THE WALL STREET JOURNAL / CALIFORNIA
Entrepreneur Drives to Sell Workable Substitute for Gas
By Ryan Tate
Staff Reporter of The Wall Street Journal

08/25/1999
The Wall Street Journal
CA2
(Copyright (c) 1999, Dow Jones & Company, Inc.)

LOS ANGELES -- A state law forcing car makers to cut smog-producing auto emissions by four-fifths over the next 10 years could put fresh air into the lungs of 35 million Californians. But will it also put billions of dollars into the pockets of one entrepreneur?

Todd Marsh hopes so. The Los Angeles businessman says the rules will help make his nonpolluting electric generator, called a fuel cell, as ubiquitous in cars as the Windows operating system is in computers. The auto industry has been experimenting with fuel cells for years, but Mr. Marsh's variation on the technology eliminates some of the basic problems that he claims have stalled a wide-scale roll-out so far.

Mr. Marsh's plan for his fuel cell doesn't stop with cars -- he also wants to see his generator installed in every portable phone and laptop computer on the planet, reaping healthy royalties on each unit.

A far-fetched goal, perhaps -- and especially audacious coming from a 44-year-old with no college degree, who admits his chief work experience is laying pipe, installing air conditioners and shooting album covers for a record company. But the fuel cell is "basic plumbing," Mr. Marsh insists. "It's like in `Moonstruck,' when he says to Cher, `It's simple -- it's electrolysis, lady!'"

The fuel cells themselves have an impressive pedigree. The technology Mr. Marsh controls -- and will control through the next decade under patent rules -- was refined at the Jet Propulsion Laboratory in Pasadena, which designs spaceships for the National Aeronautics and Space Administration. And it originates from a collaboration among JPL, the California Institute of Technology and the University of Southern California. (Caltech manages JPL on NASA's behalf, but they are separate institutions.)

And while the auto industry for six years dismissed the technology as an also-ran to the fuel cells it had developed, Ballard Power Systems Inc., of Vancouver, British Columbia, inked a deal last month to license the technology from Mr. Marsh's DTI Energy Inc., in conjunction with Ballard's partners, DaimlerChrysler AG and Ford Motor Co. (The parties refused to disclose the terms of the deal.)

Those companies are scrambling to invent so-called zero-emission vehicles, which emit no carbon monoxide, nitrogen oxides or nonmethane organic gases. Such cars must constitute 10% of the number produced for California by 2003 under rules enacted by the state Air Resources Board. If they don't, car makers face a $5,000 penalty for each car under the quota.

Ann Smith, a spokeswoman for DaimlerChrysler, which plans to spend $1.4 billion on fuel-cell research between 1994 and 2004 (she declined to break out the portion of that going to cells like Mr. Marsh's), says the company is looking closely at the technology, but only as one of several approaches. While simpler and newer than other cells, she says, Mr. Marsh's cells are "still several years behind the type of technology we're bringing to market in 2004."

Some experts, too, say Mr. Marsh's cells have some maturing to do. Scott Samuelsen, director of the National Fuel Cell Research Center at the University of California-Irvine, says the cells show strong promise, but that others based on a variant of conventional gasoline are better poised to make use of the existing petroleum infrastructure. (Ray Lewis, the founder of the American Methanol Institute, counters that Mr. Marsh's cells are further along, and that the type of gasoline to be used in petroleum cells would require many of the same infrastructure modifications.)

Mr. Marsh took a roundabout way to his fuel cell license. He says that after being graduated from Los Angeles's Fairfax High School in 1971, he worked for six months as a photographer at Epic Records. He remembers taking engineering classes at UCLA and USC, but never formally enrolled. Instead, he entered the marketplace, opening TRM Service -- named for his initials -- a mechanical-contracting firm that specializes in designing and installing plumbing.

It was there, he says, that he learned how ecological concerns could be good business. "I was capitalizing on the water shortage in L.A.," he says, helping businesses reduce water consumption.

Then, in 1993, he says, a mutual friend invited him to meetings initiated by a local congressman who was investigating ways to help aerospace workers laid off after defense cutbacks. That exposed Mr. Marsh to the work being done at Caltech and JPL; he believed that research there was producing technologies that could energize several different industries, but that the academics lacked the manufacturing prowess or management experience to implement their discoveries.

Mr. Marsh's curiosity brought him in 1993 to a conference on battery design, held in Long Beach by the Defense Advanced Research Projects Agency. Impressed by the fuel-cell technology on display, Mr. Marsh obtained a license from JPL in 1993 for just $100,000. (In 1996, he began paying $1.8 million to fund innovations on top of the original technology.)

To see why Mr. Marsh and JPL scientists think these fuel cells are revolutionary, it's necessary to understand how they work. Standard fuel cells combine hydrogen and oxygen in the presence of an electrolyte to produce an electrical current. Water and carbon dioxide are the only byproducts, qualifying the cells as "zero emission" under California standards. Internal-combustion engines, by contrast, emit carbon monoxide, nitrogen oxides and other smog-causing pollutants. Fuel cells stack up well against batteries, too, mainly because they can be filled quickly, like a gas tank, instead of recharged.

Those advantages have made fuel cells the top contender among alternative automotive power sources. But, for all their benefits, fuel cells have long been plagued by their need for pure hydrogen. Liquid hydrogen is notoriously difficult to distribute, meaning an entirely new filling-station infrastructure would have to be built. So scientists have turned to methanol, which is distilled from natural gas and, in refined form, presently wholesales for about half the price of refined petroleum. Methanol contains the hydrogen needed for use in the fuel cell, and it can be stored in gas stations' existing tanks.

But even that approach to fuel cells -- replacing liquid hydrogen with methanol as the fuel -- has been fraught with problems. Methanol cells required a device called a reformer to distill hydrogen atoms from the methanol as needed. The reformer adds complexity and introduces many of the same storage and temperature problems as liquid hydrogen. What's more, the reformer produces some of the very pollutants fuel cells are intended to eliminate.

This is where Mr. Marsh's technology is different. His cell converts methanol into electricity without a reformer, making it much simpler and, potentially, cheaper and more reliable than liquid hydrogen- or methanol-and-reformer-based cells.

"We questioned ourselves -- why should {methanol} be vaporized?" says Rao Surampudi, supervisor of JPL's electrochemical-technology group and a co-inventor of the technology. "We came up with the concept that it should be a liquid fuel cell instead."

The new cells work in part thanks to dabs of platinum on the membrane separating the methanol and the oxygen. The platinum reacts with the methanol and separates out hydrogen atoms, which migrate across the membrane to react with oxygen atoms from the other side, generating current. This type of fuel cell is called a "direct methanol, liquid feed" fuel cell.

JPL scientists have used a stack of five cells to generate 250 watts, and say that within one year they will have stacks capable of 1,000 watts, enough to power a golf-cart-size vehicle. The cost is high, about $200-$300 per kilowatt, the inventors say, compared with about $50 for a conventional automobile engine. But 90% of the cells' cost is materials, and the scientists hope to cut those expenses by using less platinum and by finding cheaper alternatives to the graphite and synthetics within the cell.

Proponents of the technology envision uses far beyond cars. They see fuel-cell cartridges in cell phones and laptops, and huge cells providing backup power to hospitals and military installations.

Nevertheless, no consumer battery company has signed on with Mr. Marsh's company, DTI, to develop such a technology yet. And DTI could not find a single client for the first six years after it obtained its technology license. "What we have is not a can of Coke you can just buy," says Caltech's head of licensing, Larry Gilbert. "It's an opportunity to invest a lot of time and a lot of money to commercialize something. And between 1993 and 1999, other than work at JPL and USC, there was no other party attempting to commercialize this, except {now} with Ballard, who has no mandate requiring it to develop it."

For his part, Mr. Marsh blames stubbornness on the part of car companies, saying they have invested so much in "indirect" fuel-cell technology -- which requires either a reformer or liquid hydrogen -- that they have dragged their feet in looking at other approaches. He admits, though, that his cells are about 30% less efficient than the indirect variety, elegantly simple as they may be.

But, he says, California's looming zero-emission deadline has spurred automobile makers to action like never before, hence the Ballard deal. In fact, political pressure on auto makers is the linchpin of Mr. Marsh's strategy.

"We went from the industrial revolution to what I think is the environmental revolution," says Mr. Marsh. "And we're saying the toxics are not acceptable no matter how cheap the fuel is. But we're clearly not looking at lead-acid batteries where you need to go 75 miles and find a recharging station."