Fuel Cells seem poised for rapid sales, finally. These devices can convert fuel to electricity continuously, without running down like batteries, and without efficiency killing heat waste associated with diesel generators and gas turbines.
According to a recent report from Pike Research,
The global fuel cell industry revenue climbed sharply during the period 2008 and 2010, increasing from around $260 million in 2008 to nearly $670 million two years later – an increase of more than 250%. Looking ahead, Pike Research forecasts that growth in the industry will accelerate rapidly beginning in 2012, with strong growth anticipated over the next six years. Global fuel cell revenue is expected to surpass $28 billion by 2017.
We think Pike's $28 billion projection seems a tad optimistic, but even if half right, the fuel cell industry is heading toward some great progress.
Fuel Cells make good neighbors. They run silently, without smelly exhausts and vibration. They can be very small, human carried small, or large enough to power a commercial building. Fuel Cells that burn hydrogen create zero local pollution. They can be used indoors, even in a residential applications.
Fuel Cells may be the best way to convert some renewable fuels to energy, or to convert waste chemicals into useful electricity. For example, the large amounts of waste hydrogen generated as a by-product of chlorine production can be used in fuel cells. Methane gas created by landfill sites can be extracted and converted to electricity.
Fuel Cells have been around for a long time. It is reported that Welsh Physicist William Grove developed the first fuel cells in 1839 and published it in the Philosophical Magazine and Journal of Science. [[GE]], NASA and McDonnell Aircraft used a fuel cell in the Gemini space program. Fuel Cells created by UTC Power (NYSE:UTX) were also used in the Apollo missions and the Space Shuttle Program.
Fuels cells are being used in dozens of applications. These include primary and backup power for buildings and cell phone towers, powering buses, forklifts, trucks and cars, submarines, and small electronic devices.
Many types of fuel cells are being developed. Generally, fuel cells have an anode, cathode and electrolyte, but the material and construction used in those components can widely vary. In general the result is the same: fuel is consumed, water or carbon dioxide is created, and an electric current is the result. The most common fuel is hydrogen, but some fuel cells can convert or reform other fuels to hydrogen as a secondary step.
Some high profile commercial failures in the last ten years have scared off investors. It seems that hype got a few years ahead of the commercial reality of fuel cells. Fuel Cells are still developing, and many depend on government incentives and regulation to spur demand.
In its recent report, Pike Research stated:
While fuel cells for transportation applications have received the most attention from the media, the real driver of the industry is the stationary fuel cell sector. In 2010, fully 50% of all fuel cell systems shipped were for stationary applications. Certain big-ticket markets, such as residential, are already seeing shipments in the tens of thousands. A number of early adopter sectors have emerged, including residential units (particularly in Japan), power for both grid-connected and off-grid mobile telecommunications base stations, and combined heat and power (CHP) plants for a variety of markets, including hospitals and hotels.
Stationary power seems to have the most widespread momentum, with a big push by countries and states to get to renewable energy. The US government will rebate 30% of the system cost, plus an additional 30%-50% rebate is offered in several states. Privately held Bloom has installed stationary power systems for several high profile companies including Google (NASDAQ:GOOG), EBAY , Adobe (NASDAQ:ADBE) and AT&T (NYSE:T), Pacific Gas & Electic and Southern California Edison. Also the Delaware Public Service Commission is allowing [Pepco Holding’s (NYSE:POM) subsidiary] DelMarva to charge all ratepayers a $1.34 surcharge to fund a 30 megawatt project, Bloom’s largest project to date by far.
In another example FuelCell Energy (NASDAQ:FCEL) has had a big boost from the S.Korean government which has put in regulations encouraging renewable fuel generation. We discussed FCEL in an earlier article.
AFC Energy Plc is in the early stages of production of stationary power units that are designed to run using waste Hydrogen. The alkaline style of fuel cell is expected to be cost competitive with the conventional diesel and gas turbine generators, plus have the bonus of using energy more efficiently than diesels and gas turbines even at various load levels. Alkaline Fuel Cells have been used in space exploration and military vehicles.
Although unsubsidized costs per kw-hr for stationary power fuel cells may not yet low cost grid generation alternatives like nuclear, their eco attractiveness along with government incentives could be enough to support growth of the industry for the next decade. Large corporations wanting to polish their eco image are already buying in California, but we expect more purchases from a variety of sources including utilities, hospitals and governments buyers at all levels.
While most fuel cell makers are targeting business customers, a private company, ClearEdge Power is targeting a refrigerator sized box to both homes and small businesses. The unit will provide five kilowatts of power plus 20,000 BTU's of thermal heat. A February CNET report said that the company has sold about 200 units in California. However, Japan's JX Nippon Oil & Energy Corporation (OTCPK:JXHLY) is the unchallenged world leader in residential fuel cell research at this point, and has been producing 5,000-8,000 units per year since 2009.
Power for cell phone towers is getting a lot of attention from fuel cell makers. IdaTech plc based in Oregon, just announced that T-Mobile in California, recently installed its ElectraGen™ ME Fuel Cell System on its network. The system runs off a liquid fuel mixture of bio-methanol and de-ionized water.
Ballard Power (NASDAQ:BLDP) is also targeting the cell phone tower market with their Dantherm power division.
Fork Lift Trucks
Fuel Cells for fork lift trucks is proving to be one of the first commercial winners, even without the presence of government purchase incentives. Major food distribution centers like Sysco and Walmart are already putting fuel cells to work in vehicles. Plug Power (NASDAQ:PLUG) is the current leader in this application, replacing the existing batteries with a compatible hybrid unit. With about 1,000,000 lift trucks in operation the US alone, the market looks like a winner, and Plug has doubled its shipment volume every year for the last three years. The business case makes sense for buyers, and it reduces carbon emissions at the same time.
Fleet vehicles like buses are being tested in many places around the world. Fuel Cell buses are still more expensive than diesels; however governments around the world seem willing and even eager to provide incentives for fuel cell trials. Ballard Power’s filings mention several bus power projects underway. Fleets for local use, (such as city buses) can install their own hydrogen filling stations.
Significant sales of fuel cells for cars are not likely until later this decade. Although we’ve see several concept projects, Daimler is not launching its first production fuel cell car in 2015. Wide availability of Hydrogen filling stations is a requirement, will likely happen in Germany first. Honda (NYSE:HMC) and Daimler have had major fuel cell car demonstrations and Daimler plans production fuel cell cars for 2014.
According to a recent report from Pike Research, 4.5 million PFCs for portable electronics will be shipped in 2017, representing a compound annual growth rate of 237% over the next six years. A typical application for portable fuel cells is an external battery charger. Military applications are likely to fund a lot of research in portable fuel cells.
Many fuel cell developers are private, like Bloom Energy, or part of large conglomerates or vehicle manufacturers like UTC, JX Holdings or Daimler. A small number of public pure play companies exist. Although none is currently profitable, Plug Power, Ballard Power and FuelCell Energy are three that have the potential to reach profitability in the next year or two.
Disclosure: I am long PLUG.