Nippon Oil Treads where US Oil/Gas Fears To Go

Nippon Oil Company (NOC), Japan's largest refiner and leading supplier of home-heating fuel, has helped bail out financially troubled Sanyo Electric by purchasing its stationary fuel cell business. In a deal faintly reminiscent of last week's Daimler-Ford-Ballard agreement, NOC will form a new company of which it will have an 80% share with Sanyo owning the remainder. NOC has been the most successful participant in the Japanese government's Large-Scale Demonstration Project which has placed around 2000 1 kW co-generation systems in Japanese homes over the last three years.

NOC has developed 2 separate reformers, one producing hydrogen from kerosene that has been packaged with the Ballard-designed Ebara-Ballard stack, and an LPG reformer that has been packaged with the smaller (700w) Sanyo stacks. NOC earlier this year took over primary competitor Cosmo Oil's position in the program, essentially doubling and redoubling its bet on its reformer technology and residential fuel cell co-generation systems in general. Japan sports about 1.2 million new homes per year which are primary prospects for the new technology.

Ballard counts on the Ebara and its Japan co-gen business for future growth - Ballard has not officially reponded to the development as yet. My reasonable take is that all players who can produce a reliable stack (Ballard is now testing for 40,000 hours lifetime, a 2010 goal of the program) will do well if any do, and there is no reason for NOC not to stick with both stacks for the long run. We will probably have to wait until the allocations for the extension year of the program, FY2008, happen in March or April of nex year, and are negotiated by the system marketers and the goverment (NEDO through METI through NEF - don't worry about it).

The FC cogen systems provide base load electricity and much of the domestic hot water and heating needs, cutting GHG emissions (as compared to central-produced power by natural gas) by up to 40%, save users $600/year, and cut all other pollutants to practically zero. The cost has been the major stumbling block, but it appears that Nippon Oil is intent on turning some of its oil profits into distributed fuel cell power production, expecting big returns in the future.