Hydrogen & Fuel Cell Summit Keynote by Warren Leon, Director, Renewable Energy Trust, Massachusetts Technology Collaborative

Hydrogen & Fuel Cell Summit – June 5, 2006, WPI. Keynote by Warren Leon, Director, Renewable Energy Trust, Massachusetts Technology Collaborative

Hydrogen & Fuel Cell Summit – June 5, 2006, WPI. Keynote by Warren Leon, Director, Renewable Energy Trust, Massachusetts Technology Collaborative This is going to be a talk in three parts: optimistic exhortations, words of caution, and straight information. Let’s start with the optimism:

We are all participating in a particularly exciting and important moment for the hydrogen and fuel cell industry in Massachusetts.

Because of high energy prices as well as concern about foreign oil supplies and global warming, the public is more receptive to alternative energy technologies than ever before. People crave those technologies.

In addition, because of the realization that we live in an increasingly competitive, technology-oriented world, the public is increasingly interested in having the US invest in advanced technologies and in businesses that can provide high-quality technology-oriented jobs. Public officials in Massachusetts, like those in other states, see alternative energy technologies in general, and fuel cells in particular, as important to the future of their state—from both an economic development standpoint and an energy supply standpoint.

There is a growing realization that the fuel cell industry is precisely the type of industry that should play to the inherent strengths of Massachusetts—our outstanding research universities, our skilled technical workforce, our tradition of bringing new technologies from the lab into the marketplace. And luckily, we already have an interesting and important group of emerging fuel cell companies to build on.

As today’s conference shows, there is growing momentum in the industry, Not only are individual companies making important advances but there are increasing ties between companies and among universities engaged in fuel cell-related research.

The emergence of the Hydrogen Coalition as an important force has been an especially significant development, because an industry is more likely to advance when it is organized and has a mechanism for sharing information, ideas, and strategies.

Over the past few months, many of you have been working together to contribute to the creation of a strategic roadmap for the future growth of the industry. The creation of such a written document was mandated by the state legislature back in December and what is emerging will be an important achievement. The drafts I have seen include good ideas and smart strategic thinking based on a realistic understanding of what it will take to succeed in an arena in which many companies in other states are pursuing similar technological advances and economic goals.

The strategy, which will be finalized in the next few weeks, should provide useful guidance to us all, whether we are in the private sector, in academia, or in government. Now it might not be possible to implement all the recommendations right away, but if we can rally around some of the key tasks identified in the strategy, we should be able to speed the development of the industry here in Massachusetts. We should be grateful to all who have participated in its development.

So, in sum, the future looks bright.

Part Two: There are reasons not to get carried away with our optimism.

The fuel cell industry may not end up achieving its promise here in Massachusetts. If we aren’t careful, we could find ourselves sitting around ten years from now wondering why the industry never advanced very much despite its promising start. Let me point out two pitfalls that could end up causing problems for the industry:

1. The glamour of the technology. I believe there is a tendency for individuals connected to hydrogen and fuel cells to get seduced by the technology. Because the technology is exciting and there is the need for considerable technological innovation, many of the people who start or are attracted to companies in the fuel cell industry are motivated by an interest in the technology. That’s where their passion lies. That’s fine, but they sometimes don’t give enough attention to how to turn the technology into a money-making business. We at the Renewable Energy Trust have seen a number of cases where a company has a good technology development plan or a good technology application plan but only a rudimentary business plan, if any. Fuel cell companies need people who are as passionate about and skilled at the business side of the company as at the technology side.

Moreover, there is a tendency to focus on those companies with the sexiest, most innovative technology, but those aren’t always the companies with the greatest opportunity to make money or to create jobs. We need to also focus on and get excited about companies that produce mundane, but important, products and services that are essential to the growth of the industry

2. Overhyping the industry and its prospects. There has been a tendency on the part of some people, of course not anyone in this room, to overhype the prospects of hydrogen and fuel cells, and to exaggerate how close to commercialization particular products and applications are.

For example, I remember going to a conference six years ago where a company not from Massachusetts implied that customers could right then buy large-scale fuel-cell generators that were cost-competitive with conventional power sources and would deliver power with 99.9999% operating reliability.

In other cases, fuel cell advocates have been way too optimistic in their comments about how soon different technologies could reach the marketplace. Yet others have exaggerated the near-term environmental benefits of fuel cells by blurring the distinction between the long-term vision of using hydrogen produced by electrolysis powered from clean renewable electricity sources and the near-term reality of fuel cells that run on natural gas. And, in other cases, companies’ estimates of their near-term job growth, sales, and product rollouts have been wildly optimistic.

Now it’s good to be optimistic and to set ambitious goals—that’s how progress gets made. But it is also important to inject realism into the public discourse about fuel cells. Otherwise, there is a risk that policymakers and citizens will stop believing fuel cell advocates and will conclude that the whole thing is some sort of hoax or pipedream. If that were to happen, public investment and public support could dry up. We need to set appropriate expectations by having and stating ambitious but realistic goals and targets.

Part Three: Straight Information

The Massachusetts Technology Collaborative’s Renewable Energy Trust has several initiatives that you can take advantage of, and we will likely have at least one or two additional ones after we digest the final fuel cell strategy and determine which of its recommendations make sense for us to implement.

Let me mention several existing initiatives and activities:

Large Onsite Renewables Initiative provides feasibility study grants of up to $40,000, as well as design and construction grants up to $570,000, to businesses and institutions for the installation of distributed electricity generating systems, including fuel cells.

The Massachusetts Green Energy Fund is a privately managed $15+ million venture capital fund that makes investments in emerging companies

The SEED Initiative provides loans up to $500,000 to companies in need of working capital for new product development, testing and improvement, and related technology commercialization activities. The funding is primarily intended for early-stage companies that have a key technology, product, or service, but have not yet demonstrated commercial viability to an extent sufficient to attract venture capital, such as through the Massachusetts Green Energy Fund.

In addition, we provide support to organizations and events that are helping to develop the industry, including the Hydrogen Coalition and the MIT Ignite Competition.

Here’s some advice for applying for funding from the Renewable Energy Trust:

We give the vast majority of our funding out through competitive solicitations with published deadlines. We are usually not able to respond favorably to unsolicited proposals, although it happens occasionally.

Our main charge is to benefit the Massachusetts ratepayers who pay into the Renewable Energy Trust fund through their electricity bills. When applying in response to any of our solicitations, explain why and how funding your project or company will be good for Massachusetts and the ratepayers of the state.

We are not in the business of supporting research for the sake of research.

We cannot fund something just because it is a good idea or is desirable for the country as a whole or the world as a whole. It also needs to pass another test: how specifically will Massachusetts benefit in terms of jobs, economic growth, or something else.

I and my colleagues at the Massachusetts Technology Collaborative’s Renewable Energy Trust look forward to working with you in the future.