Market

The Market for Ceramic Igniters

SenCer Inc. has had several discussions with original equipment companies for the ceramic igniters. It is expected that a rapid commercialization of the UltraTemp™ igniter in a $600 million dollar global market can be achieved based upon addressing the industry need. There are an estimated 4 million gas fired furnaces produced by the OEM's each year. The igniters cost $8-$10 each as a complete unit. Therefore, the igniter market for just new gas furnaces (which is a small portion of the overall igniter market) is $32-$40 million with a total overall market of approximately $600 million per year. Through the use of the proposed advanced ignition and sensing system, a reduction in home fuel energy reduction could be as high as 30%. The direct result of this development will be to offer better energy management, a safer environment for consumers, and a lower liability to original equipment manufacturers.

The Market for Oxygen Sensors

Global automobile production is currently 71 million vehicles per year. Each vehicle has an average of 2 oxygen sensors per bank of cylinders. Air quality legislation mandates tighter emission controls and the number and complexity of oxygen sensors is increasing. Recent legislation in the United States doubled the number of oxygen sensors in each vehicle. As these vehicles age (80,000 - 100,000 miles) every oxygen sensor will have to be replaced. We estimate the global market for oxygen sensors including Tier 1 OEM supply and aftermarket to be greater than 8 billion dollars per year and growing.

How the sensor works:

Oxygen sensors are used in modern automobiles to control the fuel and ignition systems to optimize a car's performance in the areas of emissions and fuel economy. Sensors are located before and after the catalytic converter to check on the amount of oxygen in the exhaust. The sensor sends signals to the car's on-board computer, which then can adjust several variables, including air/fuel ratio and timing, in order to bring the engine into the optimum operating range.

The Fuel Cell Market and General Information

Evidence suggests that commercialization of the fuel cell began in 2007. This belief is based on the increase in manufacturing capability, decreasing costs and the increasing number of OEM tie-ups which took place during the year. Fuel cell technology is being pulled into the market by concerns over climate change, air pollution and dependence on imported fuel, and by the consumer-led demands for longer product run time and greater power requirements in portable devices.

As a technology fuel cells are highly efficient, offer a reduction in greenhouse gas (GHG) emissions, and are modular, allowing a scalable approach to increased power requirements, Currently, fuel cells are relatively expensive (due to platinum content) and there are a number of issues outstanding in terms of research, development and demonstration, codes and standards, fuel infrastructure and distribution.

Over the past three years the industry has seen an annual growth rate of 59% in fuel cell units delivered, with some 12,000 new units shipped during 2007. Fuel Cell Today estimates that the current global manufacturing capability for fuel cells is over 100,000 units per year, with a quarter of this coming from companies whose business activity is exclusively the development of hydrogen and fuel cell technologies.

Market Drivers

Climate change:

GHG emissions come from a range of sectors with current data from the European Union showing nearly one third from the production of energy and a fifth from transportation. Due to their efficiency gains and use of less carbon intensive fuel, the commercialization of fuel cells could provide significant cuts in GHGs emitted from energy production, buildings and transport, making them a key target for government support.

Energy costs and security:

The geopolitics of oil has come under intense scrutiny over the last decade. With oil prices breaking $140 per barrel in 2008, an unthinkable level even three years ago, and with the costs of exploration and extraction rising, diversification of energy supplies is high on the agenda. While hydrogen, the primary fuel for fuel cells, does not itself exist in any natural form on Earth, it can be made from a wide range of sources including wind and solar.

Urban Pollution:

Transport is one of the most important sources of atmospheric urban pollution. Although some cities are tackling this issue with policies such as low emission zones or even banning the use of internal combustion engines in certain applications. We expect to see increasing legislation in this area.

Transportation:

In the automotive arena, a number of different factors should help to push sales of fuel cells. Legislation is widely mentioned in the press, particularly in the form of the Californian zero emission vehicle (ZEV) mandate, which quantifies minimum numbers of zero emission vehicles which must be sold annually in California. Fuel cells also have the potential to be more fuel-efficient than their competitors and, in the long-term, this may prove to be the biggest driver for real sales of this technology.

Production of fuel cell powered light duty vehicles has grown considerably in 2007, with around 250 new units introduced and 800 units now deployed worldwide. Several of the major automotive OEM's have made significant announcements on fuel cell vehicles in 2007. Chief among these are Honda and General Motors who each announced that they would be leasing 100 of their fuel cell cars to customers in the next year. Both of these projects are very promising as they should lead to wider customer acceptance.

Demonstration Projects are likely to continue for th next two years while larger-scale deployment of thousands to tens of thousands of LDVs should occur within the next 8 years. We anticipate greater and greater pressure originating from the geopolitics of oil as well as GHGs to accelerate fuel cell vehicle development and production beyond today's expectations. There is no question that on a global level it will take up 5-12 years to make substantial strides in the total fuel cell infrastructure from generation to distribution to end user. However as pressures mount the amount of investment and technical resources will grow exponentially and companies like GreenCell will move the industry forward.

We believe that our SOFC technology will meet all transportation criteria at a much lower cost, with rapid start up, less specialized fuel and with longer life expectancy.