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Power Player

Par Chris Atchison | 5 octobre 2016
Power Player

If you’ve ever wondered what it’s like to be on the forefront of an energy revolution, ask Daryl Wilson. He can provide a firsthand perspective.

Wilson is President and Chief Executive Officer of Hydrogenics Corp., a global leader in designing, manufacturing and installing commercial hydrogen systems that produce and store energy without any greenhouse gas or carbon emissions. Since 1995, the publicly traded company has been developing a range of advanced renewable energy products, including hydrogen fuel cells for electric vehicles and stationary power applications, hydrogen generators for industrial processes and fueling stations as well as critical power, and pioneering power-to-gas (P2G) technology for energy storage.

Power-to-gas technology uses electrolysis to convert surplus electricity into hydrogen with the aim of reducing waste, improving storage and facilitating easier transport. According to Wilson, this is just the beginning. “In some areas, such as wind and solar technology, a mass inflection has already happened,” he explains. “The amount of wind energy being deployed around the world has gone up exponentially over the last 10 years.”

This shift presents a vast opportunity for a firm on the cutting edge of energy storage and conversion like Mississauga, Ont.-based Hydrogenics. That’s because renewable power fluctuates dramatically – think electricity produced by wind turbines or solar panels, for example – meaning it can be abundant one day and virtually non-existent the next. The result is a localized swing in energy that requires all of that clean power to be buffered to avoid waste. Enter Hydrogenics  and its energy storage products, which take the extra clean power, convert it to hydrogen and store it for use when it’s needed.

And here’s the revolutionary aspect: Due to those buffering requirements, breakthroughs in energy storage may be the tipping point needed to boost the viability of large-scale renewable energy across national power grids. As technology continues to advance and progressive regulatory policies transform how we produce and use power, renewable energy technologies and the organizations that develop them have become far more appealing both to industry partners and investors. Wilson and his counterparts in the renewable energy industry are helping to lead power and utility market disruption; they’re now seeing growth accelerate thanks to market forces and increasing demand, and becoming less reliant on government subsidies to survive.

Still, government intervention has been a catalyst for the industry’s growth to date. Nations such as Germany have led the renewable charge with sweeping policies that favour technology like wind, hydrogen and solar over legacy power sources such as gas and coal. “Germany has crossed the 30 per cent renewable energy penetration mark,” Wilson says of that country’s transition from centralized to distributed power generation. “They’ve done the most thinking about technology alternatives for large-scale energy storage, and they’ve strongly embraced hydrogen as a key part of the package.”

In Canada, both Ottawa and the provinces are trying to spur a similar transformation with extensive climate change action plans that have introduced cap-and-trade and carbon tax regimes or will soon do so. Along with a range of new subsidies and regulations, these plans are intended to accelerate the move to renewable energy across their own jurisdictions.

The confluence of legislative action, shifting demand and emerging cost savings are all good news for Hydrogenics. “Once renewable energy technology scales, there’s tremendous economic potential,” Wilson says. “We’re bidding on projects worth $50-million and $100-million now, where five years ago we weren’t doing so. As we move through this stage of scaling, our costs will decrease by another 50 per cent and that will catalyze more applications that become cost-effective for our solutions.

“One of the most important things in Canada right now is to discover the impediments to scaling renewable alternatives,” Wilson adds. “Some of those have to do with government policy; others have to do with the hard work of innovation, which we’ve been focusing on for more than 20 years. We’ve driven more than 90 per cent out of the cost of making hydrogen fuel cells over the last 10 years, and all of that’s been purely through innovation and simplification of the product.”

Developing completely new technologies over decades requires not only patience but also the management acumen to maintain profitability – or at least minimize losses in a company’s early stages. Wilson was the person entrusted to achieve that lofty goal when he was named President and CEO in 2006. Trained in lean production by Toyota Motor Corp. earlier in his career, the tech industry veteran has maintained a focus on achieving peak resource efficiency, partly by introducing lean principles to Hydrogenics’ manufacturing efforts.

Case in point: To optimize costs, Wilson and his team standardized and simplified product platforms across the company’s many applications to just two – fuel cells and electrolyzers. Hydrogenics now maintains the lowest break-even level in the industry, and Wilson predicts profitability in the near future as annual revenue edges nearer to the $60-million mark.

Controlling costs and optimizing processes is complex enough, but Wilson has faced another task that’s perhaps even more challenging: finding the kind of investors willing to fund a research and development process that has taken decades to bear fruit. His strategy for attracting those individuals or organizations is simple transparency and honesty. “What we have done is communicate very forthrightly the opportunities and risks,” Wilson says. “People who get involved with us understand that there is huge upside possibility, but it takes time, and there can be ups and downs.”

One way to allay investor anxiety and manage volatility has been to diversify Hydrogenics’ product offerings and customer base within the two standardized core product applications. That’s meant developing a range of renewable energy  

solutions for everything from public transportation manufacturers – the firm recently announced a $13-million hydrogen fuel cell sale for buses in China – and continuous power generation projects in South Korea, to power-to-gas plants in Europe and North America and nuclear wastewater treatment plants in Japan. “The more applications we can find for our two standardized platforms, the better off we’ll be in having multiple ways to win,” Wilson says. “That multiplicity of applications means we have a good shot at turning out a good overall return.”

Just as important as finding the right investors is partnering with customers who are willing and able to invest in new technology, then stand by as products are moved through the development pipeline. After gaining traction with its P2G solution in Germany – where it has a dozen facilities in operation – Hydrogenics turned its sights on the Canadian market in 2012. At that point, Wilson and his team flagged energy distribution firm Enbridge Inc. as a potential partner due to its history of embracing innovation and making major investments in new technology. With the founding of its Pathfinders Group in 1999, for example, Calgary-based Enbridge created an arm’s-length organization dedicated to finding and developing new technology with commercial potential – exactly the kind of boost that an upstart hydrogen energy company might need. Enbridge was interested and soon partnered with Hydrogenics on its first Ontario P2G facility, which is slated to start running early in 2017.

Hydrogenics’ experience offers lessons for other bottom-line-focused tech leaders on the importance of finding customers with a strong bias for innovation and an early adopter mentality. “In some ways we’re selective about our customers,” Wilson notes. “It takes a lot of patience and hard work to do things differently. Not every major customer or partner is wired to take these sorts of things on – they need patience to invest in these technologies over a protracted period of time and then enjoy the benefit of seeing opportunities scale. They have to have the stomach to go through all the challenges that one faces in pioneering.”

 

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