SEMI Breakfast Forum: Entegris’s emerging market venture – five years later

By Phil LoPiccolo, Editor-in-Chief

In emerging markets, essential ingredients for success, besides technological expertise and innovation, are patience and long-term vision. That’s one of the lessons John Goodman, SVP and chief technology and innovation officer at Entegris, stressed during a discussion at the recent SEMI New England Breakfast Forum about his company’s decision to enter the alternative energy market.

Five years ago, when studying emerging markets to determine where it could best participate, Entegris decided to direct some focus toward alternative energy, in particular hydrogen fuel cell technology, not only because it offered the potential to generate new revenue streams, but also because it provided an opportunity for the company to leave a legacy of fostering energy independence and environmental responsibility. Unfortunately, the journey is taking longer than expected. “The definition of an emerging market is one that’s not going to grow as fast as you thought it would, and won’t be profitable for some time,” Goodman quipped.

Nevertheless, last week on the fifth anniversary of the launch of Entegris’s fuel cell business, Goodman reported that the company has leveraged its expertise in semiconductor process technology and material science to become a leading global supplier of components to fuel cell developers, and is playing a significant role in the effort to move to a non fossil fuel based economy.

The decision by Entegris to get into the alternative energy business was fueled by alarming trends in the traditional energy market, namely the oil sector, said Goodman. “The main driver for the technology is energy security,” he said. “Most of the countries that are heavily investing in hydrogen fuel cell and other alternate energy technologies are doing it to avoid being dependent on foreign sources of oil.”

In fact, US dependence on foreign oil has been growing dramatically. Citing figures from the Department of Energy, Goodman showed, for example, that since the late 1980s, the US has consumed increasingly more oil for transportation alone than it has produced. Moreover, even if vehicle mileage efficiency were to achieve the highest expected improvements (60%), and if the maximum amount of oil could be pumped from the Arctic National Wildlife Refuge (ANWR) in Alaska, domestic oil production would still fall short by more than 5 billion gallons per day by ~2030 (see figure above). “And this just looks at the supply side of that problem from a national perspective,” he added, “without considering the geopolitical problems it creates.”

Why fuel cells?
Why did Entegris choose to develop hydrogen fuel cell technology? First, hydrogen is an abundant, replenishable energy carrier that can be produced through water hydrolysis from clean, renewable energy sources or even through reformation of fossil fuels, Goodman explained. Also, using hydrogen in a fuel cell is nonpolluting and highly efficient because the cell is a simple energy conversion device that doesn’t create emissions or lose heat through combustion.

Fuel cells are not a new product, Goodman explained, noting that every piloted spacecraft has used fuel cells to generate on-board power. Moreover, several types of fuel cells are currently in use, including high-end solid oxide, molten carbonate, and phosphoric acid systems for large commercial and industrial uses, as well as alkaline cells and proton exchange membrane (PEM) cells for smaller commercial, residential, and automotive applications.

Of these, Goodman believes that the technology of choice for the biggest potential markets – transportation and portable power applications – is the PEM cell because it operates at near room temperatures and is highly scaleable. As such, Entegris has directed some of its efforts to manufacturing conductive, bipolar plates for PEM cells.

In terms of operation, PEM cells produce electricity by electrochemically oxidizing hydrogen (see figure below). Each cell comprises two electrodes – the conductive, bipolar plates – and sandwiched in between is a proton exchange membrane that acts as a kind of electrical filter, blocking electrons but allowing protons to pass through. As hydrogen molecules enter at the anode, they react with a platinum catalyst and are split into protons and electrons. Then while the protons pass through the membrane unaffected, the anode collects the electrons and uses them as the load for the cell. At the cathode side of the cell, protons are reunited with electrons and combined with oxygen from the air to create water. The PEM cells each produce about one volt of electricity, and can be stacked to increase voltage, such that adding each successive cell increases the power by one volt. In addition to producing electricity, the cells also produce heat, which can be used to provide facility heat or hot water, for example.

Target applications
The various types of fuel cells range from large units used to power vehicles and even large buildings to small units to power laptops, cell phones, and other portable devices. Early target markets for PEM fuel cells include portable power applications, but, again, the adoption rate has not grown as rapidly as Entegris had hoped. “When we started five years ago, we thought that by now we would see a significant number of fuel-cell fleet vehicles,” said Goodman. But Honda recently announced it doesn’t expect to produce a commercial fleet until 2018, and other similar programs are also delayed. Nevertheless, Honda and other automakers are actively developing both fuel cell vehicle and hybrid vehicle technologies, which can be synergistic for both applications, he added. “The electric motor drives, electronic conversion components, and other technologies that you need for hybrids are what we will need eventually for fuel cell vehicles.”

Other promising applications include the use of fuel cell batteries to power a growing multitude of personal electronics. “I could give you a fuel cell that would run everything in your briefcase for 10 hours on a cartridge of methanol about the size of a butane lighter,” said Goodman, explaining that liquid methanol is an ideal fuel because it contains vast amounts of densely packed hydrogen. These cells would eliminate down-time and the need for battery recharging, because when they run out of methanol, they can instantly be replaced by another cartridge, he explained.

Circumventing barriers
The holdup is that current domestic and international airline regulations prohibit passengers from carrying methanol cartridges onto an aircraft, Goodman said. The regulation makes no sense, he argued, because bottles of alcohol and perfume, which are likewise flammable, are permitted on airplanes, while micro fuel cell methanol cartridges, which can only be opened with “a couple of screwdrivers and hammer” and are therefore relatively safe, are not allowed. The good news is that the US Fuel Cell Council and others are making good progress toward resolving this issue, he said. “The technology is there, but this is the big hurdle we have to cross.”

Other roadblocks to further adoption of fuel cell technology, largely for transportation, include cost, availability, and durability issues. “I could get you a fuel cell car … if you have about a million dollars,” Goodman said. But he added that costs would plummet with further technology development and volume manufacturing of fuel cell and hybrid vehicles.

Availability of hydrogen is also a major barrier. “The nearest hydrogen filling station is in Washington, DC, and the next closest is in Manitoba,” said Goodman. Thus, we will need an infrastructure, but it won’t have to be built all at once, he contended, noting that less than 10% of gas stations sell diesel, and diesel trucks get along just fine.

Also, the infrastructure is already starting to be erected by the oil companies, Goodman said. Shell is investing heavily in hydrogen programs, and BP, which now stands for “Beyond Petroleum,” is converting to alternate energy sources, he said. “BP is not going the way of the railroad companies and saying they are in the railroad business and not the transportation business.”

Furthermore, building a hydrogen infrastructure may not be prohibitively expensive. For example, GM recently studied the feasibility of retrofitting some 11,000 filling stations to reform either gasoline or natural gas to hydrogen in 100 major cities and at 25 mile intervals along Interstate freeways. The automaker estimated that the conversion would cost about $1 million per station, or some $12 billion in total, and that the retrofitted stations would serve about 70% to 80% of the population’s transportation fuel needs, reported Goodman. “The gasoline industry currently spends more than that each year maintaining their underground tanks,” he said.

Finally, one common concern about hydrogen is that its high degree of flammability would make it unsafe to use in vehicles. But Goodman contends that a hydrogen vehicle that is well designed would be just as safe as existing cars. As evidence, he pointed to a recent university study that lit a fire under both a hydrogen fuel-cell car and a gasoline-powered car. The gasoline car exploded in flames when the liquid gas in the tank ignited. But when the compressed hydrogen gas tank overheated, a pressure valve opened and safely vented the lighter-than-air hydrogen straight up into the air.

Political choices
While the economic and technological hurdles are significant, they may pale in comparison to the political challenges. Indeed, alternative energy is a high-risk proposition for politicians because the payback will not be realized during their term in office or even during their successors’ terms in office, explained Goodman. “I have been in Capitol Hill offices with representatives who say that alternative energy technology is a great idea, but people don’t understand it, and it won’t help them get re-elected,” he said, “so they can’t support moving in that direction.” Alas, the other, perhaps more likely scenario is that there will be a catastrophe of some kind, such as the energy crisis in the early 1970s, in Goodman’s opinion, and that would not likely be tolerated because of the disruption it would cause to the electorate’s accustomed lifestyle.

In the meantime, fuel-cell technology will continue to evolve to a point where there will be pervasive energy conversion devices, and a key to non-fossil fuel based economy, Goodman predicted. We would love for this to be our legacy, he said. “It is technically feasible and will be economically feasible as oil becomes more expensive, and it is why we continue to be enthusiastic about it from a business perspective.”

“But I want to be very clear that if you’re thinking of entering a dynamic emerging market, this is a very exciting one, but it’s not growing nearly as fast as we’d like it to, and it’s difficult to make money because everyone is in the prototype stage,” Goodman cautioned, noting that fuel-cell related sales represented less than one percent of his company’s revenue in 2006. “You have to have very patient time horizons if you’re going to go after this emerging market.” – P.L.

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