I recently had the chance to interview Ian Clifford who is the CEO of Zenn Motors ( ZNN.V ). His company has an agreement to market the breakthrough energy storage units (EESU) being developed by the stealth Texas company EEStor. Although no-one has ever publicly confirmed seeing an EESU in operation, these devices have the potential to disruptively leapfrog lithium-ion batteries for electric cars. They are orders of magnitude lighter and energy dense, can be recharged in minutes, do not appreciably degrade and cost a fraction of what lithium-ion batteries do to produce. The ZENNCity electric car which would be the first vehicle to use these batteries has a 52kwh 250 mile range EESU that would only weigh 280 pounds.
So what’s been going on lately with ZMC and EEStor?
The first event was when EEStor demonstrated their permittivity milestone and then we went through our own independent verification of that particular scientific milestone. And that triggered a couple of things. It triggered our $700,000 payment to make on our technology agreement with EEStor, but it also triggered an option to further extend our equity position with EEStor which we did.
We moved our ownership stake from around 3.8% to around 10.7% and at the same time we also just concluded a 9.3 million dollar equity raise in Zenn Motor Companies. So a lot of different financial and predominantly EEStor-related transactions (occurred) over the last couple of months.
Did the permittivity milestone increase your confidence in EEStor?
Absolutely. According to EEStor it was really the last scientific hurdle achieved and now they’re just flat out working towards commercial product. Absolutely a very very significant step.
As an owner and investor, do you go to EEStor’s facilities and see prototypes?
We are in their facility frequently. We see their progress on a regular basis. We had our own independent third party verification of the permittivity result. We retested all the materials, re-calibrated all the equipment, did a very exhaustive re-verification as it was a significant trigger for us. And a few weeks ago EEStor made the public statement that they anticipate having at-voltage components verified independently by September of this year and deliver of production prototype EESU to us by then end of 2009. That’s directly from EEStor. They made that statement very recently, so it’s very very exciting progress.
EEStor has said that before, even once by the end of 2007, so is this really any different than the last 2 years?
Absolutely. They started their commercial build-out in 2006 and have continued to dramatically ramp up their production capability. Their choice of announcing permittivity was entirely up to them so they made the decision when they felt ready to do that. In terms of progress, the unique thing than Zenn other than Lockheed Martin has is access to the facility and very demonstrative indication of their progress. And we see very clearly where they are at and how they’re progressing. So it’s a somewhat unique visibility that we have on their technology.
Are you seeing an actual assembly line now being constructed?
Absolutely. This is a full production facility here. Often people are saying there is no facility or assembly line, etc this is simply not the case. They’re building a state of the art pilot production plant that is very significant. Lots of people have seen it, it’s not just us.
Is permittivity a value that suggests the material can hold the energy density they claim it can, is that true?
That’s a pretty fair statement. It’s a measurement of capacitance of the material. Once again one of the very significant breakthroughs here is that as a dielectric material there are other materials that have high levels of capacitance but they tend to have very very narrow temperature range, and we had these materials certified from -20 to 65 degrees Celsius. So they’ve created a unique dielectric material and that’s a very very important distinction. It’s a brand new material and it needs to be to meet the energy density and performance characteristics and specifications of their energy storage. They have created a breakthrough unique dielectric material.
You talked about at-voltage testing, in vehicle application are you talking about 300 to 400V?
Actually likely higher than that. EEStor stores their energy at around 3500V. We would step that down to operating voltages likely in the 600 V range. Very very high efficiency drive system operating at much higher voltages than any other current EV drive system. That does a number of things. It increases the drive efficiency, it makes the components somewhat smaller, and ultimately less expensive and obviously for mass commercialization that’s a very important consideration.
So the testing you did was at a low voltage?
It’s a standard permittivity capacitance test on a powder in a matrix. It’s not a high voltage test it is a low voltage test, but EEStor achieved many other important milestones over the past 18 months. Especially directed towards a high voltage energy storage device.
If you read our press release related to permittivity, were very very clear on the other key elements of development that EEStor has achieved in order to commercialize a high voltage capacitor with high energy density.
And as I said before, this September EEStor has stated that they will be certifying at-voltage components which actually are build capacitors off their production facility.
So they’re going to actually demonstrate true truly functioning capacitors, not just a powder?
Exactly. Which has always been their next logical step towards a final commercial product.
In your vehicle you might have a bunch of those capacitors in serial or parallel?
They’ll build up their energy storage devices in parallel, because each component, or building block is very very tiny, it’s a very tiny footprint. It is a 3500 volt capacitor and they will build them up in parallel to create the energy storage requirement that the application calls for.
We can go anywhere. We’ve talked about our cityZenn vehicle with a 52 kwh energy storage device, but we can do anything depending on the market and the application.
Have you actually seen one of the devices functioning?
That gets into the point of non disclosure. Just to be clear, there have not been any production EESUs delivered to us, that’s a very specific milestone, our last milestone is delivery of production equipment. EEStor originally did all of this, their original lab prototyping and everything else a number of years ago. We did our original due diligence back in 2002 and 2003. We were exposed to the original technology then. Right now, we like everyone else are waiting for at voltage components off their production line. And that’s as specific as I will get. And really that’s all that matters.
And right now EEStor has indicated a very very short window of delivery and are working towards that aggressively.
So you said prototypes by the end of the year, but production units not?
No this is a production prototype off of the production line. Once they deliver a production prototype it is a production unit that is production ready.
With all the Recovery Act green grant money, and A123, for example, asking for $1 billion for a battery plant, if this thing is so certain why haven’t you gone out and asked for money to build out a giant EESU plant?
First of all that’s up to EEStor to decide, because we don’t build the EESU. Quite frankly their engineering and deployment costs compared to lithium ion production is so much less, their production facility and ramp up costs are a fraction of lithium-ion. Lithium ion is a very very expensive technology to produce, especially large format. Nobody has really done mass production of large format lithium ion cells yet. Some of the individual pieces of equipment in a lithium ion battery plant cost more than an entire EESU production line. It is much more economical technology to manufacture.
So they can do it with the money they have now?
This initial production facility is fully financed based on the money they got which is great.
What kind of volume in vehicle sper year of EESUs can this plant produce?
In terms of disclosure on that it depends on the size of the EESU obviously.
For the ZENNCity?
We spec’d that at 52 kwh. We may not go to that full size depending on the application as I mentioned. Depending on the market that gives us a250 mile range on a single charge. That’s a lot more than a lot of jurisdictions require. You’ll see. I’m not going to comment on volume right now I know there is a number of analysts who will be covering this story and they will very likely talk about capacity at EEStor. I do not want that information coming from us I'd rather that information come from EEStor directly.
Its very very scalable. Their model which they’ve talked about is they build a relatively small production line which is what is being built now in Austin. They then replicate that line. So they don’t build massive amounts of line. They basically take a small model line and they replicate it over and over and over again to increase volume. And that’s very typical in hard disk manufacturing and other high technology manufacturing which is where Dick Weir and Carl Nelson come from. They’ve been working in that world for decades and they know everything about scalable mass production. Not a big worry from our perspective. They know how to do it, and they’ve got Lockheed Martin involved. They’ve got some really sophisticated people involved in the scaling of the technology, so its not a huge concern for us.
It sounds like the future of your company rides on what they're doing?
It always has. When I started this company it was all about the significance of energy storage as it related to mass production. It became a matter of choosing the most exciting and viable energy storage possibilities that were out there. We looked at lots of different technologies at the time, and EEStor was by far the most compelling and certainly undoubtedly the most disruptive.
If they start delivering production-grade EESUs by the end of 09, how long will it take for the first ZENN Cities to roll of the line to commercial availability?
Commercial availability is one thing. We’ll have the car powered and demonstrated, and it will probably be a number of different platforms, and applications that well be demonstrating at that time. Our exclusivity covers a broad range of applications including retrofitting any existing 4wheel vehicle. So our intention is to truly demonstrate the breadth of opportunities that the technology represents. We have been for the last 18 months engineering ZEENergy drives and we’ll have a drop in application for what EEStor delivers to us because we’ve been working with them for the same amount of time to make sure what they deliver we can utilize immediately.
Its not going to take 2 minutes, but it will take days as opposed to months to get the demonstrations on line.
So the socket in your car is perfectly configured for the EESU when it arrives?
Exactly. Were building to accept it and their building to fit, that’s always been the intent.
So in 2010 certainly we should be able to see some of this?
Yes, absolutely. It will be clearly be demonstrated around the world in 2010 and commercialization is really jus ta question of how quickly EEStor ramps. We believe well be able to sell everything they can produce. There’s no question there.
How confident are you that this is going to happen?
I made that clear on how I voted with my own money my company’s supportiveness and the amount of support we’ve gotten from the financial community. We’re very confident.