Faster, Cheaper, Cleaner: The Promise of Battery and Fuel Cell Startups

Posted in: Company Lists, Sector and Company Insights, alevo, aquion energy, ballard power systems, bettery, bloom energy, clean energy, Clean Tech, clearedge, department of energy, firstelement, fuel cell, fuelcell energy, ge fuel cells, lilliputian systems, lionano, plug power, redox power, relion, seeo

Technology is nothing without power – innovations in fuel cell and battery technology are driving the servers supporting big data, autos transporting us to work, mobile devices directing our lives. As a result, the fuel cell market is expected to grow from 62,000 unit shipments in 2013 to more than 214,000 unit shipments in 2019.

With more people concerned about climate change, the promise of clean renewable energy has put the spotlight on fuel cell technology. According to a report from CB Insights, cleantech investments grew by 17 percent last year to a total of $1.7 billion. Among those cleantech investments were investments in battery and fuel cell technology companies.

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What is a fuel cell?

A fuel cell is sort of like a battery. A fuel cell generates electricity from the abundant hydrogen and oxygen found in chemical compounds all around us. For instance, a hydrogen fuel cell’s exhaust is nothing but water.

If you want to learn how fuel cell technology generates clean electricity from hydrogen while only emitting water, watch this video:

Fuel Cells Power Autos, Buildings, and Data Centers

Fuel cells provide critical energy backup for large facilities, primary energy for remote locations, power vehicles, and homes. Large fuel cells power factories and commercial buildings. One company installing large fuel cell systems in office buildings and data centers is FuelCell Energy, a global leader in stationary fuel cell technology. FuelCell Energy (FCEL) even reduces the cost of to scrub greenhouse gases from coal plants by using the fumes as energy.

Smaller fuel cells power telecommunications towers. Sprint, with financial assistance from the Department of Energy (DOE), deploys hydrogen fuel cells as backup power sources for rooftop network sites.

Other public companies focusing on fuel cell technologies include Plug Power Inc., which was the third-best performer on the Nasdaq Composite Index in Q1 2014. In the past two months, Plug Power (PLUG) announced deals to supply fuel cell-powered electric forklifts to multiple companies including Wal-Mart Stores. Ballard Power Systems Inc., eighth on the index, recently signed two major contracts in the automotive sector. Ballard Power Systems (BLDP) foresees opportunities are in aerospace, railway and military applications.

Despite the growing opportunities for fuel cells, these three public companies’ stock prices have dropped between 50% and 60% in the past year – likely due to the downturn in energy prices

Fuel cells not only power facilities but also power vehicles currently on the road. In November 2014, Toyota released it’s long anticipated, hydrogen fuel cell vehicle (FCV), dubbed Mirai. A close competitor to the Mirai is Hyundai’s Tucson FCV.

Hydrogen fuel cells, though, require hydrogen fuel filling stations. Some states like California are planning to install hydrogen filling stations to kickstart the industry. In May 2014, the California Energy Commission gave a $27.6 million grant to FirstElement Fuel Inc., a California startup, to install 19 hydrogen fuel filling stations.

Government Partnerships

The FirstElement Fuel and Sprint projects highlight the additional government funding sources available to companies developing fuel cell technologies. State and national governments have a huge stake in this market, as fuel cells could provide more reliable backup energy capabilities.

Other examples of public-private fuel cell partnerships include Microsoft Corp, Redox Power Systems and the University of Maryland, which received a $5 million government grant to test fuel cell technology in Microsoft's data centers.

Japan wants to do for the hydrogen fuel cells what it did for computer chips and cars – develop fuel cells to drive down costs and attract general consumers with lower prices. Japanese manufacturers, including Panasonic Corp, are working to make fuel cells small and cheap enough for homes. Japan has set a goal of installing fuel cells in 5.3 million Japanese homes by 2030, about 10 percent of all households.

Fuel Cell Startups

Due to the high development and production costs for fuel cells, most startups that require a large amount of early funding get acquired at an early stage. In April 2014, Plug Power acquired the assets of ReliOn, a developer of hydrogen fuel cell stack technology and fuel cell systems, paying approximately $4 million in common stock for ReliOn’s assets. ReliOn had previously raised at least $86 million from investors.

Doosan Corporation snapped up ClearEdge Power and Fuel Cell Power last month. ClearEdge had acquired the fuel cell business of technology conglomerate United Technology Corporation in 2012.

Startups are not only acquisition targets but also competitors of large public energy companies. GE unveiled its new start-up, GE Fuel Cells, after scientists from GE labs cracked an important puzzle involving solid oxide fuel cell. The breakthrough allowed GE Fuel Cells to build a new pilot fuel cell manufacturing and development facility that could soon start producing electricity.

Three months ago startup Seeo received $17 million funding round from Samsung Ventures. Seeo has developed a lithium ion battery it says is safer to use than the standard ones currently on the market.

Although there have been significant acquisitions and funding rounds, there also have been some spectacular failures. Lilliputian Systems closed down at the end of 2014 after selling off its intellectual property and burning through over $150 million in funding since 2001. Lilliputian Systems had one core innovation but was stalled by the countless manufacturing, engineering, and distribution challenges required to bring a first-of-a-kind consumer hardware product to market. In the end, Lilliputian never delivered its product at a price point the market could bear.

Fuel Cell Investors

Kleiner, Perkins is the dominant VC investor in the market, with portfolio companies like battery startup Aquion Energy. Aquion unveiled the second generation of its low-cost battery in October. Customers can even plug it into solar systems.

Of the top American commercial fuel cell producers, Bloom Energy (valued at $2.9 billion), is the only private company on the list and has made it into the Billion Dollar Club.

Startup Alevo joined the Billion Dollar Club with its latest funding round. The company un-stealthed after about a decade of development in Germany. The company is now going straight to production and opening up a factory in North Carolina at the location of a former cigarette plant.

Clean Energy Conferences and Accelerators

Who are the future winners in the market? Perhaps they presented at the first ever New York's Cleantech Startup Showcase last November. Power innovator Lionano has created a revolutionary nano-engineered anode material for Li-ion batteries that delivers 3 times the capacity, 4 times the battery life, and recharges 3 times faster than any anode material on the market today. Also in the running are proof-of-concept companies like American Fuel Cell with new PEM fuel cell technology and Conamix’s advanced nano-materials, with multiple applications including in lithium-ion battery anodes.

To help us all keep current on winners and losers Battery Ventures launched Powered by Battery. Battery Ventures believes the future of fuel cell and battery technology indeed looks bright.