PRESS RELEASES

POLYFUEL ANNOUNCES BREAKTHROUGH TECHNOLOGY ADVANCE FOR AUTOMOTIVE FUEL CELLS
New Membrane Technology Brings Fuel Cell-powered Consumer Vehicles Much Closer

MOUNTAIN VIEW, Calif. – October 5, 2004 – PolyFuel, a world leader in engineered membranes for fuel cells, announced today a breakthrough in technology that could ultimately make hydrogen fuel cell-powered automobiles a commercial reality. At the heart of the breakthrough is a new family of membranes - the crucial heart of a fuel cell - that exhibit a set of performance characteristics never before simultaneously achieved in hydrogen-based fuel cells. PolyFuel has already introduced the highest-performing membranes available for the compact, portable, methanol-based fuel cells that are widely being developed to replace batteries in portable electronic devices such as notebook computers and cell phones.

“A commercially-viable fuel cell for automotive applications is sort of the ‘holy grail’ among developers of advanced technology vehicles,” said Atakan Ozbek, director of energy research at ABI Research. “Ideally, you would hope for a solution that yielded vehicles with costs, capabilities, and performance similar to those on the road today. Unfortunately, current fuel cell technology has not yet reached that ideal.”

It is a holy grail because the automotive market is huge; 60 million automobiles are produced each year. On the assumption that automotive fuel cells will ultimately meet the stringent requirements demanded by automakers, and once the fuel delivery infrastructure begins to approach reasonable levels, adoption by consumers of the pollution-free vehicles will begin gaining momentum, according to most analysts. But none of this will occur until automotive fuel cells see a step-function improvement in capability.

The principal limitation has always been the fuel-cell membrane, a thin film of sophisticated material resembling plastic wrap that makes fuel cells possible. Since the first practical fuel cells were designed for the Gemini space program nearly 40 years ago, the best available membrane material has been based upon DuPont’s Teflon^® - the same polymer used to coat non-stick cookware - and, as it turns out, used to make the “miracle” fabric Gore-Tex^®. These “perfluorinated” membranes, as insiders call them, have resulted in workable fuel cells, but - depending upon the application - the manufacturing cost, the performance, and the reliability of the membrane have always been limitations.

In automotive applications, perfluorinated membranes are currently far too expensive, have to operate at such low temperatures that standard radiators can not be used, need carefully controlled environments (adding complexity and limiting durability), and have inadequate lifetimes. As a result, a fuel cell powered vehicle today would be too costly to compete with either hybrid or internal combustion engine vehicles. In addition, consumers would not have the performance and reliability they have come to expect from motor vehicles. For example, power and top speed would be limited on very hot days, prolonged power uses such as hill climbs, or keeping up on Europe’s high-speed autobahns, would not be possible, and much more routine and unexpected maintenance would be required. These factors have so far kept commercially viable fuel cell automobiles from becoming a reality.

The new technology developed by PolyFuel is expected to mitigate many of these shortcomings. PolyFuel’s membrane technology uses new hydrocarbon-based polymers that show improved operating characteristics over perfluorinated membranes, at substantially reduced cost.

For example, perfluorinated membranes typically require high levels of moisture (humidification) for stable operation. Unlike most perfluorinated membranes, PolyFuel’s hydrocarbon membrane technology operates stably at low relative humidity. This means that the fuel cell or automotive manufacturers do not have to add overly complicated and expensive systems to keep the membrane hydrated. Additionally, the PolyFuel hydrocarbon membranes retain stability at an operating temperature of 95°C - a fact that reduces engine cooling system complexities and limitations. Furthermore, PolyFuel hydrocarbon membranes produce 10 to 15 percent more power at real-world operating conditions compared to perfluorinated membranes.

Finally, the manufacturing cost of PolyFuel hydrocarbon membranes is already significantly less than that of perfluorinated membranes, and will go even lower with volume. Currently, it takes about $5000 worth of perfluorinated membrane to make a single fuel cell for a 100 kilowatt (134 horsepower) vehicle. Because the PolyFuel hydrocarbon membrane has fundamental cost advantages over perfluorinated membranes, critical automotive cost targets can be realized much sooner than previously expected.

“PolyFuel has certainly advanced the state of the art,” said Dr. David P. Wilkinson, professor of chemical and biological engineering with the University of British Columbia, and former vice president of research and development for Ballard Power Systems, the world leader in proton exchange membrane fuel cells. “Automakers and fuel cell manufacturers can be expected to react positively and quickly to this announcement.” Canada is considered a world center of excellence for fuel cell research and development, and Wilkinson additionally holds an appointment with the Institute for Fuel Cell Innovation, part of the Canadian government’s guiding National Research Council.

Such ‘quick and positive reaction’ has already occurred, said Jim Balcom, PolyFuel president and CEO. “The minute that such companies review our data, the requests for meetings and test samples come almost instantaneously.”

Power for the Future

Fuel cells, which can be thought of as “refuelable batteries” have been the subject of significant interest for decades. They are widely considered to offer the best hope of providing a clean, renewable source of inexpensive power suitable for use in a wide range of applications ranging from motor vehicles to consumer electronics to industry. However, technical limitations, particularly in the membrane, have relegated fuel cells to a few high-value-added applications such as spacecraft where the cost or technical complexity is significantly outweighed by the utility. In automotive applications, where their widespread use could - quite literally - clean up the environment, eliminate the dependence on foreign oil, or achieve any one of a dozen other significant social, political, or environmental benefits, limitations such as those previously described have kept fuel cells at the experimental level.

It’s All in the Membrane

Fuel cells typically use methanol as a fuel in the case of portable fuel cells, or hydrogen in the case of automotive applications. Both can be easily obtained from abundant natural gas, as well as from renewable sources. The fuel is introduced into the cell where the membrane - with the help of a catalyst coating - encourages the hydrogen atoms in the fuel to give up their electrons, and then, as “naked” protons, to migrate through the membrane to the other side of the fuel cell, where they combine instantly with available oxygen to create water molecules. The electrons, which are prohibited from passing through the membrane due to the membrane’s unique properties, flow out a terminal of the fuel cell through an electrical load - such as a motor - before returning to the oxygen side of the fuel cell to participate in the creation of the water. That water, in a hydrogen fuel cell, is the only waste product, and it is 100% pure.

The membrane is an extremely sophisticated material; it must provide a concentrated source of hydrogen ions at its surface, act as a barrier to electrons, be porous to protons, and prevent the fuel on one side of the cell from combining with ever-present oxygen on the other. The physical and chemical characteristics of this membrane determine whether a fuel cell will be efficient or inefficient, compact or bulky, economical or expensive, reliable or unreliable, convenient or clumsy. It is fair to say that the state of the art of a fuel cell is essentially the state of the art of the membrane.

Engineering “Nano-architectures”

Creating alternative membranes is an extremely challenging process, and for most of recent decades, a process of trial and error. PolyFuel, however, recognized that it could use its thorough understanding of system-level fuel cell requirements to directly engineer the nano-architecture and the chemical characteristics of the membrane. Its engineers’ ability to, figuratively, “think like a proton” - and the company’s rapid prototyping and assessment capability - have led to literally hundreds of candidate membrane materials being developed over the past year. Several of these membranes have exhibited breakthroughs in fuel cell performance. Such “engineered membranes,” the company believes, will be the future of fuel cells.

PolyFuel has developed an extremely efficient, closed loop, membrane engineering and fabrication capability that enables it to progress from “concept to membrane” in a short period of time. Says Balcom, “Today’s hydrogen fuel cell announcement, which comes only months after our unveiling of the world’s best-performing membrane for portable direct methanol fuel cells [DMFC], is testimony to the power of our unique capability to directly engineer fuel cell membranes to a target specification, rather than try to find one by years of experimentation. Our hydrocarbon-based membrane technology promises to give hydrogen fuel cells a step-function improvement in meeting the stringent requirements of automakers around the world, and I am confident that our unmatched engineering capability will continue to generate additional substantive improvements.”

Technology Highlights - PolyFuel’s Hydrocarbon-based Hydrogen Fuel Cell Membrane

PolyFuel’s hydrocarbon membrane technology already addresses the most challenging automotive fuel cell requirements. Stable operation is possible at 35% relative humidity. The membrane is also able to provide stable performance at temperatures up to 95°C. In addition, when compared with typical perfluorinated membranes, the PolyFuel membrane is more than twice as strong, more than 16 times as stiff and has 4 times less hydrogen permeability - all of which are important criteria for durability and manufacturability. Most important, because of its comprehensive knowledge of the membrane/catalyst interface - as well as an intimate understanding of the effects of real-world requirements on the total fuel cell system - PolyFuel has succeeded in directly engineering a hydrocarbon membrane technology that produces 10 to 15% more power than DuPont’s perfluorinated membrane at real-world operating conditions. All of these achievements have been realized in a comparatively short time frame, with significantly lower-cost materials and manufacturing processes than those used for perfluorinated membranes. Because of PolyFuel’s unique membrane engineering expertise, continued additional performance improvements over today’s new benchmark levels are planned and expected.

About PolyFuel

PolyFuel is a world leader in engineered membranes that provide breakthrough performance in fuel cells for portable electronic and automotive applications. The state of the art of fuel cells is essentially that of the membrane, and PolyFuel’s leading-edge, hydrocarbon-based membranes enable a new generation of fuel cells that for the first time can deliver on the long-awaited promise of clean, long-running, and cost-effective portable power, based upon renewable energy sources.

PolyFuel’s unmatched capability to rapidly translate the system-level requirements of fuel cell designers and manufacturers into engineered polymer nano-architectures has led to its introduction of best-in-class hydrocarbon membranes for both portable direct methanol fuel cells and for automotive hydrogen fuel cells. Such capability - based on PolyFuel’s over 140 combined years of fuel cell experience, world-class polymer nano-architects, and a fundamental patent position covering more than 15 different inventions - also makes PolyFuel an essential development partner and supplier to any company seeking to advance the state of the art in fuel cells. Polymer electrolyte fuel cells built with PolyFuel membranes can be smaller, lighter, longer-running, more efficient, less expensive and more robust than those made with other membrane materials.

PolyFuel was spun out of SRI International (formerly the Stanford Research Institute) in 1999, after 14 years of applied membrane research. The company is based in Mountain View, California, and is privately held. Investors include Mayfield, Ventures West, CDP Capital - Private Equity, Technology Partners, Intel Capital, Chrysalix Energy, Conduit Ventures, KTB Ventures, Hotung Venture Partners, Yasuda Enterprise Development, and BiNEXT, a part of the Daesung Group.

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