Background Information

Can Bailey Power Systems Compete With A Process That Makes 95% of the World's Hydrogen?

While some environmentalists might find it morally awkward to buy a "green" fuel made from natural gas, the end product is 99.99% pure hydrogen and until recently, steam-methane reforming was the most cost-efficient way to make it. So fuel cell electric vehicle ( FCEV) proponents, a group that resoundingly includes Bailey Power Systems, should regard it as just another source of fuel. The goal is to get more FCEV's on the road.

The fact is that Bailey Power Systems now finds itself poised to enter the hydrogen fuel market while enjoying a position of strength elevated to levels unimaginable even just a year ago. How can this be? Major automakers have been ramping up investments in FCEV's during the last year and expanding mass production lines at a time when the growth of U.S. hydrogen fueling stations has stalled out. There are only a paltry 42 in the entire country, with 38 of these in California. In the world of supply-and-demand equations, this looks pretty good to us, and competitively puts the company at a point that, historically, is akin to the year 1912. The year 1912 was a fantastic time to enter the business of fueling automobiles in the U.S. That was the year prior to Gulf Refining Co. opening the country's first drive-in gas fueling station. And it was also the year when the number of cars on the road increased to 8,000, with many of their drivers having a tough time finding fuel. But many in the country remained skeptical of the automobile's usefulness and future, as exemplified by a popular prognostication of the times, "Cars– they'll never replace the horse!" But the once unimaginable spectre of drive-in gas fueling turned out to be a big hit, it wasn't long before they swept the nation. The current number of FCEV's on U.S roads is a bit more than 5,000.

Though FCEV's have many critics, they continue to draw widespread support by automakers, as shown by this headline in the Dec. 11, 2018 Financial Times of London: "Hyundai Motor Group Commits $7bn to fuel-cell technology." Even by the standards of the auto industyr, that's a lot of money. But as Hyundai and its affiliate, Kia, launched the world's first mass-produced FCEF, the Tucson, in 2013, they probably know quite a bit about FCEV's by now and believe another $7-billion is money well spent.

Regarding steam-methane reforming as a competing force, the U.S. Dept. of Energy says about 70 percent of the hydrogen made by this process is used for petroleum refining and another 20 percent, fertilizer production.

Sure, producers are moving a lot of hydrogen with this process and even have 1,600 miles of pipeline at their disposal for doing so. But they have the wrong process at the wrong place for FCEV's. Producers using steam-methane reforming are able to drive down their costs primarily through establishing economies of scale because their energy costs are huge. As such, they're stationary operators, a position soon to become an anomaly in the developing markets for FCEV's. Unlike the early refiners of gasoline, centralized producers of hydrogen do not have a best-practice process to rely on and nor do they have an easy route to obtain it. A contributing but smaller impediment is the specialized trucks, storage devices and other equipment required for delivering hydrogen to fueling stations. These costs are high.

Bailey Power Systems does not have any of the above problems common to steam-methane reforming. Quite the opposite. BPS has the process that is "best practice" in the industry for producing hydrogen. BPS invented it and it's the subject of five patents with about 60 claims filed in May of 2018. The patents were given Fast Track status by the USPTO because of their potential benefits for the country.

The protocol with USPTO is that once a patent application has been approved for publication by the governing patent examiner, full approval follows within three months. Publication is the final stage of the patent process and includes the opportunity for the patent examiner to ask questions that add to their understanding of the invention. The December 27 publication was the second of five. BPS believes the remaining three will soon follow suit and all five will grant during the first quarter of the year.


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