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Business & Technology 5/11/98

Piston engine, R.I.P.?
Eco-friendly fuel cells may revolutionize the automobile


Running the 66 Chicago Avenue route through downtown Chicago, the big, new 39-passenger transit bus is silent like a ghost. No diesel engine roar heralds its approach for waiting passengers. And when it pulls away from a stop, no choking cloud of black exhaust smoke follows it down the street. The only emission is a wisp of warm moist air that puffs from a silver stack atop the vehicle.

The No. 66 bus may run quietly, but it is making a very loud statement: The tried-and-true internal combustion engine may at last have a serious competitor. The remarkable vehicle--one of three that began service on Chicago's streets in March--is propelled by a fuel cell, an electric power generating system similar to those on the space shuttle. It works by electrochemically combining hydrogen, stored in tanks on the roof of the bus, and oxygen from the air to produce electricity, heat, water vapor--and no pollutants whatsoever. The process is precisely the reverse of the familiar high school experiment in which an electric current is passed through water to crack it into its constituent hydrogen and oxygen gases.

Equipping motor vehicles with clean, efficient, technically elegant fuel cells is a dream that engineers have held for years. General Motors, for example, has experimented with them for more than a decade. The cost, however, was always too high--roughly 100 times more expensive than a standard gasoline engine. Now, the prospect that costs can be substantially reduced, combined with growing pressure on car makers to reduce vehicular pollution, has touched off a worldwide scramble in the auto industry--in particular, Daimler-Benz, Ford, GM, and Toyota--to put fuel-cell vehicles on the road. Their target date is 2004, barely an eye blink away for auto manufacturers who must plan their products years in advance. Chrysler engineers are also enthusiastic about the technology, but they believe a more realistic date to see fuel-cell cars in dealer showrooms is 2010.

Eco-cruisers. Fuel cells face several formidable challenges, ranging from lingering technical and production problems to today's supercheap gasoline prices. Americans have been snapping up heavyweight, gas-guzzling sport utility vehicles, a trend that suggests U.S. consumers may be reluctant to spend more for cars that do less damage to the environment.

Even so, ruthlessly pragmatic auto executives who scoff at other alternative power systems concede that fuel-cell power plants have the potential, at least, to replace their beloved piston engines--and do so sooner than just about anyone thought possible a few years ago. GM Vice Chairman Harry Pearce calls fuel cells the best long-term solution because they "are very high in efficiency and potentially very low in emissions." Ford's chairman, Alex Trotman, told stockholders in the company's latest annual report that "we view fuel cells as one of the most important technologies for the early 21st century."

The key player in the race, however, is neither an auto maker nor a Fortune 500 corporation. It's tiny Ballard Power Systems Inc., located in Burnaby, British Columbia, a company with 400 employees and barely $25 million in annual revenues. Yet, as the acknowledged leader in fuel cells, Ballard has seen its stock soar from $8 a share in 1993 to $115 last week; its price/earnings ratio (the price of a share of stock divided by earnings per share for a 12-month period) is a stunning 1,477, compared with the Standard & Poor's average of 27.

Ballard also has some very high-powered new friends. In a series of deals worth $650 million, Germany's Daimler-Benz, maker of Mercedes-Benz cars and trucks, last August purchased 20 percent of Ballard. Since the only way to cut the cost of manufacturing fuel cells is to produce a large number of them, Daimler-Benz wanted to team up with another big global car maker. Then Ford bought 15 percent of Ballard in December. The three companies will work together to commercialize the technology. Ballard will develop the fuel cells, Ford will make the electric drive motors and electronic controllers, and Daimler-Benz will assemble the crucial accessories--like fuel processors--to make the system work. "When auto companies want to put their cars on the road in 2003," says Ballard CEO Firoz Rasul, "we want to be in the position to be their supplier."

Ballard enjoys a commanding lead, at least for now, but other companies are racing to develop the technology. Toyota, for example, is working on its own fuel cells. "We're doing it all internally," says Mark Amstock, alternative fuel vehicle planning manager for Toyota in the United States. "It's too significant a market to leave to our competitors." GM has the same view and expects to have a production-ready car, with its own fuel cell, by 2004. "We're making a substantial investment, even by GM standards," says Bryan McCormick, executive director of GM's fuel-cell program. And International Fuel Cells, which is owned by United Technologies Corp. and Toshiba and makes the units for the space shuttle, is quickly setting up a new company dedicated to automotive fuel cells.

Green light. The Ballard/Daimler-Benz/Ford deal "served as clear evidence that the technology was going to commercialize faster than we originally thought," says Bill Hahn, IFC's vice president for business development. He argues that the firm's cells will be simpler and smaller than Ballard's for the same power output. A typical fuel cell for a small car will deliver about 50 kilowatts. By comparison, the three fuel cells in the space shuttle produce a total of only 15 kilowatts.

All the past work on battery-powered electric cars--GM alone claims it has spent a half-billion dollars--may pay off for fuel-cell machines. They are electric cars in which a fuel cell replaces the batteries, so range is limited only by the size of the fuel tank. The electronic gear and electric motors are the same.

The cost of fuel cells is expected to drop sharply once they are produced in high volume. Bradford Bates, Ford's fuel-cell research manager, says that if you take a fuel cell apart "and lay out all the pieces on the floor, and you do the same for a gasoline engine, the gasoline engine has more complex pieces made out of more expensive materials at higher tolerances." Fuel-cell stacks today are made by hand. But Bates says that the individual cells can be made by a machine similar to a printing press and assembled robotically. "There are all kinds of challenges but no fundamental problems," he says. Adding to the attractiveness, he says, "fuel cells have no wear-out mechanism." No one, in fact, knows how long one might last, but it's certainly much longer than a modern gasoline engine.

The biggest problem has nothing to do with the cells themselves. It's where to get the hydrogen fuel. The Chicago buses can run on compressed hydrogen gas because they're big enough to carry large tanks and they are refueled every night back at the barn. Cars, however, are too small to carry big tanks of gaseous hydrogen. A more compact liquid fuel, such as methanol, gasoline, or kerosene, is required. In order to strip the hydrogen from these fuels, a kind of mini chemical factory, called a fuel processor or reformer, will be needed on every vehicle. The challenge, says Ramon Espino, director of the chemical sciences laboratory for Exxon Research and Engineering Co., "is to take the chemistry we know very well how to do and do it in a little gadget that fits under the hood of a car."

There are two "killer variables" to deal with, says Espino, who is working under contract to GM. The first is how quickly the reformer can be started. The most efficient methanol reforming method could take 10 minutes to warm up. "If that's the case," he says, "you close up shop," because drivers wouldn't wait that long. Other kinds of reformers could start up much faster, though they have other problems--like operating at very high temperatures.

The second potential killer is "transient response," how quickly a car responds when a driver mashes the accelerator. A gasoline engine responds in milliseconds, as does a fuel cell running on pure hydrogen. But a reformer that reacts slowly would mean a sluggish car, and drivers would reject it.

There is a big debate about whether to go with methanol or gasoline. Many experts prefer methanol because it is more efficient. But unlike gasoline, methanol would require a new infrastructure to make and sell it. Still, reforming either fuel would result in much less carbon dioxide than is produced by the best internal combustion engines today.

If fuel cells become popular, a hydrogen infrastructure could be developed that would reduce CO2 output. At first, hydrogen would be made from natural gas, as is methanol. But if oil and natural gas run low, hydrogen could be produced with solar electricity and water, resulting in a totally renewable energy economy in which no global warming gases are produced.

Daimler-Benz, Ford, and Toyota all lean toward methanol, because it has three hydrogen atoms for every carbon atom. Methanol produces less carbon dioxide than does gasoline, which has two hydrogens for every carbon. GM claims to be agnostic in the fuel debate. And Chrysler, which will buy fuel cells from Ballard and electric drivetrains from Delphi, a GM subsidiary, loudly champions gasoline, because the infrastructure is already in place. "If we can develop a reformer to run on gasoline," says Chris Borroni-Bird, Chrysler's technical strategy planning manager, "it will run on other fuels."

Some experts also argue that there is little difference in CO2 production between methanol and gasoline if all processes, from wellhead to wheel, are taken into account. Oil companies, which are working uncharacteristically closely with the car makers on this issue, naturally favor reformers that process gasoline or kerosene made from crude oil.

If reformers can be perfected, then cost is the last major hurdle. Asked what kinds of vehicles Ford might put fuel cells in, Bates replied, "If you can beat the price of an internal combustion power train, then guess what, the answer is, 'all vehicles.' And if you can't make them cheap enough, the answer is 'no vehicles,' because our customers are king."

Before fuel-cell cars take to the road, other innovative, high-mileage, low-polluting propulsion systems such as advanced direct-injection diesel engines and hybrids that meld electric and internal combustion engines will appear. "We're going to see more diesels," predicts Ford's John Wallace. That's because new diesel engines no longer clatter like the old ones: They start easily, they perform as well as gasoline engines, and they offer roughly a 56 percent improvement in fuel economy (and 24 percent reduction in CO2) compared with gasoline engines. A likely target for the new diesel engines: sport utility vehicles. For example, Japan's Isuzu, which is partly owned by GM, is developing new diesels to be used throughout GM. There's one big catch, however. It's not yet clear that the new diesels can meet strict future air-pollution standards.

Mix and match. While American auto makers have promised to show "production ready" hybrid vehicles early in the next century, Toyota is already doing a brisk business selling the world's first commercially available hybrid, the Prius, which went on sale last December in Japan. The four-door cars are somewhat larger than a Corolla yet get 66 miles per gallon on the Japanese test cycle and an estimated 55 mpg on the higher-speed American EPA test, plus can hit 100 mph. They are so popular that Toyota this month raised production from 1,200 a month to 2,000. The cars retail for $16,800 but are believed to cost Toyota about twice that to make. The car maker is willing to take a loss at first to get the market started.

Toyota has only one Prius in the United States to demonstrate, but American auto manufacturers have purchased them and are trying them out on their test tracks. "It's an outstanding engineering implementation of the hybrid concept," says a Big Three engineer admiringly. Here's how it works: Stop at a light and the small, slow-speed gasoline engine switches off. When the light changes, the car moves off silently under electric power. When the driver demands more speed, the engine turns itself on. Cruising on the highway, the gasoline engine supplies the power, so Prius has the same range and fuel supply as a straight gasoline car. For maximum acceleration, both the engine and the battery drive the wheels.

The Prius, or something like it, will come to America in two years or so, Toyota says. American auto makers, who are developing their own hybrids under the industry-government Partnership for a New Generation of Vehicles, are skeptical about its prospects here. "The best market in the world for hybrids is Japan," says Wallace, because of the nation's slow, stop-and-go traffic patterns. Hybrids capture part of the braking energy to recharge the battery, increasing fuel economy. They're less likely to show much advantage where speeds are constant. "At 70 mph on the freeway, a hybrid only hurts" because the heavy, expensive electric power system isn't being employed, says Mike Tamor, a hybrid project leader at Ford. Hybrids are not likely to be shown at all in Europe, where traffic really moves. Engineers at Daimler-Benz, for example, can't understand why anyone would want to pay for two separate drivetrains in the same car.

Chrysler's hybrid prototype, the sleek, aerodynamic Dodge Intrepid ESX2--which the company calls a "mybrid," for mild hybrid--depends on a direct-injection turbo-diesel engine to propel the full-size car. The electric drive helps a bit during acceleration, moves the car in reverse, and provides power for accessories. With the diesel engine alone, the car gets 63 miles per gallon. Adding the hybrid electric drive raises the figure to 70 mpg. According to computer simulations, a Jeep Grand Cherokee with the same mybrid power train would get about 35 mpg.

One of the big reasons for ESX2's high mileage is that it weighs only 2,250 pounds (a 1998 Intrepid weighs 3,457 pounds) and offers less wind resistance. The weight reduction was achieved by making the car's body out of six pieces of injection-molded thermoplastic polyester, the same stuff used for soft-drink bottles. Besides being lighter, it's expected to be much cheaper to build in the factory. "It has to be, to pay for the power train," says Steve Speth, Chrysler's hybrid program manager. Even so, the company says the ESX2 would cost about $15,000 more than current cars.

That's the dilemma. With gasoline so cheap in the United States, it's hard for consumers to become excited about the prospect of an 80-mile-per-gallon car, the target of the Partnership for a New Generation of Vehicles project. Someone who drives 15,000 miles a year in an SUV that gets 20 miles per gallon spends $937 for gasoline at $1.25 a gallon. If the same SUV got 80 miles per gallon, the driver would spend $234 going the same distance, an annual savings of about $700. Over the seven-year life of that SUV, the driver would save less than $5,000, so that's the most Americans could be expected to pay extra to get supermileage.

In other parts of the world, however, fuel costs are much steeper, making high-mileage vehicles attractive. And there may be another factor at work that could also help speed their development. "Consumers are placing the environment in a greater role," says Mark Amstock of Toyota. "We think there are market-driven opportunities" for cleaner, more efficient cars. Few question that gasoline engines will be around for a long time. Yet, says GM's Harry Pearce, "I don't doubt that over the next 25 years alternative propulsion vehicles as a group will make up 25 percent of GM's fleet in the United States." And that, in the context of the past 100 years of auto manufacturing, would be a revolutionary rate of change.

With Warren Cohen