Market

There are three types of stationary fuel cell markets: utility, campus, and residential.  Growing demand for energy and the deployment of alternative energy saving and generation technology is creating a market for fuel cells.  Fuel cells are expected to be one of the main utility and residential stationary power sources within ten years. Market factors of economics, energy independence, and environmental concerns are driving the development of the fuel cell industry. Stationary fuel cell markets are poised for rapid growth.

The trials have been completed products are ready for use in real situations.

In 2001 utility markets accounted for 81% of stationary fuel cell shipments, but this percentage drops to 37% by 2007. In 2001, campus fuel cell applications accounted for the remainder of the market, 19%. By 2007, campus fuel cell applications account for 50% of shipments.  Residential fuel cell shipments were not at a level where they could be counted in 2001, but by 2007, residential fuel cells account for 13% of the shipment dollars.  Total stationary fuel cell markets at $45.2 million in 2001 are expected to reach $11.4 billion by 2007

Commercial demand for fuel cell products and services, including revenues associated with prototyping and test marketing activities, will increase nearly sevenfold to $2.6 billion in 2009. By 2014, those revenues are expected to reach $13.6 billion as a number of viable markets for fuel cells are projected to develop during this time period, while advances and economies of scale help drive costs down to competitive levels. World fuel cell spending (including research and development funding and investment in fuel cell enterprises, in addition to commercial sales) will more than double to $10.8 billion in 2009.

Application

Electric power generation is emerging as the first large-scale commercial application for fuel cells and will account for more than half of global product and service demand through 2014. However, portable electronics applications are projected to register the strongest gains over the next 10 years, rising from what are now extremely low levels of demand to become the second largest fuel cell market. Fuel cell-powered industrial stationary and motive power equipment will achieve some commercial success as well.

Motor vehicle-related fuel cell demand is potentially huge but has not yet lived up to its potential, constrained by technical and infrastructure-related issues, as well as by high cost barriers. Nevertheless, the use of fuel cell vehicles in government and commercial fleets will provide some impetus to market growth through 2014, as automakers continue to invest in demonstration and test marketing programs. Proton-exchange membrane (PEM) fuel cells, which currently account for more than half of world commercial demand, will maintain their dominant position through 2009 and beyond.

With a few notable exceptions (such as China), future demand for fuel cell products and services will largely be concentrated in geographic areas where pre-commercialization activity has been concentrated - the United States, Canada, parts of Western Europe and Japan. Applications that are the most amenable to the use of fuel cells tend to be highly evolved in economically advanced countries such as these, and sufficient amounts of wealth exist in these nations to allow them to invest in fuel cells, as costs are likely to remain high for at least the initial generations of commercially viable systems. Fuel cells also are expected to find some use as a source of electricity in developing countries with inadequate central power grids.

Unlike power plants that use conventional technologies, fuel cell plants that generate electricity and usable heat can be built in a wide range of sizes from 200 kW units suitable for powering commercial buildings to 100 mW plants that can add base load capacity to utility power plants. By 2010, an estimated 130 gW of new generating capacity will be installed in the U.S. In world markets and within a much closer time frame, nearly 550 gW of generating capacity will be added. Fuel cell commercialization opportunities in the U.S. market are focused in several large-scale areas: re-powering, central power plants, industrial generators, and commercial/residential generators.

With commercialization of most of the fuel cell technologies rapidly falling in place, this market is expected to have a steep increase to an estimated $2.4 billion by 2005, an AAGR (average annual growth rate) of more than 61.7%.

With the technology’s extensive use in the vehicle market, proton exchange membrane fuel cell sales have become the dominant version in the market, bringing 2000 sales of $104 million up to $1.6 billion by 2005. Once the largest selling fuel cell version, solid oxide fuel cell (SOFC) sales declined sharply in 2000, to $54 million from $166 million in 1999, because the 1999 sales were made up of demonstration projects to prepare for commercialization. Several SOFC technology configurations are under development in the U.S. for possible stationary power, defense, and transportation applications. SOFC technology configurations are solid state and operate over a wide range of temperatures. With commercialization, solid oxide sales are expected to rise at a 36.9% AAGR to $260 million.

As the fuel cell technology most suitable for large-scale applications, such as industrial and municipal power, molten carbonate fuel cell sales have been limited to the few demonstration projects undertaken so far. But commercialization of the technology should bring 2000 sales of $25 million up to $450 million by 2005, an AAGR of about 78.3%.

The most commercially mature fuel cell technology, phosphoric acid continues to enjoy steady sales. The 250 kW rail car sized machine are bring used in urban areas where more power is needed but space is at a premium. It is also being used to capture methane from landfills and convert that to electricity and heat. Since only one company produces these generators, BCC expects 2000 sales of about $20 million growing at a comparatively cooler 11.8% AAGR to about $36 million in 2005. The cost of a 250 kW PAFC installed is about $850,000.

U.S. Sales of Fuel Cell by Type, 2000-2005 ($ Millions)

State of the Technology

Alkaline fuel cell technology, the first to be applied to space technology, but which was once severely limited by cost, has had a boost in interest and sales with a recently lowered per-kilowatt cost. Still limited in application, alkaline fuel cell sales totaling about $15 million in 2000 will grow at nearly 14.9%, on average annually to about $30 million in 2005.

A unique and integrated fuel cell power system is aimed directly at low output applications where smaller internal combustion engines (ICE) and batteries are the power source. These include personal transport and fleet type vehicles used in closed range environments (airports, amusement parks, golf courses, malls, delivery circuits).

Renewable energy is the only alternative for making hydrogen. Other sources of energy are more efficiently used directly. Natural gas should be used directly. Electricity is available in off peak hours to make some hydrogen. Otherwise, renewable sources are the most reasonable energy source for manufacturing hydrogen.

Fuel cells for buildings and homes might make good backup generators, but not daily energy sources. Hydrogen can be produced on Earth by water electrolysis. This process may be very efficient (in excess of 80%). There is always a catch. The process uses electricity. It therefore does not make much sense to use electricity to generate hydrogen to generate electricity.

The production of high purity hydrogen can happen via electrolysis for export. Hydro-electricity is generally an attractive way to achieve power sources. The achievement of transporting the electricity efficiently over long distances is perhaps a more effective means of using hydropower than of converting the hydro power to manufacturing hydrogen.

The time scale of the market broadening for natural gas in the motor vehicle sector strongly depends on the build-up of a refueling infrastructure. Favorable conditions for alternative energy sources are expected to encourage vehicle production and consumer acceptance.

Over the longer term, the chemistry of fuel cells will be studied and mastered. At that time, renewal sources of energy including wind and solar power will be converted to hydrogen for use in the fuel cells. The high cost of the catalyst platinum is one of several deterrents to rapid implementation hydrogen infrastructure. Natural gas is an interim technology that can be used in local filling stations to manufacture hydrogen should that become economically attractive.

Renewable energy as a fuel source for hydrogen manufacture is what scientists think is needed. Infrastructure investment at $247 million in 2005 is expected to reach $25.2 billion by 2013. In this manner the global economy can evolve.

Estimated potential for the main alternative fuels by 2020: biomass derived fuels 15%, natural gas 10%, LPG 5% and hydrogen a few per cent.

Commercialization of fuel cells for transportation relate to making vehicle fuel cells cost competitive. Challenges are low-cost infrastructure, range, and power density. Cost reduction, component integration, complexity reduction, and increasing safety are needed.

Innovative changes in vehicle design and materials to reduce vehicle weight and improve aerodynamics will benefit fuel cell vehicles as well as conventional vehicles. The use of platinum is a central issue. Platinum is used in the core of the PEM fuel cell that is used for transport. The price of the core has to be drastically reduced for fuel cell vehicles to be viable. A unique and integrated fuel cell power system is aimed directly at low output applications where smaller internal combustion engines (ICE) and batteries are the power source. These include personal transport and fleet type vehicles used in closed range environments (airports, amusement parks, golf courses, malls, delivery circuits). Two and three wheeled scooters represent a target market. Stationary, marine and portable power applications are a target market. Hybrid and personal power represent the most likely avenue for fuel cell vehicular development. People will begin to own more than one vehicle. The personal vehicle will provide for moving around a local region, back and forth to work and around town to activities and stores. These personal vehicles will be very comfortable with music and good seating. The will be good for fuel cells because they will be small and suitable for one or two people at the most. Not much power is needed as the speeds are slow and the pickup not demanding. Major issues affecting the commercialization of hydrogen fuel cell automobiles are the cost of the fuel, building of requisite fueling infrastructure, and vehicle range. Range is limited to on-board storage ability. A hydrogen economy is a challenge that transcends the ability of industry and depends on governments to deliver necessary infrastructure. The capacity of the individual major stakeholders is limited to providing components of the fuel cell and hydrogen economy.

Governments exist to create infrastructure that is useful to the culture sustained within national borders. There are significant infrastructure investments that need to be made to make fuel cells a reality. These are the task of government. Table 3- illustrates fuel cell infrastructure investment needed.

The cost of new infrastructure for fuel cell refueling raises from $2 billion per year initially to $21 billion per year by 2010. This cost will likely be borne by governments as well as private industry. Market growth depends on $5 billion infrastructure investment in local hydrogen manufacture for fuel cells. It represents an environmentally sound investment in environmentally clean fuel. It further represents a very sound business investment that will reap enormous returns for the investors over many years.

Total vehicle fuel cell markets for autos at $772.7 million in 2007 will grow to $98 billion by 2013. Commercial introduction means that auto, bus, and truck segments will grow. Cars that use fuel cell systems are evolving sophisticated capability. By the end of the forecast period, trucks are expected to account for the largest portion of spending.

Natural gas appears to be the fuel of choice for fuel cell hydrogen. Natural gas can be used to make hydrogen. Natural gas is ubiquitous.

Market Leaders

Shell Hydrogen appears to have the lead in developing fuel for fuel cells. Other market participants appear to have promising technologies. Shell Hydrogen, Hydro-Quebec, and Gesellschaft fur Elektrometallurgie (GfE) have established a joint venture for developing, manufacturing and marketing hydrogen storage products. Gesellschaft fur Elektrometallurgie (GfE) is a German alloy company. The partners are convinced that metal hydrides provide the best means of safely and reliably storing hydrogen.

There is a vast difference between the cost of a refueling station for natural gas conversion to hydrogen and methanol as illustrated hereafter -- $1.2 million for natural gas versus $68,000 for methanol in 2005.

However, the natural gas route just takes capital. Once the refueling infrastructure is built, fuel cells will take hold in the market.

The cost of these natural gas refueling depots at $1.2 million each in 2005 is expected to drop to $300,000 per station by 2011.

The Future of the Market

Global demand for vehicles using alternative fuels is expected to be 170,000 units by the year 2002, up from 16,900 units sold in 2001. Fuel cells will replace all alternative fuels by 2005. Fleet vehicle markets will evolve first.

Vehicle fuel cell markets at $40.5 million in 2005 represent the beginning of commercial introduction of cars that use fuel cell systems. Markets are expected to reach $8.5 billion by 2011.

Commercialization challenges for the automotive fuel cell industry relate to making vehicle fuel cells cost-competitive with existing gasoline engines. The most difficult challenges are low-cost infrastructure, range and power density. Other challenges include cost reduction, component integration complexity reduction and increasing safety.

Transportation: The Next Generation

The internal combustion engine has had a successful life as the power plant of choice for the millions of vehicles produced worldwide since the turn of the 19th century. It remains the primary power source today, but its future is becoming less certain as environmental concerns, burgeoning populations and dwindling petroleum supplies combine to force industry to look ahead to something else. Like the steam engine that preceded it, the internal combustion engine is destined for extinction.

Relentless increases in electrical power requirements for industry, home consumers and the military are stretching the practical limits of existing power generation systems. Many fixed systems are nearing the end of their useful lives. The need for a new power generation technology that is efficient, quiet and nonpolluting is clear. The fuel cell in its various forms appears to be a viable answer. Technological advances indicate that a fuel cell can generate required levels of power over a wide range of stationary and mobile applications.

US fuel cell demand will grow tenfold to $1.1 billion in 2008 as technology and economies of scale lower costs. Electric power generation is emerging as the first big market, to be followed by portable electronics. Proton-exchange membrane (PEM) types will remain dominant. Fuels will outpace other products and services, with methanol and natural gas leading gains.