You’ll recall that last year the Canadian federal government refused to inject more funding into Sustainable Development Technology Canada, an agency that has proven crucial to helping Canadian energy and environmental innovations cross the “Valley of Death.” SDTC has contributed hundreds of millions of dollars to clean technology demonstration projects and leveraged twice as much from the private sector. It has enough money to fund probably one more round of projects, after which it will exist simply to manage its existing portfolio of projects (it also manages and issues grants from a separate biofuels fund). To stop funding new clean technology innovation now would be a huge mistake, and SDTC officials have made this clear to the federal government. We’ll find out at 4:30 pm today, after details of the federal budget go public, if the Harper government will continue to fund the agency’s activities. If it doesn’t, this will be a sad day for cleantech in Canada…. stay tuned.

My Clean Break column in the Toronto Star today takes a look at a former darling of the fuel-cell industry, Ballard Power — remember those guys? Ballard was the hot kid on the block back in the late 1990s, when people still bought the idea that a hydrogen economy built around fuel-cell vehicles was just around the corner and Ballard would take us there. The vision was tempting. There are no greenhouse-gas emissions, no pollutants associated with the use of hydrogen to energize a fuel-cell car. Ballard also had — and still has — great technology. Unfortunately, it was really expensive, and the hydrogen infrastructure to support the introduction of fuel-cell vehicles just didn’t exist, nor was there a rush to make it happen. The company had its believers, including yours truly, and investors were also along for the ride. Ten years ago, the money-losing company had a market cap of more than $8 billion. But as we entered the 21st century, as it became clear that the hydrogen economy was a far-off target, and as excitement grew around battery-powered vehicles, Ballard started its downward spiral. In 2007 it sold off its automotive fuel-cell business and decided to focus on less sexy markets: forklifts and backup power. The company is still losing money, but it may actually break even next year, at least on an EBITDA basis. Revenues are growing. Costs are coming down. It turns out that niche markets can pay the bills. And now the company, a sliver of its former self (in terms of market value) is turning its efforts to distributed generation with a 1-megawatt product that makes oodles of sense, particularly in remote markets that are heavily dependent on diesel generators.

I’m delighted that Ballard is finding its way. It has inspired many spinoffs. It anchors the Vancouver cleantech scene. It’s the rock star that hit it big, rose quickly, then crashed into relative obscurity, only to emerge several years later with a more mature album that, while not having mass-market appeal, is critically acclaimed and attracting loyal followers.

I have a story in MIT Technology Review today that looks at a very cool engine design from a Vancouver-based startup called Etalim.  The story gives a somewhat technical explanation of how the engine works, but basically its a hybrid of a thermoacoustic engine and a Stirling engine. What’s impressive about this technology is that — according to the company, at least — it’s compact, made of non-toxic and recyclable materials, easy and inexpensive to manufacture, can use any source of high-grade heat (biogas, biomass, natural gas, solar, fossil fuels), and is not subject internally to mechanical friction, meaning the product is highly reliable and has a long life with very little need for maintenance.

Stirling engines, to put it simply, use heat to drive a piston as a fixed volume of gas, such as helium, heats, expands, then cools and contracts. This cycle of expansion and contraction repeats itself, and the higher the heat the higher the power. Problem is, there is a lot of mechanical friction and all of this has to operate within a sealed vessel under high temperature and high pressure. Leakage of gas is a big challenge. Rubber seals and lubricants don’t cut it, so parts have to be machined precisely to achieve metal-on-metal fittings and this adds a lot of cost, and even then, long-term reliability can be an issue. Etalim founder and chief scientist Thomas Steiner, a former chief physicist at Creo (where he worked side-by-side with Michel Laberge, founder of nuclear fusion startup General Fusion), decided to turn to thermoacoustics to solve the problem.

Research into thermoacoustics has been around for years, but it’s still a relatively new area. I’m not qualified to say too much about it, suffice to say it involves the bizarre interaction of thermodynamics and acoustics — i.e. heat can be used to stimulate the creation of intense sound waves that can be used to achieve mechanical work. Dr. Greg Swift, a thermoacoustics expert at Los Alamos National Laboratory and someone I quote in the article, has a great little essay here that describes what thermoacoustics is all about.

In a nutshell, Steiner designed an engine core that eliminates all rubbing parts (i.e. mechanical friction). The piston is replaced with a thick steel plate fixed to the engine wall. Helium gas on the top side of the plate is heated, triggering intense sound waves that cause the plate to vibrate. Below the plate and separated by a thin layer of helium is another metal plate — a diaphragm – attached to a shaft. As the first plate vibrates it causes the diaphragm (and the shaft) to move rapidly up and down. And I mean rapidly — 30,000 cycles per minute. The shaft is connected to a linear alternator that induces an electric current as it moves up and down. That movement is very minimal at only 200 microns so Etalim has had to cleverly configure its alternator to capture such small movement. (See video with this post to get a visual of how this all works).

The end result is a highly efficient and durable compact engine that moves less gas per cycle than a conventional Stirling engine but compensates by achieving dramatically more cycles per minute. Etalim is aiming to manufacture engines that can supply 1.6 to 3 kilowatts and it believes it can get the cost down to a stunning 15 cents per watt, which is more than competitive with internal combustion engines and leaves fuel cells in the dust. It if can deliver, this would change the economics of microCHP (combined heat and power) for the home, biogas/landfill generation, solar thermal power generation and a whole host of distributed generation applications in need of a small, efficient and affordable engine that’s agnostic to fuel or energy source, as long as it supplies heat.

Etalim has a long way to go. It made its first prototype last year and proved that the design works as expected, but efficiency was low — just 10 per cent. The second prototype will come this spring and will aim for up to 30 per cent efficiency, with hopes of achieving 40 per cent by the time Etalim comes out with its first commercial product in 2012. That puts it in the territory of fuel-cell efficiency, but at a fraction of the cost. Etalim’s goal is to reach 50 per cent, but it has to figure out how to design the engine to handle temperatures exceeding 1,000 degrees C, meaning some use of ceramic materials will be necessary.

This is a great emerging story. So far the company has raised about $4.7 million, roughly half private equity (no VC) and the rest a grant from Sustainable Development Technology Canada for a demonstration project. It will likely be seeking $6 to $8 million in a first round of VC financing this summer.

I’ve been thinking a bit about Bloom Energy’s announcement last week that it wants to sell electricity as a service as a way to get its Bloom Box fuel cell into companies. The idea is that Bloom, as part of a service called Bloom Electrons, would sign 10-year power purchase agreements with the customer — i.e. the customer would agree to pay a certain amount per kilowatt-hour over 10 years in exchange for having Bloom plunk its fuel cells into their facilities and produce electricity on-site using natural gas. Bloom would presumably earn back its initial capital investment after a few years and the customer would be guaranteed a stable power rate that, in some jurisdictions anyway, is lower than what they pay today. That is certainly the case in California, where high electricity prices and generous subsidies make this approach a good fit. Bloom also handles all maintenance, another bonus for the customer.

Bloom is obviously betting that low-cost natural gas, thanks to the shale-gas boom, is going to be around for awhile. And the model is not unlike what we see today with many solar projects — a developer such as SunEdison, for example, will sign long-term projects at no upfront cost to the customer, which pays for the electricity it receives, not the equipment on its rooftop. The difference is that Bloom has to factor in the future cost of natural gas.

It will be interesting to see the uptake, and wouldn’t it to be nice to see this tested out in Ontario? Companies such as Enbridge should be kicking the tires on this, not sitting back and waiting to see what happens.  Bloom says it eventually expects the Bloom Electrons service to represent half of its revenues, and that doesn’t surprise me.

Now, one question: is this a green energy offering? Kind of. Burning natural gas onsite for electricity production (if you capture the waste heat) is more efficient than burning it in a power station and transmitting long distances via wires. Burning natural gas in a Bloom Box instead of a standard microgeneration system is even more efficient and eliminates nearly all smog-forming emissions. But having a Bloom Box in a community or a large building, such as a data centre, opens up the possibility of using biogas instead of natural gas. There are other benefits as well, if not green in nature. The Bloom Box can sell surplus electricity to the grid, creating a kind of distributed backup system that makes the grid more stable.

Bloom still has a lot of work ahead of it, and it’s not the only fuel-cell maker heading in this direction, but it’s at least trying to be creative and its high profile is getting people thinking how we can do things differently, and that’s a good thing.

Just figured I’d recognize a milestone for Vancouver-based Ballard Power, which recently manufactured its one-millionth membrane electrode assembly (MEA), which is a core component in its proton-exchange membrane fuel cells. Ballard says the high volumes have led to cost reductions that give it an edge over competitors. Still, it’s important to note that each MEA that’s manufactured leads to production of one fuel cell that can only power a light bulb. These fuel cells, however, are stacked together to form larger fuel-cell systems — from kilowatts to megawatts in size.

Anyway, the hydrogen economy may not be here as predicted 10 or 15 years ago, but Ballard is slowly proving there is a role for fuel cells and that costs, with volume, are coming down.