FC10T 12 Pike Research

7/30/2019 FC10T 12 Pike Research

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Kerry-Ann AdamsonResearch Director

Lisa JerramSenior Analyst

Anissa DehamnaResearch Analyst

The Fuel Cell and Hydrogen Industries:Ten Trends to Watch in 2012 and Beyond

Published 1Q 2012


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2012 Pike Research LLC.All Rights Reserved. This publication may be used only as expressly permitted by license from Pike Research LLC and may not otherwise be accessed or used, without theexpress written permission of Pike Research LLC.

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Section 1

EXECUTIVE SUMMARY

1.1 Introduction

The beginning of any year is an opportunity to take a step back and look at the largerpicture. More specifically, what are the key trends in the fuel cell and hydrogen industries?

This Pike Research white paper draws together information and analysis from our ongoingresearch in the global fuel cell and hydrogen markets and discusses our take on the tenkey trends in these industries. The ten key trends for 2012, in no particular order, are:

1. The resCHP market will gather momentum

2. Rhetoric and reality will diverge in the hydrogen energy storage market

3. Flight to third-party countries for manufacturing will increase

4. Hype will be followed by disappointment in the portable fuel cell sector

5. Interest in FCEVs will reemerge as the limitations of BEVs are realized

6. Buyouts and corporate investments in both fuel cells and hydrogen will continue

7. Remote sensing will be the 2012 breakout fuel cell market

8. Renewables, storage, and fuel cells will converge in the off-grid power market

9. IPP and ESCO tie-ups with utilities will increase

10. Fuel cell and hydrogen industries will generate $785 million in revenue during 2012

Note: Pike Research will publish a suite of reports analyzing these trends in depthduring 2012.


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Section 2

TEN KEY TRENDS IN THE FUEL CELL

AND HYDROGEN INDUSTRIES2.1 The resCHP Market Will Gather Momentum

Due to the increase in market pull and the number of products available, the residentialcombined heat and power (resCHP) market is experiencing annual double-digit growth.The small, stationary fuel cells used for resCHP systems typically range in power ratingsfrom 0.8 kW to up to 8 kW and provide on-site electricity and low-grade heat generation forthe home. In the fuel cell arena, the growth of the resCHP market in 2012 is increasinglybeing restricted by production capacity and the limits of available subsidies.

Chart 2.1 resCHP Systems by Technology Type, World Markets: 2010-2012

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2010 2011 2012

Fuel Cell

Non-Fuel Cell

(Systems

)

(Source: Pike Research)

Between 2010 and the end of 2012, the fuel cell resCHP sector is forecast to expand at acompound annual growth rate (CAGR) of 67.7%. However, if just one more manufacturercomes online during 2012, the CAGR could be as high as 82%.

In Pike Researchs 2011 white paper, Fuel Cell and Hydrogen Industry: Ten Trends toWatch in 2011 and Beyond, the number of companies moving from batch to continuousmanufacturing were highlighted. While this has happened in other areas of the fuel cellindustry, manufacturing has remained at best at batch level in the resCHP market. Thereason for this is that at present, the fuel cell resCHP sector (even though it is postinggains) is reliant on subsidies for adoption. Without subsidies, the adoption of resCHPsystems is very, very limited. The companies are therefore matching production to theamount of subsidies available. This will continue, to some degree, to hamper the rate of


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adoption in 2012. It is expected, though, that the subsidies available for adoption willincrease. Due to this factor and the expected system cost downs, 2012 could be the yearthat the fuel cell resCHP sector shifts from subsidy constraint to manufacturer constrained.

The key developments related to resCHP systems in 2012 are likely to be:

Energy service company (ESCO)/independent power producer (IPP) interest inworking with utilities to roll out resCHP will increase

Regulatory issues will bubble to the surface; grid interconnection and feed-in-tariffswill be two big ticket items

Interest from the U.S. Department of Energy (DOE) in resCHP will increase, butthere will be little shift in adoption

Pressure on R&D-based companies to come to market sooner than originallyplanned will increase

In terms of leading countries for the adoption of resCHP systems, the running order willremain Japan, South Korea, and Germany. Not only are these three countries the clearest

in terms of policy, but they are also the strongest in terms of local manufacturing bases.

2.2 Rhetoric and Reality Will Diverge in the Hydrogen Energy Storage Market

The storage of energy for minutes right up to seasonal shifts is increasingly becoming ahot topic, with 2012 shaping up to be a year of reality checks for the industry. Like manyother sectors before it, the energy storage market is facing something of a perceived landgrab. Indeed, a wide range of technologies for energy storage are marketing themselvesas the next big thing.

Hydrogen is very definitely in the mix of technologies that is taking part in this land grab.Over the past 18 months, the hydrogen industry has increasingly promoted itself as thefuture energy storage option of choice. The reality check here is that to date, hydrogenhas simply not been on the energy storage map, as is clearly highlighted in Chart 2.2.


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Chart 2.2 Cumulative Energy Storage Capacity by Technology, World Markets: 4Q 2011

Hydrogen, 1

Flywheel, 20CAES, 400

Lead/Carbon , 0

Flow Battery, 108

Li-ion, 49 NiCd, 26

Molten Salt, 150

NaS Battery, 324

Lead-Acid, 80Thermal, 1

New PumpedStorage, 30

Traditional PumpedStorage, 112,830

(MW)


Realistically, the three current market-proven options for grid-level energy storage arecompressed air energy storage (CAES), sodium sulfur (NaS) batteries, and pumpedstorage. At community and residential level, the picture is even narrower, as battery-basedtechnologies are the only option on the table. These technologies include flow batteries,which are sometimes mistakenly referred to as fuel cells due to their use of an electrolyte.

While Pike Research forecasts the market for energy storage (grid, ancillary services, and

community level) will reach $45.9 billion by the end of 2012, hydrogen will be unable tobreak into this market at a commercial level, except for very specificgovernment-sponsored programs or large integrated projects. One example of the latterthat is gaining a significant amount of press attention is the Performing Energy Alliance forHydrogen from Wind (PEAH), a grouping of 14 companies and organizations with the aimto show the viability of using hydrogen as a storage medium for excess renewable energy.

2012 will also see an increase in rhetoric from the hydrogen industry concerning thepositive benefits of using hydrogen as a storage medium. A key challenge for hydrogenproponents will be to develop models to accurately and fairly compare hydrogen to otherenergy storage technologies. However, if the vernacular of utilities and the energy storageindustry is not adopted, hydrogen will struggle to make inroads.


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2.3 Flight to Third-Party Countries for Manufacturing Will Increase

Along with an increase in manufacturing capability, Pike Research anticipates a number offuel cell companies will relocate (or co-locate) their manufacturing facilities outside of thecountry of the companies headquarters in 2012. It is important to note here, though, that a

repeat of the China syndrome, where companies rushed to open low-cost manufacturingfacilities in China, is not expected.

Rather, 2012 will see a more tactical market access approach, where a percentage ofmanufacturing, or product integration, is done in a third-party country. This flight ispredicated on a number of reasons, not just the cost of manufacturing. Additional reasonsinclude access to local government benefits for locally manufactured products, access to

job subsidies, partnership agreements, and reductions in the costs of transport in thesupply chain. Countries that are likely to see increasing gains in 2012 in terms of fuel cellmanufacturing are, in no particular order: Germany, South Africa, Taiwan, and Singapore.

The impact of this move to third-party countries is likely to be most keenly felt by advocatesputting forward arguments to government for industry support. The payoff is local, highquality, high value job creation. Job creation is increasingly being seen as an important

factor for government investment in new technologies. A company that is going abroad tomanufacture, with the majority of jobs created abroad, will likely see either an increase increative accounting (jobs figures being assigned to the country of the parent company, notthe country of manufacture) or increasing pressure to manufacture locally.

2.4 Hype Will Be Followed by Disappointment in the Portable Fuel Cell Sector

2011 was the year of the specter of Apple and possibly incorporating fuel cells intopersonal electronics. However, 2012 is likely to be a year of hype followed by a healthydose of disappointment.

During 2011, Apple was granted one fuel cell-related patent on the use of liquid metal infuel cell bipolar plates. Then in October and December 2011, Apple applied for a total offour other patents related to fuel cells for use specifically in MacBooks. The information

that Apple had applied for four patents led to many, many column inches on the tantalizingpossibility of a MacBook with the extra power durability offered by an integrated fuel cell.

In 2012, if these U.S. patents are granted, Pike Research fully expects to see the rumormill going into overdrive on potential product release dates.1 This, in turn, will lead to a(probably needed) dose of disappointment since the release dates of fuel cells integratedinto some form of personal electronics will likely still be some years away. With Toshiba,Canon, and Samsung all active in this sector but without a commercial product and nonews on roadmaps for release dates, the personal electronics fuel cell market will still bedominated by external battery rechargers in 2012.

1 From time of patent f iling to granting can anywhere from 18 months to 3 years, so the Apple patents may not be granted in 2012.


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Meanwhile, the likes of Powertrekk and Aquafairy will prove that these products can beuseful and attractive, as shown in Figure 2.1. While this means that the disappointmentwill be limited to the diehard tech heads, the myth that fuel cells are always ten years awaymay persist, with its attendant hindering of market development.

Figure 2.1 The myFC Powertrekk External Recharger Portable Fuel Cell

(Source: myFC)

2.5 Interest in FCEVs Will Reemerge as the Limitations of BEVs Are Realized

With the continued disappointment in the price of battery electric vehicles (BEVs) and a

rate of adoption lower than initially forecast, Pike Research forecasts that 2012 will start tosee a return of interest in fuel cell electric vehicles (FCEVs). Such interest will be seenmainly in regions that have been showing commitments to hydrogen infrastructure. Thismeans that Germany, Denmark, the United Kingdom, and Europe in general will showgreater interest in FCEVs than the United States.

Automakers have resolutely stuck to their forecasts of the initial rollout of FCEVs between2013 and 2015. Therefore, 2012 will be the year when increased movement related tostabilizing the supply chain and ramping up the PR machine should be expected. In termsof numbers of on-the-road FCEVs, however, 2012 will unlikely to see any rollout ofdemonstration trial vehicles.

A commercial rollout of FCEVs in 2015 will require the opening of a number of newhydrogen refueling stations. More than ten such stations will likely open. Each will have

the capacity to refuel over a thousand vehicles daily and will be centered on projectedareas of initial sales.


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The start of this trend of returning interest in FCEVs appearing has already been seen withthe launch in the United Kingdom of UKH2Mobility. This program includes the aim to:

Analyze in detail the specific U.K. case for the introduction of FCEVs and quantifythe potential emissions benefits

Review the investments required to commercialize the technology, including theneeded refueling infrastructure

This UKH2Mobility follows on from the German project of a similar aim, H2Mobility.

2.6 Buyouts and Corporate Investments in Both Fuel Cells and Hydrogen WillContinue

The fuel cell industry is in a very interesting period. It is (slowly) transitioning away frombeing primarily an R&D-based industry to becoming a commercial industry. As part of thistransition, normal industry consolidation is already being seen, with a number ofcompanies going out of business or selling of intellectual property (IP).

2011 saw a number of high-profile corporate buyouts, including some in the fuel cell

industry. The one that stands out is BICs buyout of Angstrom Power. The reason givenby BIC for this move is that it had been developing fuel cartridges for fuel cell for a numberof years and had seen a few synergies with Angstrom Power. Reading between the lines,Pike Research cannot help but wonder if this implies that BIC was looking to lock down itssupply chain before entering the market with a commercial product.

It is the supply chain that will likely see the most interest and activity during 2012/2013.According to Pike Researchs report, The Fuel Cell Stack Supply Chain: Opportunities andConstraints in Early Market Applications, only 70 companies with commercial productrelated to PEM fuel cells can be identified. The geographic spread of these companies for2011 is shown in Chart 2.3. For a large multinational wanting to enter a new product area,ensuring stability in the supply chain is critical.

Chart 2.3 Geographic Location of Commercial Supply Chain, World Markets: 2011

-

5

10

15

20

25

Membrane Catalyst MEA Suppliers Gas DiffusionLayer

Bipolar Plates Gaskets, Other,& Stack

Assembly

Rest of World

North America

Europe

Asia Pacific

(NumberofCompanies)



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Since more companies in the fuel cell industry are looking to roll out in volume, the lownumber of companies that manufacture the critical components is likely to lead to eitherdirect buys or IP buyouts. Either way, the supply chain will become increasingly stable.

2.7 Remote Sensing Will Be the 2012 Breakout Fuel Cell Market

Each year, Pike Research spots a number of markets that it classes as breakout markets.Breakout markets are those that have seen micro-adoption, often funded by government,and have proven externalities for adoption, but are now moving to having direct benefitsfrom adoption. In the past, breakout markets have included fuel cell forklifts andunmanned aerial vehicles (UAVs).

In 2012, Pike Research forecasts that the breakout market for fuel cells will beremote sensing (or remote monitoring). To put the size of this market in context, withinthe United States alone, more than 94,000 sites can be easily identified use remotemonitoring equipment in the low wattage range (suitable for fuel cell technology).

Apart from the potential applications listed in Table 2.1, there is also a secondary marketfor power to remote monitoring products such as road signs, portable speed cameras,

temporary traffic lights, etc. These products need only minimal power, in the low numberof watts, but require lengthy continuous runtime.

Table 2.1 Example U.S. Civilian Applications Using Remote Sensing Equipment

Type of Site Number of Sites

Weather Station 1,500

Wildlife Monitoring 3,000

Seismic Monitoring 7,000

Dam Monitoring 82,600


Although Pike Research does not forecast adoption in the high thousands in 2012, it doessee increasing interest in the remote monitoring market and increasing focus on ensuringfit-for-purpose products from the fuel cell industry.

2.8 Renewables, Storage, and Fuel Cells Will Converge in the Off-Grid PowerMarket

Convergence has recently become a hot topic. Realistically, convergence is about puttingthe pieces together to make a whole. In other words, it refers to a systems approach to theprovision of power.

This white paper focuses on the convergence of renewables with hydrogen and fuel cellsand batteries for remote and off-grid power. A number of companies have broken throughthe barriers to communications and are working together. Not just public-funded projects

are being seen, but also projects in which companies are fronting the cost to work together.

This trend will increase in 2012. There will be a convergence of technologies for theprovision of power to remote, island, and off-grid communities. Moreover, there will be anincreased interest in putting a number of building block technologies together to enable thedevelopment of stranded renewable assets.


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2.9 IPP and ESCO Tie-Ups with Utilities Will Increase

Specifically in regards to the deployment of stationary fuel cells, Pike Research forecastsan increase in the number of IPPs and ESCOs leveraging fuel cells for baseload powerproduction in 2012. This deployment should be in units from 5 kW upwards, with the

agreement between ClearEdge Power and Gssing Renewables creating a model for thistype of deal.

The benefits of this form of relationship are clear for utilities, in that it de-risks any use ofnew technology. In addition, utilities can specify, in the form of buyout rates, the price theywill pay for the power.

Like most of the trends identified in this report, this is a global trend. However, thekey regions to watch in 2012 are the United States (California and Ohio), Germany, andSouth Korea.

2.10 Fuel Cell and Hydrogen Industries Will Generate $785 Million in RevenueDuring 2012

Finally, in this white paper Pike Research forecasts that the combined revenue of the fuelcell industry and demand for hydrogen from fuel cells and internal combustion engines(ICEs) will reach $785 million globally in 2012.


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Section 3

TABLE OF CONTENTS

Section 1 ...................................................................................................................................................... 1Executive Summary .................................................................................................................................... 1

1.1 Introduction .................................................................................................................................... 1Section 2 ...................................................................................................................................................... 2Ten Key Trends in the Fuel Cell and Hydrogen Industries .................................................................... 2

2.1 The resCHP Market Will Gather Momentum ................................................................................ 22.2 Rhetoric and Reality Will Diverge in the Hydrogen Energy Storage Market ................................. 32.3 Flight to Third-Party Countries for Manufacturing Will Increase ................................................... 5 2.4 Hype Will Be Followed by Disappointment in the Portable Fuel Cell Sector ................................ 52.5 Interest in FECVs Will Reemerge as the Limitations of BEVs Are Realized ................................ 62.6 Buyouts and Corporate Investments in Both Fuel Cells and Hydrogen Will Continue ................. 72.7 Remote Sensing Will Be the 2012 Breakout Fuel Cell Market ..................................................... 82.8 Renewables, Storage, and Fuel Cells Will Converge in the Off-Grid Power Market .................... 82.9 IPP and ESCO Tie Ups with Utilities Will Increase ....................................................................... 92.10 Fuel Cell and Hydrogen Industries Will Generate $785 Million in Revenue During 2012 ............ 9

Section 3 .................................................................................................................................................... 10Table of Contents ...................................................................................................................................... 10Section 4 .................................................................................................................................................... 11Table of Charts and Figures..................................................................................................................... 11Section 5 .................................................................................................................................................... 12Scope of Study .......................................................................................................................................... 12Sources and Methodology ....................................................................................................................... 12Notes .......................................................................................................................................................... 13


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Section 4

TABLE OF CHARTS AND FIGURES

Chart 2.1 resCHP Systems by Technology Type, World Markets: 2010-2012 ....................................... 2Chart 2.2 Cumulative Energy Storage Capacity by Technology, World Markets: 4Q 2011 ................... 4Chart 2.3 Geographical Location of Commercial Supply Chain, World Markets: 2011 .......................... 7Figure 2.1 The myFC Powertrekk External Recharger Portable Fuel Cell ............................................ 6Table 2.1 Example U.S. Civilian Applications Using Remote Sensing Equipment ................................. 8


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Section 5

SCOPE OF STUDY

Pike Research has prepared this report to provide current and interested stakeholders at all levels of thefuel cell and hydrogen industries, including developers, analysts, investors, and policy makers, with anoverview of ten key trends that will affect the fuel cell and hydrogen industries during 2012. Its majorobjective is to provide an understanding of some of the key market developments and movements thatare likely to happen over the course of 2012.

The reports purpose is not to offer an exhaustive assessment of the trends and their impacts, asPike Research will provide comprehensive analyses in more in-depth reports during 2012.

SOURCES AND METHODOLOGY

Pike Researchs industry analysts utilize a variety of research sources in preparing Research Reports.The key component of Pike Researchs analysis is primary research gained from phone and in-personinterviews with industry leaders including executives, engineers, and marketing professionals. Analystsare diligent in ensuring that they speak with representatives from every part of the value chain, includingbut not limited to technology companies, utilities and other service providers, industry associations,government agencies, and the investment community.

Additional analysis includes secondary research conducted by Pike Researchs analysts and the firmsstaff of research assistants. Where applicable, all secondary research sources are appropriately citedwithin this report.

These primary and secondary research sources, combined with the analysts industry expertise, aresynthesized into the qualitative and quantitative analysis presented in Pike Researchs reports. Greatcare is taken in making sure that all analysis is well-supported by facts, but where the facts are unknownand assumptions must be made, analysts document their assumptions and are prepared to explain theirmethodology, both within the body of a report and in direct conversations with clients.

Pike Research is an independent market research firm whose goal is to present an objective, unbiasedview of market opportunities within its coverage areas. The firm is not beholden to any special interestsand is thus able to offer clear, actionable advice to help clients succeed in the industry, unfettered bytechnology hype, political agendas, or emotional factors that are inherent in cleantech markets.


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NOTES

CAGR refers to compound average annual growth rate, using the formula:

CAGR = (End Year Value Start Year Value)(1/steps) 1.

CAGRs presented in the tables are for the entire timeframe in the title. Where data for fewer years aregiven, the CAGR is for the range presented. Where relevant, CAGRs for shorter timeframes may begiven as well.

Figures are based on the best estimates available at the time of calculation. Annual revenues,shipments, and sales are based on end-of-year figures unless otherwise noted. All values are expressedin year 2012 U.S. dollars unless otherwise noted. Percentages may not add up to 100 due to rounding.


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Published 1Q 2012

2012 Pike Research LLC1320 Pearl Street, Suite 300

Boulder, CO 80302 USATel: +1 303.997.7609

http://www.pikeresearch.com

This publication is provided by Pike Research LLC (Pike). This publication may be used only asexpressly permitted by license from Pike and may not otherwise be reproduced, recorded, photocopied,distributed, displayed, modified, extracted, accessed or used without the express written permission ofPike. Notwithstanding the foregoing, Pike makes no claim to any Government data and other dataobtained from public sources found in this publication (whether or not the owners of such data are notedin this publication). If you do not have a license from Pike covering this publication, please refrain fromaccessing or using this publication. Please contact Pike to obtain a license to this publication.

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FC10T 12 Pike Research