Methanol fuel cell startup eyes hybrid market

SAN FRANCISCO (Reuters) - A fast-growing Silicon Valley start-up firm is aiming to put its methanol-based fuel cells in electric vehicles and plug-in hybrid cars.

Oorja Protonics, which sells its fuel cells to Nissan Motor Co 7201.T, is working to have a product that can be used as a range-extender in pure electric or plug-in hybrid vehicles, Chief Executive Sanjiv Malhotra said in an interview on Friday.

“We would have something in 18 to 24 months,” Malhotra said, adding that the company is working “very aggressively” on such a range-extending fuel cell.

Small and large automakers, including Toyota Motor Co 7203.T, Nissan and Ford Motor Co F.N, are racing to launch electric vehicle vehicles and plug-in hybrid versions in the United States.

Most of these vehicles that are in development pipeline use a rechargeable lithium-ion battery and include a range-extender, mostly a gasoline engine, to get the vehicle to travel further on electric power.

Fuel cells are not a new concept in the automotive world. Most major automakers have spent billions of dollars in researching a hydrogen-powered fuel cell for vehicles, tempted by the idea of a car that uses no gasoline and emits only water vapor. That research is now mostly on the back burner, given the expense, transportation issues and volatility of hydrogen gas.

Malhotra said the initial difficulty he faced when he started the company in 2005 was to find an appropriate fuel for the fuel cell. He settled on methanol as it was cheap and easily available.

“Fuel cells are synonymous with hydrogen” he said. ” The biggest challenge I was looking to solve was the hydrogen problem.”

Methanol is an alternative fuel that is derived from various sources including wood, grass, landfills, natural gas and coal. It’s a common antifreeze used in vehicle windshield fuel.

“There is a distribution infrastructure in place for methanol,” Malhotra said.

Oorja’s fuel cells, which cost about $16,500, are currently used by its customers to power fork lifts.

Nissan decided to adopt Oorja’s methanol fuel cells after an 18-month trial period in its Smyrna, Tenn. plant.

Fuel cells generate electricity by converting the chemical energy stored in a fuel into electrical and thermal energy.

Nissan uses Oorja’s fuel cells to power its “tugs” or equipment that transports components and other materials inside a plant.

Oorja was one of the first green technology investments of leading venture capital firm Sequoia Capital. The company, which came out of stealth mode last year, has also raised money from DAG Ventures.

Malhotra said the Oorja will soon be announcing more product contracts and is looking to ramp up its manufacturing capacity in an effort to sell fuel cells in the “low thousand” volume range next year.

The company has so far sold “few hundreds” of fuel cells, he added.

Oorja plans to double its manufacturing space and is in the process of opening sales and service locations around the country.

“We have grown at an exponential pace,” Malhotra said, adding that the company is on track to be profitable in the “next few months.”

Oorja is also looking to sell its fuel cells to cool big trucks when the engine is idled.

Reporting by Poornima Gupta; Editing Bernard Orr