This piece was originally published in the January/February 2019 issue of electroindustry.
Garry Golden, Futurist, Forward Elements
Mr. Golden consults on issues shaping business and society in the 21st century.
For years, fuel cells have been a disruptive technology that failed to meet expectations.
The technology gained popularity in the late 1990s as Ballard Power stocks went up and down with the dot-com boom and bust. Since the early 2000s, fuel cells found narrow success in remote power systems for telecommunications networks and as an uptime-focused solution for electric forklifts. Current industry headlines indicate that the sector is finally expanding confidently toward widespread adoption around stationary power in micro combined heat and power (mCHP), microgrids, and electric vehicles (EVs).
In 2016, the size of the global fuel cell industry was $3 billion. Grand View Research estimates the industry will grow at a compound annual growth rate (CAGR) of 20.9 percent in the next few years into a $25 billion sector by 2025. In 2018, the industry saw significant capital investments for expanding manufacturing output and production automation equipment to meet high- volume orders. Much of this change has been driven by China’s ambitious plans to expand fuel cells and hydrogen as a key part of its energy transition.
Fuel Cell Fundamentals
Fuel cells are solid-state energy appliances that convert chemical energy into electricity with heat as a byproduct. Fuel cell types are based on their membrane architecture and operating temperatures. Two are particularly relevant for electrical and power systems:
- Proton-exchange membrane (PEM) fuel cells use pure hydrogen as the feedstock. They operate at lower temperatures, giving them quick start capabilities that are versatile across applications in EVs, off-grid/backup power, and smaller portable systems (e.g., powering laptops).
- Solid oxide fuel cells (SOFC) are more tolerant of carbon-rich feedstocks such as natural gas, propane, and renewable gas. Low-temperature SOFC can be used as range-extenders in battery-powered EVs. Higher-temperature SOFC are ideal in stationary solutions.
The benefits of fuel cells include reliability, uptime, and clean operation with zero or near-zero emissions. With platforms that are modular and scalable, they provide an efficient use of capital for expanding system sizes from kilowatt to megawatt arrays. They allow producers to focus on automating manufacturing lines and lowering balance of power system costs.
The use of fuel feedstocks is equally compelling. Natural gas is clean and abundant with direct connections into many homes and businesses. Hydrogen beats batteries as an energy storage option that can provide high-volume and long- duration storage.
Let’s explore the latest use cases of fuel cells.
SIMPLIFIED DATA CENTERS
In 2013, Microsoft and the National Renewable Energy Laboratory partnered to radically rethink the notion of energy infrastructure inside massive data centers using fuel cells. In 2017, Microsoft announced the first gas-powered data center that integrated natural gas– powered SOFC directly above server racks.
This approach provides reliability, reduced costs when individual server racks are taken offline, and energy- efficiency gains by avoiding losses associated with transmission from centralized power plants.
SMALL-SCALE COMBINED HEAT AND POWER
Fuel cell manufacturers are positioning themselves as the preferred platform in small-scale mCHP systems that can achieve high-energy efficiencies of 75 to 90 percent by delivering electricity and heat for hot water systems that could augment or eliminate boiler-furnace systems.
Japan, the world leader with an installed base of close to 200,000 mCHP fuel cell systems, has set aspirational targets of one million residential systems by 2020 and five million by 2030. Europe’s EU PACE program recently passed a 1,000 mCHP installation milestone on its way to nearly 3,000 units by 2021.
Program manufacturers also are showing signs of aggressive growth targets. Solidpower will expand manufacturing capacity of its SOFC to output of 16,000 units per year beginning in 2020. Some of these units are being tested in small residential and commercial settings in the United States. In the Pittsburgh, Pennsylvania, area, Peoples Natural Gas is installing SOFC that will be based in 100 homes and small businesses in a service area with 740,000 customers.
Conflicts between electric utilities and natural gas providers, however, may surface with mCHP. Imagine a scenario where building owners use fuel cells connected directly to natural gas lines or propane tanks for all of their onsite electrical needs. This dynamic could challenge a pure electrical utility business model and encourage the convergence of gas and grid infrastructure inside the built environment.
GOODBYE, DIESEL GENERATORS
UK-based Intelligent Energy partnered with Taylor Construction Plant Ltd to develop a hydrogen fuel cell solution targeted at the construction industry. The PEM fuel cell provides rapid startup, quiet operation, and emissions-free power that make a compelling alternative to traditional diesel generators.
EVs: Recharge or Refuel?
Discussions of EVs’ future usually focus on the motor, not the battery. How we deliver electrons to that electric motor is a topic of intense debate. The long-game strategy for automotive OEMs is likely an EV platform that integrates fuel cells with batteries, creating a market where we refuel—not recharge—our electric transportation fleets.
Today, battery-powered EVs (BEVs) dominate early sales and capture media headlines that shape public awareness. Despite early success, this industry transition will take decades to unfold. Fuel cell EVs are likely to play a more dominant role over this longer time horizon. KPMG’s Global Automotive Executive Survey 2018 showed that leaders believe the integration of fuel cells with batteries will allow the sector to scale out the next hundred million EVs.
In the next decade, BEVs will continue to capture sales of affluent consumers and early fleet adopters. We will see mass-produced fuel cell EVs from Toyota, Hyundai, and Honda. Spurred by 10,000 pre-orders, Nikola Motors is building a $1 billion production facility in Arizona to mass manufacture fuel cell–powered Class 8 trucks. To support this transition, we saw significant commitments in 2018 from major players, including Air Liquide, Shell, and upstart Nel Hydrogen to build out refueling stations.
MarketsandMarkets™ estimates the automotive fuel cell market of 7,785 units in 2018 will reach a market size of nearly 270,000 by 2025 (a CAGR of 65.86 percent).5 China, however, is actively driving down cost curves for fuel cell vehicle power systems. In 2018, state-owned Weichai Power made equity investments in PEMs and SOFC to help meet its aggressive target of one million fuel cell vehicles by 2030.
Over the next decade, BEVs will dominate EV sales, with most owners recharging at home. We will see a scaling out of recharging networks and hydrogen fueling stations. There is a risk that the recharging station buildout is premature if fuel cell EVs emerge in the 2030s as the OEM choice for EV platforms. For now, the electricity equipment industry should consider a future that is fragmented with many types of EVs.
Slow Pace to Fast Change
The disruption of fuel cells may take 10 years to have an impact on our electrical energy systems, but we are now firmly in an early-growth stage of development for applications for transportation and stationary solutions for buildings and utility grids.
It is now time to imagine implications and plan for changes across our industry.
- Fuel Cell Market Size, Share & Trends Analysis Report By Product (PEMFC, PAFC, SOFC, MCFC), By Application (Stationary, Transportation, Portable), By Region, And Segment Forecasts, 2018 - 2025, Grand View Research, September 2016, https://grandviewresearch.com/industry-analysis/fuel-cell-market
- Ana Carolina Riekstin, Sean James, Aman Kansal, Jie Liu, and Eric Peterson, No More Electrical Infrastructure: Towards Fuel Cell Powered Data Centers, Microsoft, November 2013, https://www.microsoft.com/en-us/research/publication/no-more-electrical-infrastructure-towards-fuel-cell-powered-data-centers/?from=http%3A%2F%2Fresearch.microsoft.com%2Fapps%2Fpubs%2Fdefault.aspx%3Fid%3D203898
- Christian Belady and Sean James, “Redesigning Datacenters for an Advanced Energy Future,” Microsoft, September 24, 2017, https://blogs.microsoft.com/green/2017/09/24/ redesigning-datacenters-advanced-energy-future
- Global Automotive Executive Survey 2018, KPMG, 2018, https://assets.kpmg.com/ content/dam/kpmg/nl/pdf/2018/sector/automotive/global-automotive-executive- survey-2018.pdf
- “Automotive Fuel Cell Market Worth 268,786 Units by 2025,” PRNewswire, March 28, 2018, https://www.prnewswire.com/news-releases/automotive-fuel-cell-market-worth- 268786-units-by-2025-678142453.html