San Diego’s PowerGenix Engineers a New Strategy for Nickel-Zinc Battery
Dan Squiller concedes that the rechargeable lithium-ion battery has become the dominant power source for electricity-hungry technologies that include everything from laptop computers to electric vehicles. But he contends lithium-ion batteries have some drawbacks too—they’re expensive, potentially flammable, and difficult to recycle.
As the CEO at San Diego’s PowerGenix, Squiller also maintains that there is a place for the company’s competing rechargeable nickel-zinc battery technology.
So Squiller has been on a sort of technology walkabout since 2004, when PowerGenix moved from the Bay Area to San Diego in a bid to restart development of its proprietary technology. What he has been searching for is an application where nickel-zinc technology makes sense—and after some false starts, he has focused on what he calls “a huge opportunity” in the emerging market for “micro-hybrid” electric vehicles.
Micro-hybrid technology already has been integrated in some BMW and Mercedes-Benz models sold in Europe today, says Squiller, who describes it as “a starter system on steroids.” When the vehicle stops for a stoplight, for example, the micro-hybrid system simply turns off the car’s conventional internal combustion engine. When the driver touches the accelerator, the micro-hybrid system instantly restarts the engine.
“Just that can improve gas mileage by 5 to 8 percent, with the added cost [to the car’s sticker price] being less than $1,000,” says Squiller. He contends that nickel-zinc batteries are ideal for micro-hybrid systems because they are better suited to handle the heavy stop-and-go duty cycle than conventional lead-acid batteries, and they are far less expensive than lithium-ion batteries. (Nickel-zinc has a better charge acceptance rate than lead-acid, provides a quick power surge, and is made of environmentally benign materials.)
“This isn’t a fringe, niche technology. It’s rapidly becoming ubiquitous in Europe, and I believe it will become ubiquitous in the U.S.”
In the United States, Squiller says government-mandated standards for improved fuel efficiency and lower emissions have forced automakers to aggressively innovate. As a result, he estimates that automakers in the U.S. market have compressed their new technology adoption cycles from five years to two.
PowerGenix recently unveiled its first production prototype batteries, and Squiller says, “We’ll be sampling to just about all the major auto manufacturers this summer. Then the qualification cycles begin.”
The company also has reached an agreement for a substantial investment with a large institutional private equity firm based in Hong Kong, which Squiller says is expected to close in the next 45 days. It has raised $60 million through four rounds of venture investing since it was recapitalized in 2003, and Squiller says its existing venture investors will be joining the unnamed private equity firm in the company’s fifth round. Those investors include Granite Ventures, Advent International, Braemar Energy Ventures, OnPoint Technologies, Bessemer Venture Partners, Technology Partners, and the Angeleno Group.
Although Thomas Edison was awarded a U.S. patent for a rechargeable nickel-zinc battery system in 1901, Squiller says PowerGenix traces the roots of its technology to Morris Eisenberg, a chemist and Stanford University lecturer who tried in the 1990s to persuade Apple Computer to use his design for nickel-zinc batteries in Apple laptops. Jeff Phillips, who was Apple’s power group technology manager at the time, was unconvinced because nickel-zinc lacked the power density of lithium-ion cells.
But Phillips later joined the aging Eisenberg at a Foster City, CA-based company called Next Century Power, which was started to develop nickel-zinc technology. Although Next Century failed and Eisenberg died, a group of investors acquired the intellectual property needed to resume development in 2000. Phillips has continued to serve as the company’s chief technology officer at PowerGenix since it was founded.
“The company really didn’t get its legs until 2003, when professional investors stepped in,” said Squiller. PowerGenix moved to San Diego the following year, and Squiller initially focused on developing the nickel-zinc rechargeable technology for handheld drills and other cordless power tools. PowerGenix also developed rechargeable AA batteries for cameras, and sought to develop nickel-zinc batteries for power garden tools, electric scooters, and other markets.
“Two out of the three largest power tool companies have tested and qualified PowerGenix’ rechargeable nickel-zinc batteries,” Squiller said. But the company’s entry in the consumer power tools markets never materialized, “partly because we couldn’t negotiate suitable commercial terms,” Squiller says, but also because the construction industry was hit hard as the housing downturn accelerated in 2008.
The company continues to generate some revenues today from power tools and AA batteries, but not enough to become profitable, and Squiller says PowerGenix moved to develop its technology for hybrid electric and micro-hybrid electric vehicles in 2009.
“The power tool market is a $400 million to $500 million a year market, and gross margins are 15 to 20 percent,” Squiller said. “In contrast, the market in 2015 for hybrid electric vehicle batteries will be roughly $4.5 billion, with higher gross margins. While it’s certainly tough in the automotive business, we should be able to drive much healthier revenues and margins in that segment. So it’s kind of, ‘Do you want to do your fishing in a pond or in the ocean?'”
The years spent exploring opportunities for nickel-zinc batteries in power tools and other consumer markets weren’t entirely lost, Squiller said. “We’ve spent the last six years at PowerGenix gaining core experience on engineering the battery so it can be easily manufactured.”
Today PowerGenix has roughly 100 employees worldwide, but Squiller says about 85 of its employees are based in Shenzen, China, which now represents the company’s center of gravity. PowerGenix currently has a contract manufacturer in China, and plans to establish a joint venture over the next 12 months with Chinese partners the company has yet to identify.
“The rechargeable energy storage industry is dominated by the Japanese and Koreans, and the Chinese are coming on strong,” Squiller said. “They have a lot of talent, a lot of electro-chemists and engineers, so our decision to transition the company from San Diego to Asia was not tactical. It was really strategic.” As part of that strategy, Squiller added, “We had a specific objective to find a Chinese investor for our fifth round.”
Squiller says that creating a commercially viable, nickel-zinc rechargeable battery has been called a 100-year problem. PowerGenix has been working to develop its technology for only a decade or so, but given that Edison got the first nickel-zinc battery patent in 1901, the answer to this particular 100-year problem already is long overdue.