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    Wednesday, February 13, 2013


    The Fuel Cell and Hydrogen Industries: 10 Trends to Watch in 2013 and Beyond

    Kerry-Ann Adamson, Lisa Jerram and Mackinnon Lawrence, 1Q 2013 (Pike Research/Navigant)


    The fuel cell and hydrogen industries had a dynamic year in 2012. As Pike Research forecast in the 2012 iteration of this white paper, the year was marked by restructuring, the increased rollout of new business models, a sharp increase in sales and interest in the residential combined heat and power (resCHP) market, and overall revenue generation of over $1 billion.

    Today, at the start of 2013, Pike Research is looking at a fresh new page and presenting the top 10 trends for the next 12 months. The trends in this white paper were generated by drawing together information from Pike Research’s body of research on the fuel cell and hydrogen markets and its industry involvement. Note that due to the emerging nature of the industries, one of the trends is the same as for 2012.

    The 10 key trends for 2013, in no particular order, are:

    » Annual installed capacity from the stationary fuel cell sector will top 200 megawatts (MW)

    » Funding pace for hydrogen refueling stations will increase in Europe and Asia Pacific

    » An increasing number of companies will nudge toward overall profitability

    » Private equity and corporate investments from Russia, South Africa, and Asia Pacific will rise

    » Independent power producer (IPP) and energy service company (ESCO) partnerships with utilities will increase (also one of Pike Research’s top 10 trends in 2012)

    » Global revenue from the fuel cell sector will exceed $2 billion

    » Platinum and palladium shipments into the fuel cell industry will increase

    » The strongest shipment increase will occur with islanding-capable systems

    » Market penetration for fuel cell vehicles will remain low

    » Progress in the portable fuel cell sector will remain slow

    10 Key Trends in the Fuel Cell and Hydrogen Industries

    1. Annual Installed Capacity from the Stationary Fuel Cell Sector Will Top 200 MW

    In 2012, the stationary fuel cell industry experienced both growth and a period of deep restructuring. Megawatts shipped between 2009 and 2012 grew at a compound annual growth rate (CAGR) of 47%, with 160 MW of stationary fuel cell power shipped in 2012. New installed capacity will more than double in the stationary fuel cell sector in 2013. For the first time, annual installed capacity in the sector will top 200 MW.

    The key development in the market in the last year has been the sharp increase in market demand created by government policy. Table 2.1 shows the countries that have created direct or indirect policy affecting the stationary fuel cell market.

    Together, these policy instruments represent a market potential of over 3 gigawatts (GW) in 2013, increasing to over 50 GW by 2020. Pike Research defines the two types of policies as follows:

    » Direct policy includes all policies that specifically mention stationary fuel cells. An example of this is the Renewable Portfolio Standard (RPS) in South Korea, where fuel cell adoption receives double credits.

    » Indirect policy does not specifically mention fuel cell technology, but does affect the relevant markets. Examples include policy for distributed generation and policy that requires the increased resilience in off-grid power for the telecom towers markets.

    Due to increases in government policies, decreases in costs, and increasing market demand, Pike Research forecasts that capacity shipments in the stationary fuel cell sector will reach 275 MW under the business-as-usual scenario in 2013.

    2. Funding Pace for Hydrogen Refueling Stations Will Increase in Europe and Asia Pacific

    The pace of funding for the design and rollout of hydrogen refueling stations will pick up in 2013, especially in Asia Pacific and Europe. Strong interest in hydrogen refueling stations was apparent in 2012. Japan, for example, released subsidies in 2013 to kick-start the building program of hydrogen refueling stations. Called “Subsidy for Hydrogen Supply Facility Preparation,” the Japanese government has set aside a war chest of $0.5 billion for 2013. The program will provide for half a station construction cost. With stations also planned in the United Kingdom, Germany, the United States, and Canada, Pike Research expects to see a flurry of activity in 2013 in preparation for the 2015 rollout of fuel cell vehicles.

    The other interesting aspect of this trend is the continued development of different concepts for a hydrogen refueling station. Projects such as ITM Power’s Hydrogen On-Site Trials (HOST) have shown the technical feasibility of onsite hydrogen creation and orders for Hydrogenics’ electrolyzer systems have increased. Thus, Pike Research anticipates a sharp rise in the number of hydrogen refueling stations in 2013 that produce hydrogen onsite rather than transporting it from another site.

    3. An Increasing Number of Companies Will Nudge toward Overall Profitability

    In 2012, fewer than five companies were selling a fuel cell system at a profit. Fewer than four companies were earnings before tax (EBITDA) profitable and none were making an overall profit. By contrast, in 2013 Pike Research expects an increase to almost 15 companies with profit per system sold, an increase in the number of companies making EBITDA profit, and the first overall profit-making fuel cell company.

    4. Private Equity and Corporate Investments from Russia, South Africa, and Asia Pacific Will Rise

    In 2012, investments in fuel cell technology from Russia surged. The major deals included:

    » RUSNANO invested $25 million, out of a $60 million funding round, in Lilliputian. The strings attached to the deal are that Lilliputian will open an office in Russia and undertake some research and development (R&D) there.

    » Ervington Investments, owned by Russian oligarch Roman Abramovich, made a £8.7 million ($13.96 million) investment in U.K. fuel cell firm AFC Energy and then bought a 10% stake in Waste2Tricity (to which AFC Energy is also related). Ervington investments has the right to place two directors on the AFC Energy board.

    » I2BF, a Russian venture capital fund, increased its investment in ACAL Energy, a U.K. fuel cell component manufacturer.

    Pike Research’s analysis highlights two key points in these deals:

    » Technology transfer and cross-pollination of R&D between Russian fuel cell and electrolyzer scientists and their colleagues in Europe and North America is likely to increase – especially in the alkaline fuel cell (AFC) sector.

    » Palladium is increasingly being used in conjunction with platinum for fuel cell catalysts. It is known that the palladium industry, headed by Norilsk Nickel, is looking at the fuel cell industry for a potential new high-volume market for the metal. With Abramovich holding a 5.87% stake in Norilsk Nickel, collaboration could increase between Russian investors, the palladium industry, and the fuel cell industry.

    For 2013, Pike Research expects to see continued strategic interest from Russian investors in fuel cell companies, especially those developing systems that could use palladium. Moreover, there is strong potential to see investment in alkaline electrolyzer firms. Pike Research also expects South African firms to use their links with the platinum industry and increase their investment into the (high temperature) polymer electrolyte membrane ([HT] PEM) fuel cell and PEM electrolyzer sectors.

    5. Independent Power Producer and Energy Service Company Partnerships with Utilities Will Increase

    Independent power producer (IPP) and energy service company (ESCO) partnerships with utilities will continue to be a key trend in 2013. (Note that in the United States, an IPP is also known as a non-utility generator [NUG].) In other words, the number of IPPs and ESCOs leveraging fuel cells for baseload power production will increase in 2013. The benefits of this form of relationship are clear for utilities in that it de-risks any use of new technology and they can specify, in the form of buyout rates, the price they will pay for the power.

    6. Global Revenue from the Fuel Cell Sector Will Exceed $2 Billion

    In its 2012 iteration of this white paper, Pike Research stated:

    “Pike Research forecasts that the combined revenue of the fuel cell industry and demand for hydrogen from fuel cells and internal combustion engines (ICEs) will reach $785 million globally in 2012.”

    Initial data shows that during the 2012 calendar year, the combined industries generated revenue of more than $1 billion. Note that this figure came from sales of fuel cells and hydrogen systems and does not take into account any R&D funding a company received.

    For 2013, Pike Research forecasts that revenue will jump again to more than $2 billion in one year. As can be seen in Chart 2.2, which includes historical data from 2009, stationary fuel cells will generate the lion’s share of this revenue at more than $1.5 billion.

    7. Platinum and Palladium Shipments into the Fuel Cell Industry Will Increase

    The development of relationships between the platinum and palladium industries and the fuel cell and electrolyzer industries will be quite interesting in 2013. It is known that platinum loadings in low temperature fuel cells are going down and are now below 0.2 gPt/kW. However, due to the growth in shipments and the increased collaboration between the two industries, Pike Research expects that in 2013 there will be a sharp rise – albeit from a low base – of platinum and palladium shipped in the fuel cell and electrolyzer industries.

    8. The Strongest Shipment Increase Will Occur with Islanding-Capable Systems

    Due to the impact of continued black swan events, a sharp increase has occurred in the development of fuel cell systems that are married with energy storage to provide islanding capability. This is different from black-start capability, which is when a system can start without any network connection or, in simpler terms, start to produce power from cold during a grid blackout. Interest is increasing in enabling systems that are already running to continue to run during grid-level power outages.

    In 2013, Pike Research anticipates a year of policy redirection with government-level encouragement for the development and deployment of systems with islanding capability. Companies that already have this capability in place are ahead of the curve and will see strong order books for 2013. Overall, in the stationary fuel cell sector, Pike Research forecasts that systems with islanding capability will experience the strongest increase in shipments.

    9. Market Penetration for Fuel Cell Vehicles Will Remain Low

    Although large amounts of publicity and interest will be generated in niche fuel cell vehicles, the reality is that mass-market penetration by these vehicles is still down the road a bit. Unlike the rollout of fuel cell light duty vehicles, which is still on target for 2015, the niche transport sector is falling some way behind. Fuel cells for recreational vehicles (RVs) and forklifts are selling, but are not enough to pull this sector into the mainstream.

    Outside of RVs and forklifts, the marine sector is gathering an increasing number of press column inches. With fuel cell ferries being developed or launched in the United States, the United Kingdom, and Turkey, the attendant press machine is creating a somewhat false illusion that the technology is closer to the mainstream than it actually is and of its normalization in the short term. Since a large number of technical and regulatory barriers have yet to be dismantled and removed, a mass market for the marine sector is still some time away.

    Trains and light rail systems, which are among the more practical of the many applications for fuel cells, seem to have ground to a halt. Again, they continue to gather press interest, but without a significant jump-start, they risk remaining a micro-niche in 2013 and beyond.

    10. Progress in the Portable Fuel Cell Sector Will Remain Slow

    The portable sector in 2013 will continue to be the unloved child of the fuel cell industry. Although Lilliputian gathered significant press coverage for the launch of its Nectar at the 2013 Consumer Electronics Show, it is still a limited run, expensive gadget that is for sale only in the United States. It joins the myFC PowerTrekk, the Aquafairy AF-M300, and the Horizon MiniPak, all selling into this space.

    While useful, it is clear that none of these systems have a unique selling point that is strong enough to challenge the existing paradigm. Therefore, Pike Research forecasts that sales will remain marginal overall. If one of these companies is able to produce a system that can charge a laptop, then it could be “game on” for the portable fuel cell sector.


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