PowerGenix's new battery wins over venture capitalists
By Mike Freeman
UNION-TRIBUNE STAFF WRITER
December 2, 2004
In the "green" energy business, the landscape is littered with defunct companies whose technology worked in the lab but failed in the marketplace.
PowerGenix, an upstart San Diego company, is trying to reverse this trend, and it has five top-tier venture capitalists betting it will succeed.
In the past 18 months, the venture firms have poured $13.75 million into PowerGenix, which has developed a rechargeable nickel-zinc battery that the company says delivers more power than competing batteries and is easier on the environment.
Initial backers include Silicon Valley's Granite Ventures and Technology Partners. They were joined recently by Boston-based Advent International, New York's Braemer Energy Ventures and OnPoint Technologies of Florida.
Even with strong venture capitalists on board, PowerGenix could be fighting an uphill battle. Dozens of companies have failed to bring promising clean-energy technology to market. Carlsbad's Metallic Power, for example, raised $40 million to develop zinc-based fuel cells that would provide backup power to wireless base stations. But the company ran out of money before luring customers and closed last month.
In the battery business, Evercel of Hingham, Mass., tried for three years to sell nickel-zinc batteries to makers of scooters, bicycles and small fishing-boat trolling motors. Sales never amounted to more than a $1 million a year. Evercel terminated its stock listing on the Nasdaq exchange this spring.
PowerGenix's strategy for avoiding the pitfalls that tripped up other green energy companies centers on its battery design and on carefully targeting the right customers.
To keep costs down, the company engineered its battery so it can be mass produced at existing battery factories, said Dan Squiller, chief executive of PowerGenix.
To avoid resistance to untested technologies, the company is targeting two markets where it believes it has the greatest advantage: the cordless power-tool business and the military.
In power tools, Squiller said PowerGenix cells can provide more power to the battery pack.
"Think of that power tool you bought at Home Depot and imagine what it would be like if the battery pack was a third smaller, a third lighter and had 15 percent more power," he said. "It allows you to do things with that tool that previously only a corded tool could do. Our technology will actually drive the transition from corded tools to cordless tools."
For the military, the batteries could provide a stronger, greener power source for everything from night-vision goggles to laser sighting devices, Squiller said. OnPoint Technologies, PowerGenix's top venture capital investor, is funded by the Army.
If it can establish a beachhead in these markets, the company hopes to expand into other industries. "The mother of all applications is electric vehicles," Squiller said.
While nickel-zinc battery technology has been around for more than 100 years, it's been a tricky chemical puzzle to make it work for rechargeable batteries, said Frank McLarnon, a staff scientist at the Lawrence Berkeley National Laboratory who focuses on battery technologies, mostly for electric cars.
"As far as I know, they're the first ones to have taken it to a stage where they're having success with it," McLarnon said.
According to industry experts, the most common rechargeable battery today is the nickel-cadmium cell. Cadmium, however, is a toxic heavy metal. Squiller said nickel-cadmium battery makers are under pressure to stop using it.
Nickel zinc, on the other hand, is environmentally benign.
"It is a huge and very interesting market," said Gary Prime, chief executive of Evercel, which is now focused on the rental-car business. "Quite frankly, that market holds a lot of promise for a company like PowerGenix because it needs a new battery."
Other competing batteries are made of nickel metal hydride and lithium, both of which are used in electronic devices such as laptops and cell phones.
Some industry experts think nickel zinc will eventually have a cost and power advantage over nickel metal hydride, although others disagree. But nickel zinc definitely has a power advantage over lithium cells, which are designed to release power slowly over several hours.
Nickel zinc can provide a surge of power quickly. That makes it more viable than lithium for use in military equipment, power tools and other devices that gobble up power in short gulps, Squiller said.
PowerGenix, a 27-employee company that moved from the Bay Area to San Diego this spring, is about a year away from making money, Squiller said. For six months, it has been manufacturing 300 to 400 cells a week in San Diego to give to customers as samples.
"We're actually at a very interesting point," Squiller said. "After such a long time in the lab, we are finally able to provide customers with samples. We have to be careful we don't spread ourselves too thin. But the technology and the chemistry is really capable of widespread applications."
Mike Freeman: (760) 476-8209; email@example.com