals $273 million, dwarfing the assistance now provided to the Canadian R&D effort. Britton says the Bush announcement indicates that the US government is prepared to take the policy steps necessary to accelerate the national R&D effort.

“It’s a strong statement of support and it’s coming at a time when there may be war. It’s over oil and the president needs something to counterbalance that,” he says. Canada needs a national strategy and government can play a key role in early demonstration projects and first purchases.”

After years of neglect, the Canadian government finally responded last year with funding to allow the National Research Council (NRC) to double fuel cell R&D at its Fuel Cell Technology Centre (FCTC), located at the NRC Vancouver Innovation Centre on the campus of the Univ of British Columbia. The new funding directs $20 million over four years into the NRC’s fuel cells R&D activities. The NRC is also seeking additional funding to ramp up its regional clusters and community innovation initiative in this year’s Budget, expected late this month.

Fuel cells R&D has also been sporadi-cally supported by Technology Partnerships Canada and the Western Economic Partnerships Agreement (WEPA), a joint funding program between the western provinces and the federal government. Last year WEPA announced six projects worth $5.2 million, exhausting the $14-million fund. No additional funding has been committed.

Even if NRC is successful, public funding of fuel cells development is a far cry from the scale of the US effort and woefully inadequate compared to Japan. The Japanese government has committed more than $3 billion towards R&D related to fuel cells and the hydrogen economy through its 28-year World Energy Network program.

A report released last year by PricewaterhouseCoopers calls for a comprehensive national strategic plan for fuel cells. It argues that the Canadian industry must bolster its R&D while shifting from a exclusive focus on R&D to one that emphasizes production. The report, entitled Fuel Cells: The Opportunity for Canada, contends that the only firms with a chance of emerging as major players must be involved in both R&D and early production (R$, July 8/02).

The US initiatives are being launched in partnership with the private sector and focus on lowering the cost of producing hydrogen, creating effective hydrogen storage systems and lowering the cost of producing fuel cells.

Options for producing hydrogen range from nuclear energy, renewable resources and coal. Currently, the majority of US hydrogen is derived from a catalytic process of steam methane reforming which generates considerable CO2 emissions.

Yet some are suspicious of both the options being considered and the reasons for the announcement. Groups as diverse as Sierra Club and the American Physical Society have slammed the proposal as a smoke screen for failing to deal with soaring US energy consumption and the powerful auto sectors resistance to producing fuel efficient vehicles.

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