Edison Investment Research (“EIR”) has issued a note on IdaTech (AIM: IDA), saying it believes continued reduction of costs and competing on price with incumbent technology is key for the fuel cell maker's products to reach commercialisation.
"We believe that, when combined with (superior) next generation units, due in Q4 2010, ACME's distributorship agreement could provide a stepping stone to reaching this aim."
IdaTech in November announced the original supply agreement with Indian contract partner ACME Telepower Group has expired and is being replaced with a new distribution agreement, encompassing all versions of the ElectraGen fuel cell unit.
The management does not believe this change has affected strategy, and is targeting breakeven in the 2011 full year, EIR said.
The valuation of fuel cell and related companies hinges on achieving a commercial breakthrough of a scale and cost that generates market acceptance. To date this has proven elusive globally. Consistent significant volume orders of more than 1,000 units would be a milestone, achievement of which would help validate IdaTech's business model, the research house said.
The company's products combine fuel reforming and fuel cell stacks to create a power generation systems for use in a range of stationary and portable applications. The focus is now on onsite back-up power; the wireless telecommunications industry with widespread and often remote sites as a natural user.
In the back-up power market, fuel cells compete mainly with lead acid batteries and diesel generators. The key challenge for IdaTech, according to EIR, is to build production to a baseload volume that will reduce currently high production costs and trigger lower selling prices. Having successfully reduced manufacturing costs by around 50 percent as part of the tie-up with ACME, future products are likely to compete on price but also be capable of processing a variety of fuels, opening new markets, it added.
IdaTech's fuel cell products utilize advanced proton exchange membrane (PEM) technology that can be fuelled either by hydrogen directly or by generating hydrogen onsite and on demand from HydroPlus, a methanol and water liquid fuel, using IdaTech's proprietary fuel reformer.
The company offers 250W, 3kW and 5kW fuel cell products that provide solutions for applications requiring 100W to 15kW of back-up power generation.