Zenn CEO reveals details of EEStor's progress

Toronto-based Zenn Motor (TSX:ZNN) plans to incorporate ultracapacitors from stealthy EEStor into full-speed electric vehicles starting in 2010.

The news comes a day after EEStor received third-party verification that it passed its final technology milestone, leaving the company with the challenge of bringing its state-of-the-art energy storage system to commercial production (see Zenn to increase stake in EEStor after test verifies ultracapacitor technology).

Zenn CEO Ian Clifford told the Cleantech Group today that the announcement affirms that EEStor will be able to meet its promise to begin commercial production before the end of the year. That clears the path for highway-speed vehicles to incorporate the ultracapacitors in 2010—a slight delay from the fall 2009 target the companies established last year (see Zenn gearing up for EEStor-powered car).

Zenn and EEStor said third-party tests showed that the main material in the ultracapacitor technology achieved relative permittivity of at least 22,500 over an operating range of -20 to +65 degrees Celsius. Permittivity is a measurement of how much energy can be stored in a material (see EEStor's Weir on ultracapacitor milestone).

Zenn, which holds a 3.8 percent of EEStor after investing $2.5 million, now plans to exercise an option to boost its investment to a range of 6.2 percent to 10.5 percent, representing between $2 million and $5 million in capital. The amount depends on how much other investors, including Kleiner Perkins Caufield & Byers, decide to increase their stakes.

Clifford shared details of the new timeline for technology deployment with the Cleantech Group.

Zenn CEO Ian Clifford says the latest tests are a validation of his decision to invest in EEStor.

What does yesterday’s announcement mean in the larger picture of your relationship with EEStor?

Two things happened as part of the milestone. There was the $700,000 payment as part of the technology agreement that gives us exclusive rights to the technology for automotive use. Second, it gives us the option to increase our equity stake in EEStor.

We announced that confirmation of the milestone, and we have five business days to notify EEStor of our intent to increase our equity stake. Then there’s a 30-day closing period on that equity. The other investors have that option as well on the milestone, so they will, within a 30-day period, notify EEStor of their intent to participate or not, and at what level, and we would adjust our investment accordingly.

What’s the significance of the technology milestone?

It’s obviously a very, very important step. When I set up the original agreement with EEStor back in 2004, it was very important to me, and ultimately the company and shareholders, that in every single step along the way, we have this check and balance related to our own right to independent verification. If it was just EEStor stating they achieved something, it was important to have our own ability to do verification. I did that originally because the disruptive nature of the technology was so significant.

What’s the time line for completing the last step of the technology agreement, in which EEStor delivers the product?

EEStor announced they planned to begin commercial production by the end of 2009. We have no reason to believe otherwise, and we know they remain heads-down working on that objective. There’s a demand for this type of solution globally—not just within the automotive applications, but the grid applications, renewable energy, military applications. It really covers any sector where there is need for energy storage.

With the positive results of the permittivity test, what hurdles are left before this technology gets into consumers’ hands?

There’s one more remaining milestone, and that’s the delivery of a commercial EEStor unit that meets the technology specifications. This is all about two main challenges: There’s the chemicals and materials science, and they’ve overcome that major hurdle (see EEStor claims third party verification), and now there’s the commercialization phase of the energy storage unit. And they’re using manufacturing systems that are well proven.

How soon after the product reaches commercialization can you incorporate it in your vehicles?

We have been engineering our technology to accept EEStor technology as soon as it’s available, so we don’t see a particular time lag from their commercialization to their ability to offer solutions for our vehicles. We have multiple markets that we have the exclusive rights to: new vehicles up to 1,400 kilos curb weight, which is the lion’s share of that category; also exclusive rights for conversion of internal combustion engines to electric—you’re looking at 900 million vehicles, and we’ll start with large fleet conversions; also the exclusive rights to golf carts and small utility vehicles. The quickest speed to market could be in small vehicles and golf carts because the regulatory hurdles to bring small vehicles to market are the lowest.

So when will the highway speed vehicle be available?

Certainly our intention is to introduce that product, the cityZenn, in late 2009 with commercialization to follow in 2010.

Are you looking for partners to help you deploy those vehicles across the globe?

Absolutely.

Where are the biggest potential markets?

Under the new administration, the U.S. has a significant tax program for electric vehicles. Different countries in the European Union as well. England alone is offering £5,000 ($7,400) per vehicle, which is very significant (see UK to spend £250M on electric car incentives). The issue today is there just aren’t cars available.

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