Ballard announced this month it has delivered the prototypes that will be used to develop the latest in a series of residential fuel cell cogenerator units that the company and its Tokyo-based partner Ebara Corp. are trying out in Japan with subsidies from the Japanese government.

Ballard hasn't recorded a profit since 1998. But its partnership with Ebara and support from Japan's Ministry of Economy, Trade and Industry has helped the company introduce low volumes -- in the hundreds -- of fuel cell units iinto Japanese homes to heat their water and generate electricity.

This year, the company expects to ship 280 units for testing in Japan. The Japanese government will provide a total of about $6.9 million US to subsidize that testing.

Ballard's vice-president and chief customer officer Noordin Nanji said the company is aiming to develop the latest prototypes into a product that can finally be introduced for commercial sale.

That means bringing the cost of each unit down to $10,900 US by 2008, so that the end consumer will eventually pay $5,000 US to $5,500 US for a unit and the Japanese government would subsidize the rest.

The world's largest automotive fuel cell maker, Ballard has seen its market value fall sharply since reaching $8.4 billion Cdn in 2000, after it became apparent to North American investors that the company's fuel cell products were still years away from becoming profitable. The company's market value is now about $802 million.

But for Ballard and several other Canadian firms, Japan is an ideal laboratory in which to experiment with new clean-energy technologies.

According to Nanji, Japanese companies are more willing to make long-term investments on such technologies, especially since their government helps shoulder the risks.

"Japanese companies are willing to take the longer view. In North America, there's a greater focus on quarter-to-quarter performance. In Japan, companies look further out, and make investments that are very strategic but aren't going to be a huge commercial success in the short [term]," Nanji said.

He added: "The subsidies absolutely help. The [Japanese] government is sharing risks with manufacturers and is taking the price premium off the table for consumers."

More so than the Canadian government, the government of Japan has made a point of promoting fuel cell technology, Nanji said.

In 2003, the Canadian government said it would spend $215 million over five years to support fuel cell and hydrogen power development.

Japan, in comparison, is spending about $288 million US this year alone on fuel cell and hydrogen research.

Japan's willingness to bet on clean-energy technologies is largely driven by its efforts to become less dependent on foreign energy sources, said Junichi Nakajima, general manager of the Japan External Trade Organization in Vancouver.

With limited domestic energy supplies, Japan relies on foreign sources, mostly oil, coal and natural gas, for at least 80 per cent of its energy, according to the International Energy Agency.

The Japanese market is also very receptive to experimental technologies, Nakajima said.

"The Japanese people have a fondness for that which is new and better. The general public is very eager to adopt clean energy alternatives such as the technology found in the hybrid cars for example," he wrote in an email, referring to Honda and Toyota, leaders in commercializing low-pollution hybrid vehicles powered by a combination of electricity and gasoline.

Earlier this year, the private East Japan Railway Co. announced it had developed the world's first hybrid train, expected to begin operating this summer.

Japan's tough environmental laws and emissions standards have also motivated the country to become a global leader in environmental technologies, said John Cryer of Westport Innovations, a Vancouver-based developer of natural gas and hydrogen-powered vehicle engine technologies.

As a signatory to the Kyoto Protocol, Japan has committed to lowering its carbon emissions to six per cent less than its 1990 levels by 2010.

"You can walk down the streets of Tokyo and not see a piece of garbage," said Cryer, director of the company's global light-duty programs. "It's all part of the psyche of the nation which is to respect yourself, respect your fellow citizens and respect your environment."

Since 2000, Westport has been working with Japan's Isuzu Motor Inc. to develop commercial trucks that run on compressed natural gas. It's a partnership that Cryer said has been strategic for his company.

"In North America, the automakers started making natural gas vehicles years ago but they really targeted the wrong market. They were going after passenger cars," he said.

Isuzu, on the other hand, focuses on commercial vehicles, which burn a lot more fuel and offer higher demand for clean, efficient energy, he said.

Commercial success in Japan would help Westport extend its reach into other markets, particularly China and member countries of the Association of Southeast Asian Nations, Cryer said.

"If we can meet the tough Japanese legislation, we can meet anybody's," he said.

For Burnaby-based QuestAir Technologies Inc., which manufactures hydrogen purification systems for industrial and fuel cell use, Japan was the company's first fuel cell market, said Andrew Hall.

QuestAir now has partnerships with Japan's Iwatani gas and energy supply company, and Mitsubishi's subsidiary Mitsubishi Kakoki Kaisha. The two companies market QuestAir hydrogen purification systems in Japan and throughout Asia.

Developing those partnerships took time, however, requiring numerous site visits and demonstrations, Hall said.

"It took a few years before they got comfortable in our technology," he said.

The Japanese market now contributes between 10 to 20 per cent of Westport's revenues each year, he said.

Back at Ballard, vice president Noordin Nanji said his company will not likely introduce its residential fuel cell units here in B.C., regardless of whether they take off in Japan.

B.C. residents pay some of the lowest electricity rates in the world, and since the province's electricity is generated by hydro power, it's clean to produce, he said.

Japan, in contrast, has some of the world's highest electricity rates, averaging about 21 cents U.S. per kilowatt hour.

Ballard said its newest fuel cell will be able to generate one kilowatt of energy and all the required hot water in Japanese homes, allowing customers to save about $600 US per year in energy costs. The fuel cell units, which create energy from a chemical reaction that combines hydrogen and oxygen, will also reduce carbon dioxide emissions by up to 40 per cent, compared with using fossil fuels to generate electricity.

"It's critical we make the product a success in Japan and if we do, we believe there's an opportunity elsewhere," Nanji said, noting that high energy costs in Germany and South Korea could make those countries potential markets for Ballard's residential fuel cell units in the future.

But he added: "We'll move pretty slowly in those other markets at this point and keep our focus in Japan."

 FUEL CELL SALES

Ballard is relying on the Japanese government to reduce the price premium of its fuel cell cogenerator units for consumers.

$10,900 US: Projected cost of each fuel cell cogenerator unit by 2008.

$5,000 US to $5,500 US: Amount Japanese consumer would pay.

$5,400 US to $5,900 US: Amount Japanese government would subsidize per unit.

$600 US: Amount a Japanese homeowner could expect to save on annual energy costs using a fuel cell cogenerator.

http://fuelcellsworks.com/