R&D and demo support considered essential

Hydrogen and fuel cell business executives converged again in Ottawa this month to try and convince politicians and officials to revive a shelved national strategy and re-instate key support programs they contend are essential if Canada is to maintain leadership in the diverse sector. The two-day visit by the heads of several BC and Ontario-based firms and the Canadian Hydrogen and Fuel Cell Association (CHFCA) is the second this year and is all the more urgent with the sunsetting of three demonstration programs in March/10.

The lobbying campaign includes meetings with Industry Canada minister Tony Clement and Natural Resources minister Lisa Raitt as well as senior officials with those departments. CHFCA president and CEO John Tak says a previous visit in Feb/09 (R$, January 22/09) resulted in a stronger recognition of the critical issues facing the hydrogen and fuel cell (H&FC) sector but the proposed actions have not occurred.

"With a minority government, mid- and long-term issues tend to suffer. Technologies like carbon storage and sequestration (CSS) and the bio-economy are more near-term and are getting attention. Of the $1-billion clean air fund, 60% went to CSS," says Tak. "This is a call for renewed partnership. We are running to the end of identified funding in 2010 of three demonstration programs that help promote Canada globally. It's a timing issue."

In a pre-Budget submission, the CHFCA says the lack of public support for the sector places Canada at a disadvantage compared to other countries whose governments are committing large sums to support hydrogen and fuel cell development. Without public funds to help re-disk technology development and encourage private sector investment, there's a growing danger that Canada could lose its strong R&D and commercial base to other jurisdictions.

In 2008, the Canadian government provided just $30 million for hydrogen and fuel cell development and commercialization. That compares to $400 million annually in the US (plus a $3,000 per kilowatt purchase incentive tax credit), $380 million in 2009 in Japan, $1.1 billion in Germany through to 2017, $100 million annually in Korea, $50 million a year in India and $800 million over six years for a European Union Joint Technology Initiative.

Three government-commissioned reports have urged Ottawa to include hydrogen and fuel cells in a select list of technology areas where Canada can build upon demonstrated strength. Yet to date, little has been done to support the sector and a key R&D program — the Hydrogen Economy program that pumped more than $30 million annually into R&D between 2003 and 2008 — was allowed to sunset. Over the same period, private sector investment in the sector topped $1 billion.

The CHFCA submission includes several key proposals: including a fuel cell and hydrogen purchase incentive tax credit over six years to stimulate product sales and the resumption of funding for R&D and funding of demonstration activities similar to those set to sunset at the end of this FY: the BC Hydrogen Highway, Toronto Hydrogen Village and Vancouver Fuel Cell Vehicle programs.

"Canada has a strong hold on fuel cell technology right now. We're among the leaders," says Andreas Truckenbrodt, CEO of Burnaby BC-based Automotive Fuel Cell Corp (AFCC). "We have to ensure that momentum is not lost by cutting back. There's strong competition for funding from countries like Germany and Japan. It will be a big blow if we don't get (program) renewal."

AFCC is a joint venture between the Ford Motor Co and Daimler AG which took a majority interest in the automotive fuel cell assets of Ballard Power Systems Inc in March /08 (Ballard retained 19%). Truckenbrodt, who joined from Daimler, says his firm has increased staff from 112 to more than 180 in 18 months and has committed to bring key technologies to market by 2015.

"That may sound like a long time but for us it's like tomorrow," he says. "There are a variety of technologies we are going to pursue and fuel cells play a large role. There's no silver bullet and the assumption that other technologies are closer to market is an opinion we do not share."

Truckenbrodt says that for companies like Daimler and Ford, Canada's failure to level the playing field raises the issue of relocating to jurisdictions where the incentives and opportunities are greater.

In Germany, a consortium of seven car makers have committed to fuel cell development by 2015 and several energy companies such as Shell and Total have banded together in a joint memorandum of understanding, committing to build the necessary infrastructure. A similar process in also underway in California, with several automotive and energy companies working to roll out fuel cell vehicles and a system of 40 hydrogen filling stations in the Los Angeles area.

budget submission

The CHFCA's Budget submission is clearly aimed at stemming Canada's loss of momentum in the sector with recommendations that take direct aim at incentives provided in competing nations.

A doubling of support for R&D and demonstrations for the next five years is designed to stimulate private sector funding, which the modestly funded previous programs successfully achieved.

A purchase incentive program for hydrogen and fuel cell products is modelled on the US provision introduced in October/08. Such an incentive is estimated to cost $93 million over five years, offering a 30% credit for fuel cell products up to $3,000/Kw. The credit could be converted into a 30% capital grant at the request of the firm making the claim. Such a program is estimated to cost $8 million in the first two years and peaking at $27 million in the fifth year. CHFCA estimates the program would leverage $300 million of investment in capital equipment for stationary power products, materials handling facilities (lift trucks) and backup power applications (telecommunications and critical use facilities).

Also recommended is a 70% grant to stimulate the transition to hydrogen-powered lift trucks.

R$