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Ballard Power Systems testing facility in Burnaby, B.C., on Oct. 26, 2020.

Rafal Gerszak/The Globe and Mail

At Ballard Power Systems Inc.’s Ballard Power Systems Inc. production plant just outside Vancouver, vice-president of operations Jyoti Sidhu watches robotic arms make perfect knife cuts on thin components of hydrogen fuel cells. Two decades ago, she helped make components by hand. Now, she runs the factory, and she marvels at the technological progress.

“The world is changing so quickly,” she said through a face mask, before entering a long and narrow room, one of many in the sprawling two-storey plant located near parkland in the suburb of Burnaby. The “M27E cutting” performed here is one of a wide array of Ballard trade secrets in the plant, and employees need security passes to enter each room.

“There’s a lot of intellectual property in one piece,” she said, describing the “multilayered sandwich” that is each Ballard fuel cell, but without revealing the company’s secret sauce.

Story continues below advertisement

Ms. Sidhu joined Ballard in June, 2000, as a manufacturing technician in the then-new facility housing the operations of Canada’s fastest-rising clean technology star.

The company’s slogan said – and still says – hydrogen is the “power to change the world” by fuelling vehicles that emit nothing but water as exhaust and some heat.

HOW A HYDROGEN FUEL CELL WORKS

Combining hydrogen with oxygen produces an electro

chemical reaction to generate electricity in hydrogen

fuel cell technology. Fuel cells are not batteries. Instead,

hydrogen is fed into fuel cell stacks and converted into

electricity, with water vapour and heat as byproducts. If

the process can be commercialized on a wide scale, it

has the potential to create a massive new market that

would power heavy-duty transport trucks, which now

emit carbon dioxide from internal combustion engines.

ELECTRICAL CURRENT

PROTON EXCHANGE MEMBRANE

(PEM)

OXYGEN

CATHODE

1

4

3

Exhaust

water

ELECTRON

ANODE

2

1

HYDROGEN

PROTON

Unused

hydrogen

recovered

Hydrogen fuel is channelled through flow fields in

bipolar plates to the anode side, while oxygen is

channelled to the cathode side

1

At the anode side, a platinum catalyst on the mem-

brane electrode assembly (MEA) causes hydrogen

to split into positive hydrogen ions (protons) and

negatively charged electrons

2

The PEM allows protons to pass through it to the

cathode side. The electrons travel along an external

circuit to the cathode, creating electrical current

3

At the cathode, the electrons and positively charged

hydrogen ions combine with oxygen to form water,

which flows out of the fuel cell

4

THE GLOBE AND MAIL, SOURCE:

GRAPHIC NEWS; BALLARD; SETRA SYSTEMS INC.

HOW A HYDROGEN FUEL CELL WORKS

Combining hydrogen with oxygen produces an electro

chemical reaction to generate electricity in hydrogen

fuel cell technology. Fuel cells are not batteries. Instead,

hydrogen is fed into fuel cell stacks and converted into

electricity, with water vapour and heat as byproducts. If

the process can be commercialized on a wide scale, it

has the potential to create a massive new market that

would power heavy-duty transport trucks, which now

emit carbon dioxide from internal combustion engines.

ELECTRICAL CURRENT

PROTON EXCHANGE MEMBRANE

(PEM)

OXYGEN

CATHODE

1

4

3

Exhaust

water

ELECTRON

ANODE

2

1

HYDROGEN

PROTON

Unused

hydrogen

recovered

Hydrogen fuel is channelled through flow fields in

bipolar plates to the anode side, while oxygen is

channelled to the cathode side

1

At the anode side, a platinum catalyst on the mem-

brane electrode assembly (MEA) causes hydrogen

to split into positive hydrogen ions (protons) and

negatively charged electrons

2

The PEM allows protons to pass through it to the

cathode side. The electrons travel along an external

circuit to the cathode, creating electrical current

3

At the cathode, the electrons and positively charged

hydrogen ions combine with oxygen to form water,

which flows out of the fuel cell

4

THE GLOBE AND MAIL, SOURCE:

GRAPHIC NEWS; BALLARD; SETRA SYSTEMS INC.

HOW A HYDROGEN FUEL CELL WORKS

Combining hydrogen with oxygen produces an electrochemical reaction to generate

electricity in hydrogen fuel cell technology. Fuel cells are not batteries. Instead,

hydrogen is fed into fuel cell stacks and converted into electricity, with water vapour

and heat as byproducts. If the process can be commercialized on a wide scale, it has

the potential to create a massive new market that would power heavy-duty transport

trucks, which now emit carbon dioxide from internal combustion engines.

ELECTRICAL CURRENT

OXYGEN

PROTON EXCHANGE MEMBRANE

(PEM)

CATHODE

1

4

3

Exhaust

water

ELECTRON

ANODE

2

1

HYDROGEN

PROTON

Unused

hydrogen

recovered

Hydrogen fuel is channelled

through flow fields in bipolar plates

to the anode side, while oxygen is

channelled to the cathode side

At the anode side, a platinum cata-

lyst on the membrane electrode

assembly (MEA) causes hydrogen

to split into positive hydrogen ions

(protons) and negatively charged

electrons

1

2

At the cathode, the electrons

and positively charged hydrogen

ions combine with oxygen to

form water, which flows out of

the fuel cell

The PEM allows protons to pass

through it to the cathode side.

The electrons travel along an

external circuit to the cathode,

creating electrical current

3

4

THE GLOBE AND MAIL, SOURCE: GRAPHIC NEWS; BALLARD; SETRA SYSTEMS INC.

Auto giants Daimler-Benz AG and Ford Motor Co. had each invested more than $450-million and Ballard’s share price on the Toronto Stock Exchange had soared from $2.67 at issue in 1993 (after adjusting for a later stock split) to an intraday peak of $210.80 in March, 2000.

Then the market hype over hydrogen power started to evaporate and Ballard hurtled off the rails. The company’s share price plunged to less than $20 by late 2002 and kept sliding.

In 2008, Daimler and Ford spun off Ballard’s automotive-related fuel cell business located in the Burnaby factory, and then pretty much gave up on it. Ballard’s share price eventually sank below $1 in 2012.

Yet the company continued to meander along, slowly climbing toward US$100-million in annual revenue by selling fuel cell stacks in use in several thousand buses, trucks and warehouse forklifts around the world. Along the way, Ballard amassed more than 1,400 patents and patent applications.

Capacity has vastly increased since Ms. Sidhu started, and production is much more sophisticated. The so-called membrane electrode assembly (MEA), which is sandwiched by two flow-field plates to form one fuel cell (see chart), is “no longer hand-built as it used to be,” she said. “More and more automation will continue to come.”

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The other — much bigger — change over the past couple of years: A lot of investors are now very excited about the prospects for hydrogen fuel cells again. Not excited as they are about Elon Musk’s battery-powered automaker, Tesla Inc., which recently passed US$550-billion in stock market capitalization, but Ballard is definitely on a roll.

Since early 2019, Ballard’s share price has soared more than six-fold, from less than $4 to nearly $25 recently. That’s pushed Ballard’s market cap up to almost $7-billion, vaulting it past global clothing manufacturer Gildan Activewear Inc. and financier Gerald Schwartz’s Onex Corp. conglomerate, both vastly bigger companies with billions in revenue and tens of thousands of employees, compared with just over 900 staffers at Ballard.

A major catalyst for the price surge: The alliance with China’s Weichai Power Co. Ltd., a multibillion-dollar auto equipment manufacturer. Ballard announced in late 2018 that Weichai bought a 19.9-per-cent stake in the B.C. company and the two set up a joint venture in Shandong province to develop engines for buses and long-distance trucks. China is so important that Ballard chief executive Randy MacEwen’s business card has a green QR code for WeChat, China’s most popular messaging app.

Another big push is coming from governments looking for realistic and ready alternatives to fossil fuels. The International Energy Agency said hydrogen is gaining “unprecedented momentum” around the globe. Ottawa has developed a national hydrogen strategy that envisages a $5-billion sector that would create 100,000 jobs and include a countrywide network of hydrogen fuelling stations by 2050. The strategy was due for release in the summer, and is now likely to be unveiled this month.

While Ballard is still small, it is the world’s leading producer of fuel cells. Ms. Sidhu is confident the wave is unstoppable this time. “The new generation is demanding clean-energy solutions,” she said. “Everything is starting to come together.”

But is it — really?

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The FCmove, right, and FCveloCity, left, fuel cells for heavy duty application at Ballard's headquarters, seen here on Oct. 26, 2020.

Rafal Gerszak/The Globe and Mail

The global backdrop for hydrogen is actually much brighter than it was during Ballard’s first surge in the late 1990s. Back then, it was an intriguing long-term prospect for a cleaner future. Now, the need is more urgent.

Canada has committed to net-zero emissions by 2050. Dozens of countries have set additional targets along the way, or are in the process of doing so, for emissions reduction and investments in cleaner power.

Ideally, electricity generated from wind, solar or other clean sources would power vehicles and almost everything else. Many experts say that just isn’t possible by 2050, so hydrogen is viewed as a key transition fuel.

“Even the fossil fuel industry is pursuing hydrogen,” said Erik Kjeang, director of Simon Fraser University’s Fuel Cell Research Laboratory, which collaborates with Ballard. “You could imagine that hydrogen could conceivably become the new natural gas.”

Dozens of governments around the world have also committed hefty amounts to hydrogen. Germany has earmarked more than US$8-billion toward expanding its hydrogen sector over the next decade. Australia established a fund of 300 million Australian dollars ($285-million) in May for hydrogen projects, Norway has committed to spending US$369-million on hydrogen and other green technologies, and so on.

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Ottawa is playing catch-up on hydrogen, but Ballard as a company is a leader. “Ballard has had a bit of a head-start, but now many other developers around the world are hard at work on their own fuel cell technology, including automakers,” said Walter Merida, associate dean of research at the University of British Columbia’s Faculty of Applied Science.

Of course, comparisons with battery-powered electric vehicles, and competition with them, are inevitable. Fuel cells power vehicles by creating electricity.

However, two big obstacles for fuel cells in conventional cars — going right back to Ballard’s early years — have been cost and the need for nationwide networks of hydrogen fuelling stations to make them viable. Battery-powered cars can be recharged at home, there are thousands of recharging stations already and more than seven million battery-powered cars on the road worldwide, compared with just a few thousand fuel cell vehicles.

This past June, Tesla CEO Elon Musk mocked hydrogen fuel cells in a tweet, using a play on words: “Fuel cells = fool sells.”

Yet Ballard and many experts point out that fuel cells have major efficiency advantages over batteries for long-distance trucking and buses. Fuel cells are stacked together with other parts to create a module, also known as a fuel cell engine. A stack of cells and a hydrogen tank take up a lot of space in a car. But a fuel cell module weighs less than a lithium-ion battery engine and, in larger vehicles, it takes up less space.

Lithium-ion batteries also have long recharging times compared with fuelling vehicles powered by hydrogen at centralized depots. “There’s an enormous opportunity with hydrogen and especially in the heavy-duty applications,” said Erica Lau, CEO and lead portfolio manager at Vancouver-based North Growth Management Ltd. “If you have existing hydrogen infrastructure, the truck could just roll into where they normally would refuel, they would be able to do that quickly and get on their way.”

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Trucks and other vehicles powered by hydrogen have a much longer range than battery-powered vehicles: up to about 600 kilometres compared with roughly 240 kilometres.

Again, however, battery technology has a huge lead over hydrogen in terms of infrastructure.

There are already more than 25,000 vehicle recharging stations in the United States, compared with about 50 hydrogen fuelling stations. The entire continent of Asia has fewer than 200 hydrogen stations. Canada had three outlets in B.C. this past summer and, at last count, is expected to add another three by the end of the year, all in B.C. During a pilot project from 2009 to 2014 in Whistler for 20 zero-emission buses equipped with Ballard fuel cells, hydrogen had to be trucked in from Quebec.



Jyoti Sidhu, right, vice-president of operations, Randy MacEwen, left, CEO, and Paul Howard, middle, Ballard's co-founder, visit the fuel cell production facility on Nov. 9, 2020.

Rafal Gerszak/The Globe and Mail

Paul Howard, one of the three co-founders of Ballard in 1979, got a first-hand look recently at the robotic arms and other automated processes in Burnaby. “It was interesting to see the advances. This is so far ahead of what was done 20 years ago, when in many cases it was done manually,” he said afterward outside the plant.

Automation will be crucial in Ballard’s goal to reduce the costs of producing stacks of fuel cells by 70 per cent by 2024. “It has to be automated in order to get the trajectory of the costs to come down,” said Mr. Howard, who is now 77.

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A mechanical engineer, he co-founded the company with geophysicist Geoffrey Ballard and electrochemist Keith Prater. They initially focused on lithium batteries, and switched over to concentrate on hydrogen fuel cells for buses in the late 1980s.

They dreamed of revolutionary advances that would make fuel cells practical, long after NASA used General Electric fuel cells to propel Apollo space missions in the late 1960s. They wanted to improve on the expensive technology GE pioneered but abandoned.

He said the trio knew long ago the key would be the MEA, which he likened to ordinary kitchen plastic wrap for its thinness, while the fuel cell is akin to a computer chip for its sophistication.

However, finances and promoting the company to investors began to play a more commanding role. In 1988, the three men hired Firoz Rasul, a marketing specialist with a background in engineering, as CEO and made him an equal equity partner in Ballard.

Under Mr. Rasul, Ballard aimed to become the Intel of the fuel cell industry, with a dominant market share. And a lot of investors bought into that grand vision. When the shares hit their record high of $210.80 in March, 2000, it gave Ballard a market capitalization of more than $18-billion.

By that point, the three co-founders had already soured on the company. Dr. Ballard left after a rift with Mr. Rasul in 1997. Mr. Prater quit in 1998 and Mr. Howard exited in 1999.

Yet all three still believed in the potential of hydrogen power. Dr. Ballard and Mr. Howard were among the co-founders of General Hydrogen Corp. in the Vancouver suburb of Richmond in 1999. Its business included using Ballard fuel cell stacks for forklifts and drawing up concepts for infrastructure to distribute hydrogen to depots. Dr. Ballard died at the age of 75 in 2008, one year after Plug Power Inc. of Latham, N.Y., bought General Hydrogen for US$10-million.

Looking back, Mr. Howard tries to maintain some perspective on Mr. Rasul. Compared with Mr. MacEwen, the current CEO, Mr. Rasul “was more of a salesman. So, you know, there was more hype,” Mr. Howard said. “He wasn’t an irresponsible promoter. Ultimately, he oversold it, but he was a good negotiator. I mean, he helped bring in the car companies.”

Indeed, in 1997, Daimler-Benz (now known as Daimler AG) bought a 25-per-cent stake in Ballard while Ford Motor Co. acquired 15 per cent, each investing more than $450-million. But even with the high-profile alliances with those major automakers, and research funding from governments, Ballard failed to break through in the passenger car market.

By 2008, Daimler and Ford were no longer equity owners, and the two automakers and Ballard spun out most of its automotive fuel cell assets, folding them into a new private company called Automotive Fuel Cell Corp. (AFCC).

Mr. Rasul was long gone at that point, too. He stepped down as CEO in 2003. Ballard went through two other CEOs before the arrival of Mr. MacEwen, a lawyer by training, in 2014. But the company then spent another four years in the green-tech penalty box.

So how is it that, almost two decades after one of the most spectacular and punishing stock market collapses in Canadian history, the stars have aligned again for Ballard?



Even just two years later, Weichai’s investment in Ballard looks like a steal. In November, 2018, Weichai agreed to buy a 19.9-per-cent stake in Ballard for US$3.54 a share — a 15-per-cent premium to the market price — for a total investment of just US$163 million. That made it the largest shareholder in the company, and cemented a joint venture in China. It’s a market that executives at both companies, and many investors and analysts, now see as an almost limitless frontier.

Based in Shandong province, the joint venture is 51-per-cent owned by Weichai and 49 per cent by Ballard. MEAs built in Burnaby are flown to a factory in Shandong, and then incorporated in fuel cell stacks and power modules for buses, commercial trucks and forklifts.

The joint venture is designed to protect Ballard’s intellectual property while generating steady revenue stream from it. Yet Weichai does have significant influence in Burnaby. Two of Ballard’s nine directors are Weichai’s nominees: Kevin Jiang and Sherman Sun.

Zhongshan Broad-Ocean Motor Co. Ltd. of China is another key partner, buying fuel cell modules from Ballard. Since mid-2017, the two companies have operated from a base in Guangdong province as they seek to make inroads in selling fuel cell products to bus and truck companies in three regions, including the Shanghai area.

Ballard’s goal over the next several years is to derive 40 per cent of its revenue from China, 40 per cent from Europe and 20 per cent from North America, concentrating on California to start. The target markets are primarily long-haul trucking and buses.

But Ballard hasn’t abandoned cars entirely. In another milestone in 2018, albeit less spectacular than the Weichai deal, the company quietly bought back the assets and operations of AFCC from Daimler and Ford. It also extended a deal with Audi AG for more than three years to help develop fuel stacks for passenger cars.

Of Ballard’s 900 employees today, more than 800 of them are based at the Burnaby plant and at the nearby head office, which also houses product testing and research and development. Fifty staff are in Europe (mostly in Denmark) and 20 are in China. Another 150 employees belong to the Weichai-Ballard joint venture.

In addition to pursuing international expansion, Mr. MacEwen is keen to demonstrate Ballard’s financial and operational strength and discipline. Last month, Ballard issued 20.9 million shares in a bought-deal equity offering that was upsized by 60 per cent and brought in US$402.5-million.

“We’ve just installed a lot of production capacity, so our actual utilization of our facilities is relatively low,” he said, speaking through his mask as he took The Globe and Mail on a tour of Ballard’s Burnaby plant. “Our profitability profile, gross margins, productivity and capacity utilization will be much better three or four years from now.”

But Ballard’s $7-billion market cap remains an absurd valuation by just about any conventional financial metric that looks at its tiny revenues and persistent operating losses. No price-to-earnings ratio applies, because the company has posted only one annual profit since the late 1990s (in 2008). Ballard lost US$36.7-million in the first nine months of this year, compared with a US$28.8-million loss in the same period last year.

Even so, the company’s balance sheet is strong, with nearly US$744-million in cash and no debt, said McMurray Whale, an analyst with Toronto-based Cormark Securities Inc. who is bullish on Ballard and its war chest, which could be used to make acquisitions.

Investors betting on Ballard appear to be focused almost entirely on big-picture growth prospects for fuel cells and environmental, social and governance (ESG) issues. There are grounds for optimism on both counts.

One consulting firm in India published a widely cited forecast in June that projected the global hydrogen fuel cell market will grow from US$1.8-billion in 2019 to U$5.6-billion by 2026. Ballard foresees a total addressable global market worth at least US$100-billion a year for fuel cell engines in commercial trucking alone by 2030, and another US$30-billion a year for bus, train and marine applications.

There are also the tailwinds from the government initiatives promoting hydrogen and the rapid rise in ESG investment generally over the past several years. All sorts of institutions are now looking for environmentally supportive investments. Ballard is one of the few sizeable publicly traded options in Canada and a leader in hydrogen fuel cells worldwide.

Of course, Ballard’s stratospheric stock valuation has also attracted the attention of short sellers keen to identify the next big market bubble. And it’s drawn the scoffing from Tesla’s Mr. Musk.

Still, even Mr. Musk’s jibes may have helped Ballard more than they hurt. Mr. MacEwen said there is plenty of room for batteries and hydrogen fuel cells to co-exist in different segments of the electric vehicle market. “The important thing is Elon Musk has been a real driving force for the adoption of electric vehicles,” he said.

In 1997, Ballard executives coined a phrase to underscore their mission and trademarked it: “Power to change the world.” The company still stands by that rallying cry. It’s also still an expression of faith. But 23 tumultuous years later, in many ways, it looks much more solid now than it did then.

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