Fuel Cell Works Supplemental News Page

**FUTURE FUEL:**
**Wallingford company bets big on hydrogen technology**
Publication date: 20-June-04 Source: New Haven Register
Maria Garriga , Register Staff WALLINGFORD — With fossil fuels soaring in price and dwindling in supply, a small, money-losing enterprise here is getting a lot of attention from investors. Proton Energy Systems Inc. manufactures hydrogen generators for industrial use, and plans one day to sell the generators to gas stations — to fill up the hydrogen fuel cell vehicles of the future. Advertisement Proton is also designing regenerative fuel cells — the kind that can be placed in cell phone towers — to keep the wireless system working even if the power grid fails. The benefits of fuel cells are clear: Fuel cell cars can run on alternatives to fossil fuels and produce virtually no pollution. Environmentalists and Wall Street both find something to love. "Hydrogen is the next big thing," said Bryan Garcia, programs director for the Connecticut Clean Energy Fund. Proton President Walter W. "Chip" Schroeder has raised the stakes by expanding Proton’s mission. He wants the hydrogen generators to receive their own power from renewable resources, such as solar power or wind turbines. "We want to be nonpolluting, non-depleting" he said. Betting on the future The company spends $8 million a year on research and development, and the success of its futuristic products will be determined by changing laws, competing technologies and the vagaries of the market. It’s a risky bet, because fuel cell vehicles are a long way off. The technology exists but the costs far exceed those for gasoline-powered engines, and so far fuel cell technology yields less mileage than gasoline. But that hasn’t stopped investors from handing Schroeder $135 million for taking a risk. Schroeder said he wants to eventually see Proton hydrogen generators in every service station in America. "Let’s say we get one-third of 1 percent of the gasoline market. That’s $1 billion a year in revenues," Schroeder said. Schroeder left a career in banking at The Goldman Sachs Group to head a company that loses $15 million a year, makes a product that barely covers its cost of production at $5 million a year, and designs support technology for products that won’t be available for another seven to 10 years or more. Some experts say fuel cell cars won’t be mainstream for at least 20 years. If that dream doesn’t pan out, Schroeder said the company will continue to build revenue on its bread-and-butter: commercial hydrogen generators. Technology transfer Proton was founded by engineers associated with United Technologies Corp. in 1996, to find uses for proton exchange membrane technology. Proton quickly developed commercial hydrogen generation, then moved into regenerative fuel cells, and is now pursuing technology for distributed generation from renewable resources. The concept of distributed energy means power users have local generators or power sources rather than depending on transmission lines. That could mean a hydrogen generator in every home as well as every gas station. But to make the generators friendly to the environment, they need to get their own power from renewable resources such as wind and solar power. Last year, Proton bought Northern Power Systems Inc., a Vermont-based engineering company that can integrate renewable fuels into power systems. In December, Schroeder set up a holding company, Distributed Energy Systems Corp., for both Proton and Northern. The new company name called attention to the main goal — to make "distributed generation" a reality. Schroeder has given his engineers a simple mandate: find a way to make hydrogen fuel as cheap as gasoline. The fuel cell industry’s response to Proton has been enthusiastic: The company has been asked to supply the hydrogen generators for the futuristic hydrogen fueling stations on California’s proposed Hydrogen Highway. To date, Proton has 17 hydrogen generators in California and has won a $375,000 contract to develop a regenerative solar/Proton Exchange Membrane hydrogen fuel cell demonstration system at California’s China Lake Naval Air Station. Free at last Many industry experts believe hydrogen-powered fuel cell vehicles will free the country from its dependence on oil. According to the Renewable Fuels Association in Washington, D.C., the United States spends $300 million a day on imported oil, an annual cost exceeding $100 billion. In President Bush’s 2004 State of the Union address, he announced a $1.7 billion, 5-year spending initiative to develop hydrogen-powered fuel cells. California, which issued a zero emissions requirement for cars, has the lead on fuel cell development, but Connecticut is catching up and already boasts half of all North American jobs in the fuel cell industry, between 1,200 and 1,500. This year, the Connecticut state legislature passed the nation’s strictest clean car bill, giving momentum to the state’s budding fuel cell industry. In 2001, the state funded the Connecticut Global Fuel Cell Research Center at the University of Connecticut. "The fuel cell industry is ours to lose," Garcia said. He said the success of companies such as Proton would have a tremendous impact on Connecticut. He said the number of jobs related to fuel-cell technology could rise from 3,500 to 150,000 by 2015, according to one recent study. That would translate into 75,000 jobs in Connecticut by 2015. ~

Maria Garriga , Register Staff

WALLINGFORD — With fossil fuels soaring in price and dwindling in supply, a small, money-losing enterprise here is getting a lot of attention from investors.

Proton Energy Systems Inc. manufactures hydrogen generators for industrial use, and plans one day to sell the generators to gas stations — to fill up the hydrogen fuel cell vehicles of the future.

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Proton is also designing regenerative fuel cells — the kind that can be placed in cell phone towers — to keep the wireless system working even if the power grid fails.

The benefits of fuel cells are clear: Fuel cell cars can run on alternatives to fossil fuels and produce virtually no pollution.

Environmentalists and Wall Street both find something to love.

"Hydrogen is the next big thing," said Bryan Garcia, programs director for the Connecticut Clean Energy Fund.

Proton President Walter W. "Chip" Schroeder has raised the stakes by expanding Proton’s mission. He wants the hydrogen generators to receive their own power from renewable resources, such as solar power or wind turbines.

"We want to be nonpolluting, non-depleting" he said.

Betting on the future

The company spends $8 million a year on research and development, and the success of its futuristic products will be determined by changing laws, competing technologies and the vagaries of the market.

It’s a risky bet, because fuel cell vehicles are a long way off. The technology exists but the costs far exceed those for gasoline-powered engines, and so far fuel cell technology yields less mileage than gasoline.

But that hasn’t stopped investors from handing Schroeder $135 million for taking a risk.

Schroeder said he wants to eventually see Proton hydrogen generators in every service station in America.

"Let’s say we get one-third of 1 percent of the gasoline market. That’s $1 billion a year in revenues," Schroeder said.

Schroeder left a career in banking at The Goldman Sachs Group to head a company that loses $15 million a year, makes a product that barely covers its cost of production at $5 million a year, and designs support technology for products that won’t be available for another seven to 10 years or more. Some experts say fuel cell cars won’t be mainstream for at least 20 years.

If that dream doesn’t pan out, Schroeder said the company will continue to build revenue on its bread-and-butter: commercial hydrogen generators.

Technology transfer

Proton was founded by engineers associated with United Technologies Corp. in 1996, to find uses for proton exchange membrane technology.

Proton quickly developed commercial hydrogen generation, then moved into regenerative fuel cells, and is now pursuing technology for distributed generation from renewable resources.

The concept of distributed energy means power users have local generators or power sources rather than depending on transmission lines. That could mean a hydrogen generator in every home as well as every gas station.

But to make the generators friendly to the environment, they need to get their own power from renewable resources such as wind and solar power.

Last year, Proton bought Northern Power Systems Inc., a Vermont-based engineering company that can integrate renewable fuels into power systems.

In December, Schroeder set up a holding company, Distributed Energy Systems Corp., for both Proton and Northern.

The new company name called attention to the main goal — to make "distributed generation" a reality.

Schroeder has given his engineers a simple mandate: find a way to make hydrogen fuel as cheap as gasoline.

The fuel cell industry’s response to Proton has been enthusiastic: The company has been asked to supply the hydrogen generators for the futuristic hydrogen fueling stations on California’s proposed Hydrogen Highway.

To date, Proton has 17 hydrogen generators in California and has won a $375,000 contract to develop a regenerative solar/Proton Exchange Membrane hydrogen fuel cell demonstration system at California’s China Lake Naval Air Station.

Free at last

Many industry experts believe hydrogen-powered fuel cell vehicles will free the country from its dependence on oil.

According to the Renewable Fuels Association in Washington, D.C., the United States spends $300 million a day on imported oil, an annual cost exceeding $100 billion.

In President Bush’s 2004 State of the Union address, he announced a $1.7 billion, 5-year spending initiative to develop hydrogen-powered fuel cells.

California, which issued a zero emissions requirement for cars, has the lead on fuel cell development, but Connecticut is catching up and already boasts half of all North American jobs in the fuel cell industry, between 1,200 and 1,500.

This year, the Connecticut state legislature passed the nation’s strictest clean car bill, giving momentum to the state’s budding fuel cell industry. In 2001, the state funded the Connecticut Global Fuel Cell Research Center at the University of Connecticut.

"The fuel cell industry is ours to lose," Garcia said.

He said the success of companies such as Proton would have a tremendous impact on Connecticut. He said the number of jobs related to fuel-cell technology could rise from 3,500 to 150,000 by 2015, according to one recent study. That would translate into 75,000 jobs in Connecticut by 2015.