High-performance air compressors for fuel cells
Today forklifts, tomorrow long-haul trucks and stationary power systems. These are the rapidly growing markets for this maker of fuel cell air compressors, says Milburn.
Fuel cell engines offer a low- to no-emission option for providing electricity in everything from homes and businesses to powering forklifts, busses and long-haul trucks. Since fuel cell engines are powered by gases, namely methanol (natural gas) and hydrogen, they can be refueled more like an internal combustion engine (ICE), within a few minutes -- unlike batteries that need several hours to recharge -- making them ideal for near continuous operation for long periods of time.
The air compressors being built by VAIREX control engine power output. "Fuel cell power output is controlled by using the airflow rate," says Milburn. "The fueling rate follows, just like when you push down on the gas pedal in your car. So, the cathode air compressors we build are the first link in the control chain, which imposes quite a list of technical requirements, response time just the tip of the iceberg."
VAIREX's biggest current market is fuel cell-powered forklifts, which are becoming more common. COVID-19 actually spawned further growth in the industry, according to Milburn. "It turns out that fuel-cell powered forklifts are really a key for giant indoor food distribution centers," he says. Gas-powered ICE forklifts couldn't be used in such space because the exhaust can damage foods, he maintains, not to mention its impact on workers in closed spaces. Battery-powered electric forklifts need to be charged or the batteries changed roughly every seven hours.
"Fuel-cell forklifts run 24/7 and they spend about five minutes a day on the fueling stand and the rest of the time they just go," Milburn says. "Walmart, Amazon, Kroger, and a few others have deployed fuel cell forklifts at a record pace. They were doing that before coronavirus, and then when corona came along and they suddenly realized that their core business was going to roughly double, they just started ordering forklifts like nobody's business. We became designated as a critical supplier."
That's led to a sales boom for VAIREX, which won the Outstanding Energy & Environmental Manufacturer of 2020 in the Colorado Manufacturing Awards. When it was nominated earlier in the year, the company anticipated surpassing 10,000 cumulative units sold since launching the product series six years ago. Now Milburn forecasts producing 6,000 in 2020 alone, according to Milburn. "Our first and second quarter revenues are double last year," he says.
Milburn says that the company is now manufacturing air compressors for four of the top five fuel cell forklift companies in the world and that it is in talks with the fifth.
The company, which produces the units in Boulder, uses a principle of radical simplicity and has created compressors with less than a dozen parts that assemble in minutes, Milburn says. He says most competitors' products have more than a hundred parts and take hours to assemble. This has allowed it to remain competitive in a global market and to not move production overseas.
Usually the company is focused on baseline production. "But sometimes depending on the ebb and flow of orders, we've got to build 500 compressors a week, a hundred every day," Milburn says. At maximum production levels, it could produce 25,000 a year, he estimates.
VAIREX currently has its niche in smaller applications. "For 30 kilowatts and below, we're devastatingly competitive and we're not facing a lot of competition," Milburn says.
The company is working on making compressors that will power larger fuel systems as well. Milburn calls those emerging markets, which will include city buses and long-haul trucks, high-value markets.
While a forklift can be powered by a five-kilowatt fuel cell engine, long-haul tractor trailers will require a substantially more powerful fuel delivery system, which Milburn says will be in the range of 250 to 300 kilowatts. The same goes for fuel cell buses, now coming online in China, and other local vehicles, which he says will likely have 60-kilowatt fuel cell engines.
"In that world we're competing with electric turbos, which are equivalently simple to our product, but run at really, really high speeds," says Milburn, noting that electric turbos are somewhat similar in complexity, but operate at tens of thousands of RPMs and require more expensive components. "We think we're competitive. We think we'll do fine against those guys."
VAIREX's compressors are now being tested on buses in China. "We're developing those products right now, but we have to tell you that we're a small company with a pretty creative, but limited engineering staff. So we're taking it step by step," Milburn notes.
VAIREX's air compressors are also being used in stationary operations, particularly in South Korea -- its second largest market -- and increasingly in Japan. "Korea's national plan is really pushing a very specific kind of thing, a low-carbon, resilient grid, which depends on a lot of renewables and a lot of fuel cells," he says. With a mandate that new buildings must have their own clean power sources, fuel cells are part of that, and some companies are leveraging VAIREX's compressors.
One Japanese company is using the fuel cell as a heating element to boil water, and then it makes electricity as a byproduct. "Fuel cells basically take fuel, in this case natural gas, and they converted about half of it into electricity but the other half is heat," Milburn explains. "So the net efficiency of the system is like 99 percent or something," since all the heat and electric energy are being used in the system.
Despite an increasingly global market for VAIREX's products, Milburn says the company will maintain its headquarters and manufacturing in Colorado. "We don't need super low labor costs like a lot of people do," he says. That said, he could see doing some final assembly in areas closer to VAIREX's final markets in the future.
Challenges: Currency risk, says Milburn. "The United States is now running deficits that are bigger than the Vietnam War era. It led to inflation, I think the U.S. dollar inflated by 8X over about a 10-year period from the mid-'70s to mid-'80s. The deficits we're running suggests that that will happen and of course, inflationary risk when it's not shared by the world leads to currency risk."
Another: "We are pulling out of international agreements. That's causing disharmonization of international technical standards.
Opportunities: "The obvious big opportunity is just to grow and dominate the forklift business. The second one is to do the same thing in stationary power. Right now, that's primarily an Asia thing, although we're making some inroads in cell phone tower backup in the United States right now," Milburn says. "We've got a really interesting business in Europe built right now around small delivery vehicles and urban delivery vehicles. Europe is leading the world when it comes to banning internal combustion engines from inner cities. It's all going to be battery or fuel cell within a few years. And then of course, the blockbuster is the China truck and bus market."
Needs: "For a manufacturing company we generate remarkably high margins," Milburn says. "But when you start doubling every year it's hard to manufacture and to have enough capital. . . . So we're still looking for a couple million more dollars. We're talking to some strategic partners and we're talking to some financial partners."