In the past, I've always been pretty negative on the prospects for the portable fuel cell market for handheld or even luggable electronic devices like large laptops.The insurmountable problems as I saw it were;

1. The energy density is not that much higher than lithium ion batteries 350 compared to 200 watt hours per kilo. Better, but not revolutionary.
   
2. Who wants to have the hassle of having to buy something else from the shops on a regular basis for their electronic equipment? I always wince at the thought of buying new cartridges for my printer  Why would consumers take to buying methanol cartridges for their mp3 players, phones and laptops when they can conveniently recharge their batteries at home?
3. Despite all the hype, just like their larger cousins in the auto industry, you have never been able to buy micro fuel cells anywhere unless you are part of government or a tv science documentary
   
4. After some well-publicised terrorist incidents, the chances of being allowed to carry any sort of combustible fuel - i.e. methanol, gas, etc. - onto a commercial airliner were somewhere between nil and zero.

So I was most interested to read in this week's Economist, that I may now be proved wrong . . . henceforward !

Portable fuel cells, may yet be on the way. And this is why according to the Economist article, in my preferred order of importance;

i) America's Department of Transportation is planning a rule change from October 1st to allow passengers and crew to bring fuel-cell-powered electronic devices and one or two fuel cartridges on board in their carry-on baggage. THIS IS AN EARTHQUAKE. Probably the biggest stumbling block of all is about to be removed to the adoption of consumer fuel cells. Where America's Department of Transportation goes, others will meekly follow. Although each passenger would initially be entitled to only 200ml of fuel - a measly 70 watt hours with current technology.

ii) Toshiba is going to start making them within a year for laptops and mobile phones. BIG DEAL. When top laptop manufacturers are entering the consumer fuel cell arena with that sort of intent, take notice.

And yet, I still think that by and large, micro fuel cells seemed like a poor solution to a not very big problem. As I've discussed before, the only real customers for portable fuel cells right now - are soldiers, often special forces, or the emerging intelligent infantryman, who are increasingly deployed are a long way from a mains socket. Moreover, the emergence of micro laptops with 9" and 7" screens, had extended the run time of lithium ion powered laptops without mains power to nearly 9 hours.

Anyway, take a careful look at the AEI global list of fuel cell stocks here and make your own mind up.

The Japan Postal Service, which until recently, thanks to vast savings of the Japanese non-consumer, was part of the largest bank in the world, has just made the momentous decision to go all electric with its vehicle fleet. As reported in the Guardian and on Bloomberg, this proved to be a real shot in the arm for GS Yuasa which gained 6% and Furukawa Battery Co (a stock I shall add shortly) upping by 12%.

Leaving aside the pretty much unrivalled expertise Japanese firms have in carmaking and advanced batteries, Japan is well-suited for the early arrival of electric vehicles delivering postal services for other reasons too. These are;

i) It's an island nation with no oil or gas resources to speak of and is far more vulnerable to energy security concerns
ii) It has a great deal of low carbon nuclear electrical infrastructure and relatively high solar penetration (although still tiny, a weak point really)
iii) Most of the population lives at high density in urban areas favouring short-run, low emissions, stop start slow speed delivery vehicles

So if you're in Japan electric vehicles are going to become a very common sight. It's also interesting to learn that conventional acid batteries are coming under price pressure because of the rising price of lead. The global lead-acid starter battery market it would seem is not growing that fast of all - from sales of EUR 856m today to maybe EUR 1 billion in 2014.

No question, Protonex is having a good April. They have just won a $3.6m order from the US Army for its Pulse M250 portable fuel cells, just two weeks after landing a $1.6m deal to develop fuel cells for the US Navy's UAVs (Unmanned Aerial Vehicles). Fuel Cells have been for almost everyone, a huge disappointment. What is fascinating is how keen the US Military is to deploy them. This is one of the rare and not fully appreciated success stories for fuel cells in recent times and I would venture, in the years to come.

Soldiers - especially infantrymen - are increasingly carrying a lot of electronic kit with them and they need power. These gadgets might include Night Vision Goggles, laptops, radios, mobile phones (for backup),  micro and small UAVs, laser target designators, telescopic sights etc.

There is however only so much weight an infantryman can carry in the field. Hence the demand for portable fuel cells which have a higher energy density per kilo - around 350 watts - than batteries. The nature of warfare - particularly the low intensity, discretely kinetic kind to win hearts and minds like in Iraq and Afghanistan - is shifting the application of force from the huge weapons platforms of the past to the grunt on the ground. It's much easier and cheaper to launch a portable UAV to look over the hill than request air recon from a jet or helicopter.

Certainly, fuel cells have come in for some stick for being so expensive. But the costs are calculated very differently when it comes to saving or even taking lives compared to an extended run time on your ipod.

The findings of a very interesting study have just been released that works on the assumption that by 2025, one quarter of US cars will be plug in hybrid vehicles (PHEVs). Assuming continued growth in population and vehicle ownership in America, that amounts to at least 60 million vehicles, up from - I would guesstimate - a few dozen today.

The Oak Ridge National Laboratory Study was principally concerned with what the impact would be on electricity demand. As per their press release;

"In an analysis of the potential impacts of plug-in hybrid electric vehicles projected for 2020 and 2030 in 13 regions of the United States, ORNL researchers explored their potential effect on electricity demand, supply, infrastructure, prices and associated emission levels. Electricity requirements for hybrids used a projection of 25 percent market penetration of hybrid vehicles by 2020 including a mixture of sedans and sport utility vehicles. Several scenarios were run for each region for the years 2020 and 2030 and the times of 5 p.m. or 10:00 p.m., in addition to other variables.

The report found that the need for added generation would be most critical by 2030, when hybrids have been on the market for some time and become a larger percentage of the automobiles Americans drive. In the worst-case scenario—if all hybrid owners charged their vehicles at 5 p.m., at six kilowatts of power—up to 160 large power plants would be needed nationwide to supply the extra electricity, and the demand would reduce the reserve power margins for a particular region's system.

The best-case scenario occurs when vehicles are plugged in after 10 p.m., when the electric load on the system is at a minimum and the wholesale price for energy is least expensive. Depending on the power demand per household, charging vehicles after 10 p.m. would require, at lower demand levels, no additional power generation or, in higher-demand projections, just eight additional power plants nationwide."

So timing is everything. Even in a country like the UK, which powers most of its electricity by coal and gas, charging up overnight makes sense because when demand drops from a peak of 60 GW during the day to 20 GW at night, only the nuclear, hydro and wind power stations are still generating electricity. And because no one uses it much then, it's cheap, virtually half-price. The study also from what I gather, does not factor in the arrival of pure electric vehicles which would also want some of that demand.

Now, back to the bigger story. For PHEVs, from several dozen to 60 million in the US alone - this is a phenomenal growth curve - how could an investor get exposure to it?

Hybrid Battery Technology stocks;

Altairnano

Applied Intellectual Capital

Electro Energy

Quantum Fuel Systems Technologies Worldwide

There's also Ener1 - see here, which I don't list because it is a OTCBB stock.

and for the pure electric vehicle play . . .

Tanfield Group - UK based

Zenn Motor Company - Canada based but doing business in the States

So there aren't that many stocks and they're all pretty small. One should also be cautious as similar projections were made for fuel cell cars which everyone would now agree were ridiculous. I have more confidence though that plug in hybrids will succeed because they already work at a reasonable cost. Definitely a sector to swat up on.

I don't think anyone saw this coming. Because of tax and regulatory incentives, it has always been difficult to find a totally straightforward relationship between the price of oil and alternative energy stocks. Yet no one ever really disputed that, say, if oil prices had remained low - at $10 a barrel as they were in 1999 - there's no way we could have had the boom in alternative energy investment of recent years.

However, over the last few weeks, they have clearly been heading in the opposite direction. Oil is reaching new highs - $111 and the Wilder Hill Clean Energy Index which closed at 206.77 yesterday, is a long way off it's 2007 Boxing Day high of 297.05.

Obviously, there are a lot of investors out there who haven't read the script !

What's happening is that commodities like oil and gold, in the face of the credit crunch, have become the new defensive investments. That strikes me as pretty risky, but it seems to be working for those investors, for now.

And still there is no let up in sight to the alternative energy boom. Figures out earlier this week from Clean Edge make this clear - in 2007, a 40% increase in revenue growth for solar photovoltaics, wind, biofuels, and fuel cells to $77.3 billion. And the projections for 2017 are;

• Biofuels sales will grow to $81.1 billion by 2017 - a 319% increase
  


• Wind power (new installation capital costs) will grow to $83.4 billion in 2017 - a 277% increase
  


• Solar photovoltaics (including modules, system components, and installation) will grow to $74 billion by 2017 - a 365% increase
  


• The fuel cell and distributed hydrogen market will grow to $16 billion over the next decade - a 1066% increase
  

All projections far into the future have a habit of being wrong of course, but Clean Edge has the only annual and projected figures in town. And let's be honest, most of us would be very happy with half these growth rates. It's also worth noting that in the last few years, alt. e. growth rates have actually been faster than anticipated. If there's anything I'm overtly sceptical about in these projections, it would have to be the fuel cell industry which has been the future for a long time. I still don't see a big breakthrough in sight.

It would be interesting to start seeing some figures though on the growth in energy storage technologies, particularly those in the category of hybrid electric vehicles.

Ok, let's face it, no one in alternative energy is doing anything quite as well as Moore's Law. Let's just remind ourselves what it is ...

The observation made in 1965 by Gordon Moore, co-founder of Intel, that the number of transistors per square inch on integrated circuits had doubled every year since the integrated circuit was invented. Moore predicted that this trend would continue for the foreseeable future. In subsequent years, the pace slowed down a bit, but data density has doubled approximately every 18 months, and this is the current definition of Moore's Law, which Moore himself has blessed. Most experts, including Moore himself, expect Moore's Law to hold for at least another two decades.

From Webpedia.

Ray Kurzweil of course, would go much further. Roughly each year, computers chips will not only double their power, but the bandwidth of networks will triple and most importantly, the number of computational calculations per $1,000 will double too.

Now back to the starting theme of this post. An excellent article in the Economist this week In search of the perfect battery got me thinking, after looking at the chart entitled Super store. Solar PV efficiency is increasing by around 1 percent per annum. Today, your average new solar panel can crank out 15% efficiency, so by 2015, we could be up to 22%. According to the chart however, the projected rate of increase for power density in lithium ion batteries will jump from about 180 watt hours per kg to 320 - a nearly 80% increase. 

The other bit that caught my eye. According to Menahem Anderman, "between now and 2015 . . . the worldwide market for hybrid-vehicle batteries will more than triple, to $2.3 billion" and half of hybrid cars in 2009 will be using lithium ion batteries. Granted, that's a much slower growth rate than solar (approx 17% p.a.), which  will probably grow by at least 30% a year until 2015, yielding a 6 fold increase in production.  But the sheer size of the Global automotive industry, with probably close to, I guesstimate, $800 billion in annual sales, just might point to a growth curve for automotive lithium ion batteries on a par with solar, at the back end of the next decade. Especially, if Peak Oil finally kicks in by then.

If you want to know why Quantum Technologies - or to use it's full name - Quantum Fuel Systems Technologies Worldwide - rose by a staggering 18.42% yesterday, there's just one answer;

The Fisker Karma
- as launched at the Geneva Motor Show yesterday.

This comes not long after being awarded $14.5 m by Fisker Automotive to advance and integrate Quantum's proprietary high-performance plug-in-hybrid electric vehicle ("PHEV") architecture -- known as "Q-Drive" -- for the Fisker Karma four-door sport sedan production model.

For more details about the Fisker, see their website here.

It's fascinating how many niche players are emerging into the nascent alternative energy vehicle market,with production runs in the low 1000s. Meanwhile the big automotive players, Toyota excepted, bang on about fuel cells and run endless and expensive demonstration programmes with a handful of vehicles, proclaiming a breakthrough.  Honda's FCX Clarity and BMW's 7 series edition, are both cases in point.

The other day I was in a supermarket and was shocked to find a portable CD player on sale for £6 / $12 and not really any better than the one I bought 7 years ago for £150 / $300. We all know the first part of the story as to why this happened; scaled-up low cost Chinese manufacturing. The second reason for these fast-falling costs, the hardware refresh rate, needs further exploration. The hardware refresh rate is all about how often a given product is replaced. I'm only a very occasional music listener, but I've had two mp3 players since then, so I have in the course of 7 years, refreshed the hardware twice. That's typical with consumer goods, the hardware refresh rate tends to be far quicker than the lifetime of the product itself. Perhaps the ultimate example is the mobile telephone - probably about once a year or certainly every two.

So what does this have to do with alternative energy technologies?

I think the rollout and development of alternative energy technologies needs to be thought of not just in terms of increased production yielding lower costs, but in the rate of hardware refresh rates. For background, read this usefully sceptical piece about plans to switch Israel to all electric road transport in 10 years.

So here are the hardware refresh rates and an important reason why they're won't be a Moore's law for solar, wind, fuel cells or anything else in the near future;

Conventional road vehicle - 15 years
Conventional power plant (coal, gas, nuclear) - 40 years

Solar PV - 30 years
Wind turbine - 15 years
Fuel cell - maybe 15 years?

The one hardware refresh rate bright spot I would suggest is energy storage because conventional lithium ion batteries have a limited number of charge/recharge cycles - about 500 before they are finished. That has led to plenty of research which is quick to market in extending battery life.

Lithium ion batteries are pretty good and getting better - already, products like cameras and mp3 players that a few years ago were working on throwaway batteries are now switching to rechargeable lithium ion batteries. We've seen progress as well in the recharge times. The Prius with its Nickel Metal Hydride batteries seems just so yesterday. But we're not looking at an exponential improvement in battery technology, akin to Moore's law and computing power - as said in this interview 18 months ago, with MIT materials scientist and battery expert Yet-Ming Chiang, who cofounded the battery startup A123 Systems;

"One thing we have to keep in mind is you can't really conceive of anything like Moore's Law for electrochemical energy storage. Moore's Law was based on being able to perform similar functions [for computing] using either fewer electrons or, more recently, fewer photons. But energy is constrained by chemistry and the periodic table. Expecting Moore's Law from battery chemistry is like expecting steel next year to weigh half as much and be twice as strong. People who are working on better batteries are very optimistic. There's definitely room for growth; there are many avenues for improvement. If you look at it realistically, I'd say a factor of two improvement in the next decade is quite realistic. A factor of 10 is not."

Which strikes me as a very sober observation - just what I like.

So you can understand the fuss that has been generated by EEStor - still no company website - over the last couple of weeks and their battery-ultracapacitor hybrid technology based on barium-titanate powders which they claim  will dramatically outperform the best lithium-ion batteries on the market in terms of energy density, price, charge time, and safety. Pound for pound, this technology will also pack 10 times the punch of lead-acid batteries at half the cost and without the need for toxic materials or chemicals.

The hardcore figure you need to know is that they claim that their technology can deliver an energy density of about 280 watt hours per kilogram, compared with around 120 watt hours per kilogram for lithium-ion and 32 watt hours per kilogram for lead-acid gel batteries.

So  they appear to have doubled energy density in 18 months - rather than over 10 years, which is a bit like Moore's law after all. And they intend to use their technology in this vehicle the Zenn Car - a stock I will add shortly. And here's some youtube about the Zenn for your amusement;






For all that, there is still a big performance gap with electric cars that horsepower hungry American consumers are perhaps more sensitive to than Europeans;  the energy density of petrol or gas is way, way, more - about 13,000 watt hours per kilogram. Still, I suspect that this gap will be closed not so much by improvements in battery technology, but by weight reduction. There is still so much heavy metal in today's cars and many cumbersome safety features. The next generation of GPS satnavs will most likely calculate not just where you want to go, but keep any eye on the position of all other vehicles relative to you on the road, intervening automatically in the brakes where necessary. My view is that in the long run, say the next 15 years, the shift to plastics/lighter materials and a presumption towards crash avoidance rather than crash survival, will probably be more significant than batteries in extending range and power.

Anyway, If you want to understand the progress in batteries that has been made over the last year, I strongly recommend reading the collection of articles here under the MIT Technology Review Better Batteries Report.

Altair Nano Technologies, a manufacturer of highly advanced lithium ion batteries, has got a healthy eye on publicity. Their batteries powered the winner of a competition organised by the (get ready for this!) National Electric Drag Racing Association !

See story here.

A drag race incidentally is a timed race in a straight line over a quarter of a mile, with one passenger driver. The goal - and I think this is right - is to get to the highest speed in the shortest possible period of time. The main engineering challenge in drag racing is to keep the vehicle on the ground - a bit like power-boating - and is equally dangerous. See youtube video here of the winner of the competition, from a couple of weeks ago, the Current Eliminator V in a potentially fatal spin-out.

What I think is important about this is that electric vehicles are making great performance strides from the nerdy to the sleek and sexy. And that is a critical image shift as far as consumers and investors are concerned.

 And we have a new world record to celebrate; 7.956 seconds at 159.85 miles per hour. So congratulations to the pilot, Dennis "Kilowatt" Berube. With more progress been made each year in electric batteries, is it too far fetched to imagine Formula 1 electric vehicle races at Daytona or Brands Hatch in the not too distant future?