Thousand Oaks Company Goes Private With NASA Fuel-Cell Technology

The metallic box the size of a large dumpster once provided on-board power for spacecrafts on the way to the moon. So why shouldn’t the fuel cell developed for NASA generate pollution-free heat and electricity for hospitals, hotels and factories?

That’s the question a team of engineers and scientists, who worked with the technology when it was still classified, is trying to answer. Refugees from a shrinking defense industry, the founders of Energy 2000 Inc. have started marketing the million-dollar fuel cells pitching their efficiency and environmental qualities.

The company chose the Thousand Oaks Environmental Business Cluster for its headquarters. The business incubator provides them with a low-cost office space and administrative support.

So far, no one in the self-funded company has drawn a paycheck.

But they’re working fast: They’ve pitched the clean-burning, oversized batteries to food-processing plants from Saticoy to the San Joaquin Valley, hospitals and a city in Northern California.

The start-up firm is reselling fuel cell power plants manufactured by Connecticut’s ONSI Corp., a division of $22-billion giant United Technologies. The 200-kilowatt unit, which costs about $1 million, can sustain the operations of a facility such as large hospital, a hotel or a food processing plant.

That’s expensive, said Tom Nielsen, the company’s chief executive officer. But in the long run, fuel cells can save money and provide more efficient, nonpolluting power that will not be affected by power failures, he said.

Officials at Southern California Gas Co., which has seven fuel cell plants throughout the Southland, said the plants are anywhere from 5% to 15% more efficient in their generation of heat and energy. Payback on investment is between five and 15 years, said Tom Hobson, an engineer with the utility company.

“They are very reliable,” Hobson said. “They are extremely environmentally friendly. In a place like Southern California, this is the type of technology that will take us into the next century.”

What is unknown about the technology is whether it will be acceptable commercially, Hobson said. “That’s what Energy 2000 is trying to prove,” he added.

And whether they can prove it remains to be seen.

So far, Energy 2000 has been able to generate a lot of interest. But the fledgling company has yet to sell one of the plants. It has placed two purchase orders for the cells with ONSI for possible installation in Pittsburg in Northern California.

At ONSI, however, Energy 2000 is seen as a potentially important customer.

“They are taking advantage of a new technology that is not on the street,” said Herb Healy, a marketing manager at ONSI. “They are positioning themselves to market the fuel cells effectively.”

Nielsen, a computer technician turned entrepreneur, said with the deregulation trend that is sweeping the energy industry, small companies like Energy 2000 will be able to serve niche markets.

Nielsen and another company founder, Orv Moe, watched the defense downsizing from a computer company that served Point Mugu Naval Air Weapons Station and Pasadena’s Jet Propulsion Laboratory and decided it was time to do something else for a living--someday.

That day came four months ago when they joined five engineers and scientists--and one businessman with a knowledge of the agriculture industry--to form their own firm.

Part of the young company’s strategy is to remain nimble, Nielsen said. That is why, for example, they have refrained from printing their titles on their business cards.

“If your card says ‘marketing,’ people get the idea that is all you do,” Nielsen said. “Because we are so small, we can’t afford to do that. We’ve got engineers that sell and marketeers that engineer.”

Energy 2000 takes what they call a “whole system” approach.

When evaluating a potential customer, they look at all their energy needs, said Nielsen, who recently returned from placing a bid for one of the cells at a Huntington Beach hospital.

“We looked at all their equipment,” he said. That includes their critical life-support instruments that can’t afford to lose power, their regular electricity needs and their demand for things such as hot water and air conditioning.

The fuel cells are particularly suited for this type of application because they generate usable heat as a byproduct, which can meet the hospital’s need for hot water or air conditioning at no additional cost.

The fuel cell power plant, which has a footprint of 10-by-18 feet and is 10 feet tall, is powered by hydrogen-rich gas that is extracted from natural gas. In a hospital setting, it is hooked onto the hospital’s gas lines. The facility can draw most of its electricity and heat from the fuel cell, and extract additional power from the utility power grid.

The advantage of the setup is that in the event of a power grid failure, the fuel cell acts as the emergency power supply and can take over the hospital’s essential operations without interruption.

Traditionally, hospitals have to maintain a separate emergency electrical generator, usually diesel-powered, which has to be started when a power failure occurs.

An added advantage is that the cells are more reliable than traditional generators, experts said. The mean time between outages is about 2,200 hours, instead of the 350 to 600 hours of diesel generators and gas turbines, Healy said.

Besides working relationships with ONSI and Southern California Gas Co., Energy 2000 officials have begun talking about possible licensing agreements with Ballard Power Systems, a Vancouver, B.C.-based company that is building fuel-cell-powered buses and has been at the forefront of the technology’s research and development. Energy 2000 also has a joint-venture agreement with an East Coast lab to license a small fuel cell that can be used as a portable generator.

Last week, company officials were pitching the units to Sunkist processing facilities in Saticoy and to Golden Eagle Distributors, a division of Anheuser Busch, in Tucson. They also opened an office in Bakersfield to have easier access to food processors in the San Joaquin Valley.

The future, in their eyes, is rosy. Energy 2000 expects to have sold five units by mid-1997, said David Konwinski, head of marketing for the company.

“Given the interest we have generated, we could probably sell 10 to 15 in the next year,” Konwinski said. “But the manufacturer is not set up to produce the units fast enough.” With the increased demand, Energy 2000 will gain more clout with the manufacturer and will be able to get more units as they come off the production lines, Konwinski said.

Energy experts have heralded environmental qualities of fuel cells. Smaller fuel cells are being envisioned as the most promising technology for zero-emission vehicles.

“Fuel cells are the most pristine fossil fuel generator in the world by at least an order of magnitude,” ONSI’s Healy said. They are so clean, Healy said, that the South Coast Air Quality Management District, which has the longest operating fuel cell power plant in California, has issued a blanket exemption for air quality permitting.

That means no permit is needed to install one of the units.

This is particularly significant for San Joaquin Valley food processors who are under close scrutiny from the state regulators, Nielsen said. Food processing plants, which are often precluded from expanding because of strict environmental regulations, can replace existing generators with a fuel cell power plant and thus be allowed to grow, Nielsen said.

The more you incorporate the cost of pollution into the equation, the more attractive the technology becomes, said Jon Leonard, an environmental scientist with the South Coast Air Quality Management District.

Government agencies are helping to bring costs down, he said. Right now, the U.S. Department of Energy gives $200,000 grants to those who install ONSI’s fuel cell power plant.

“The outlook is very bright,” Leonard said. “Once we start mass-producing these, the price will come down.”