The fuel cell sector posted a third year of steady growth in 2017.
The latest Fuel Cell Industry Review by London-based consulting firm E4tech estimates that megawatts shipped rose to 670 megawatts this year, marking a 30 percent year-over-year increase.
Factoring in market expansions of 73 percent in 2016 and 61 percent in 2015, fuel cell industry volumes have more than tripled over the past three years. They could rise again by half in 2018, with an estimated 335 megawatts of additional shipments, reaching the 1,000-megawatt level for the year.
These volumes and growth rates are consistent with those seen in solar and wind in earlier decades; this year’s 670 megawatts of fuel cell shipments compares favorably with 454 megawatts for solar PV in 2002 and 500 megawatts for wind in 1994.
Profitability, however, remains a work in progress.
Recent growth has been driven by proton exchange membrane (PEM) fuel cells, which now represent almost three-quarters of megawatts shipped. Solid-oxide fuel cell (SOFC) shipments stood at 76 megawatts, dominated by Bloom Energy’s data center business. Phosphoric acid fuel cells (PAFC) grew to 81 megawatts last year, leveraging strength in South Korea. PAFC technology has found a niche in data centers, generating on-site electricity and pumping the oxygen-depleted fuel cell exhaust into buildings for preventative fire protection.
The success of PAFC has been partly at the expense of molten carbonate fuel cell (MCFC) technology, which has retrenched in recent years, but could rebound in 2018. Alkaline fuel cells (AFC) and direct methanol fuel cells (DMFC) represent a very small proportion of shipped megawatts.
Source: Fuel Cell Industry Review 2017
Early learning-curve trends
Learning-curve effects have catalyzed the growth of wind and solar, as they have done for many industries. Cost reductions enlarged the addressable market, enabling increased production, the gross profits from which financed further cost-reduction efforts.
In a September presentation, Bloomberg New Energy Finance pegged the learning rate (the cost decline per doubling of cumulative production) for wind energy and batteries at 19 percent and for solar energy in the 24 to 28 percent range.
At its December 6 investor and analyst conference, Latham, New York-based Plug Power reported a historical learning rate of 25 percent. Management expects to reduce costs 40 percent in the next five years -- roughly what would be expected from a quadrupling of cumulative production.
Startups sometimes make overly aggressive forecasts, but blue chip companies are less prone to doing so. Toyota has also signaled dramatic cost reductions. The Mirai fuel cell system was reported to cost $50,000 in 2015 at a production volume of 3,000 units per year. Toyota’s next-generation fuel cell system has a significantly lower cost target of $13,000 to $17,000 in the 2020 timeframe, with rumored target volumes of 30,000 units per year.
While achieving further cost reductions will be difficult, Toyota still aims to make its fuel cell system as cheap as a gasoline hybrid system by 2025. Judging by today's price differentials between hybrid and non-hybrid vehicle models on the Toyota website, the sticker price premium for a future fuel cell car could be in the $3,000-$4,000 range.
Significant cost reductions seem plausible, given that the key components in fuel cells tend to be low-volume specialty materials. In the case of the PEM technology used by both Toyota and Plug Power, the platinum catalyst and carbon fiber gas diffusion media are unique to the sector. At current volumes, overhead costs per unit for suppliers’ fuel cell divisions remain significant. As production increases, these costs can be spread across more product volume, bringing costs down independent of process and technology improvements -- which, of course, continue.
The rise of China
More than 90 percent of the megawatts of fuel cells shipped in 2017 will be split, roughly evenly, between North America and Asia. While 2,100 fuel cell electric vehicles are expected to be sold in the United States, the Fuel Cell Review estimates that China will have deployed 2,500 fuel cell trucks and buses by year’s end, with a comparable number of vehicles awaiting final assembly.
These are overwhelmingly battery electric vehicles for which a small (30-kilowatt) fuel cell is used as a range extender. This allows for the use of a smaller battery, providing weight and cost savings.
Fuel cells enjoy policy support from national and regional governments in China; Shanghai aims to host 3,000 fuel cell vehicles by 2020. This has filtered down to the private sector, with China’s fourth-biggest battery-electric bus manufacturer Zhuhai Yinlong anticipating the integration of fuel-cell range extenders into 20 percent of its buses by 2020.
While Chinese fuel cell vehicles currently use internationally produced membrane electrode assemblies for their PEM fuel cells (most notably from Canadian firms Ballard and Hydrogenics), local companies are developing their own aggressively priced designs. As these improve, they will pull prices down, similar to what happened in the solar sector as Chinese production ramped. While this would hasten fuel cell costs down the learning curve, facilitating sector growth, it could put existing suppliers in a precarious position.
Looking to 2018
In their earlier years, both the wind and solar PV sectors saw uneven growth, as the earlier comparison shows. The same is likely to prove true for fuel cells.
A variety of factors should help the fuel cell sector exceed this year's 30 percent growth rate in 2018, but growth could also slow until 2020, according to certain corporate timelines.
PEM fuel cell technology is the first technology to begin to scale, with reason to believe solar industry-level learning rates could apply for several more years. The novelty of the materials used in other fuel cell technologies suggests that these too could achieve aggressive learning rates, if they find sustained growth.
And then perhaps -- just perhaps -- we’ll be able to talk about fuel cell company profits.
Matthew Klippenstein heads Electron Communications, a cleantech-centric consultancy, and is a contributor to this year’s Fuel Cell Industry Review. He chronicles the Canadian electric car market for GreenCarReports and co-hosts the CleanTech Talk podcast. He does not own shares in or conduct business with any of the companies listed above, but previously worked for Ballard Power Systems.