FC10T 12 Pike Research

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

Published 1Q 2012
Kerry-Ann Adamson Research Director Lisa Jerram Senior Analyst Anissa Dehamna Research Analyst
The Fuel Cell and Hydrogen Industries: Ten Trends to Watch in 2012 and Beyond
Section 1
EXECUTIVE SUMMARY
1.1 Introduction
The beginning of any year is an opportunity to take a step back and look at the larger picture. 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 ongoing research in the global fuel cell and hydrogen markets and discusses our take on the ten key 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 depth during 2012.
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 the express written permission of Pike Research LLC.
Section 2
TEN KEY TRENDS IN THE FUEL CELL AND HYDROGEN INDUSTRIES
2.1 The resCHP Market Will Gather Momentum
Due to the increase in market pull and the number of products available, the residential combined heat and power (resCHP) market is experiencing annual double-digit growth. The small, stationary fuel cells used for resCHP systems typically range in power ratings from 0.8 kW to up to 8 kW and provide on-site electricity and low-grade heat generation for the home. In the fuel cell arena, the growth of the resCHP market in 2012 is increasingly being restricted by production capacity and the limits of available subsidies. Chart 2.1 resCHP Systems by Technology Type, World Markets: 2010-2012
80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 2010 2011 2012
(Source: Pike Research)
Fuel Cell Non-Fuel Cell
(Systems)
Between 2010 and the end of 2012, the fuel cell resCHP sector is forecast to expand at a compound annual growth rate (CAGR) of 67.7%. However, if just one more manufacturer comes online during 2012, the CAGR could be as high as 82%. In Pike Researchs 2011 white paper, Fuel Cell and Hydrogen Industry: Ten Trends to Watch in 2011 and Beyond, the number of companies moving from batch to continuous manufacturing were highlighted. While this has happened in other areas of the fuel cell industry, manufacturing has remained at best at batch level in the resCHP market. The reason for this is that at present, the fuel cell resCHP sector (even though it is posting gains) is reliant on subsidies for adoption. Without subsidies, the adoption of resCHP systems is very, very limited. The companies are therefore matching production to the amount of subsidies available. This will continue, to some degree, to hamper the rate of
adoption in 2012. It is expected, though, that the subsidies available for adoption will increase. Due to this factor and the expected system cost downs, 2012 could be the year that 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 in working with utilities to roll out resCHP will increase Regulatory issues will bubble to the surface; grid interconnection and feed-in-tariffs will be two big ticket items Interest from the U.S. Department of Energy (DOE) in resCHP will increase, but there will be little shift in adoption Pressure on R&D-based companies to come to market sooner than originally planned will increase
In terms of leading countries for the adoption of resCHP systems, the running order will remain 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 a hot topic, with 2012 shaping up to be a year of reality checks for the industry. Like many other sectors before it, the energy storage market is facing something of a perceived land grab. Indeed, a wide range of technologies for energy storage are marketing themselves as 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 the future energy storage option of choice. The reality check here is that to date, hydrogen has simply not been on the energy storage map, as is clearly highlighted in Chart 2.2.
Chart 2.2
(MW)
Cumulative Energy Storage Capacity by Technology, World Markets: 4Q 2011

Li-ion, 49 Flow Battery, 108 Lead/Carbon , 0 CAES, 400 Flywheel, 20 Hydrogen, 1 NiCd, 26 Molten Salt, 150 NaS Battery, 324 Lead-Acid, 80 Thermal, 1 New Pumped Storage, 30
Traditional Pumped Storage, 112,830
Realistically, the three current market-proven options for grid-level energy storage are compressed air energy storage (CAES), sodium sulfur (NaS) batteries, and pumped storage. At community and residential level, the picture is even narrower, as battery-based technologies 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 to break into this market at a commercial level, except for very specific government-sponsored programs or large integrated projects. One example of the latter that is gaining a significant amount of press attention is the Performing Energy Alliance for Hydrogen from Wind (PEAH), a grouping of 14 companies and organizations with the aim to 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 the positive benefits of using hydrogen as a storage medium. A key challenge for hydrogen proponents will be to develop models to accurately and fairly compare hydrogen to other energy storage technologies. However, if the vernacular of utilities and the energy storage industry is not adopted, hydrogen will struggle to make inroads.
2.3 Flight to Third-Party Countries for Manufacturing Will Increase
Along with an increase in manufacturing capability, Pike Research anticipates a number of fuel cell companies will relocate (or co-locate) their manufacturing facilities outside of the country 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 manufacturing facilities in China, is not expected. Rather, 2012 will see a more tactical market access approach, where a percentage of manufacturing, or product integration, is done in a third-party country. This flight is predicated on a number of reasons, not just the cost of manufacturing. Additional reasons include access to local government benefits for locally manufactured products, access to job subsidies, partnership agreements, and reductions in the costs of transport in the supply chain. Countries that are likely to see increasing gains in 2012 in terms of fuel cell manufacturing 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 advocates putting forward arguments to government for industry support. The payoff is local, high quality, 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 to manufacture, with the majority of jobs created abroad, will likely see either an increase in creative accounting (jobs figures being assigned to the country of the parent company, not the 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 into personal electronics. However, 2012 is likely to be a year of hype followed by a healthy dose of disappointment. During 2011, Apple was granted one fuel cell-related patent on the use of liquid metal in fuel cell bipolar plates. Then in October and December 2011, Apple applied for a total of four 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 tantalizing possibility 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 rumor mill 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 integrated into 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 no news on roadmaps for release dates, the personal electronics fuel cell market will still be dominated by external battery rechargers in 2012.
From time of patent filing to granting can anywhere from 18 months to 3 years, so the Apple patents may not be granted in 2012.
Meanwhile, the likes of Powertrekk and Aquafairy will prove that these products can be useful and attractive, as shown in Figure 2.1. While this means that the disappointment will be limited to the diehard tech heads, the myth that fuel cells are always ten years away may 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 to see a return of interest in fuel cell electric vehicles (FCEVs). Such interest will be seen mainly in regions that have been showing commitments to hydrogen infrastructure. This means that Germany, Denmark, the United Kingdom, and Europe in general will show greater interest in FCEVs than the United States. Automakers have resolutely stuck to their forecasts of the initial rollout of FCEVs between 2013 and 2015. Therefore, 2012 will be the year when increased movement related to stabilizing the supply chain and ramping up the PR machine should be expected. In terms of numbers of on-the-road FCEVs, however, 2012 will unlikely to see any rollout of demonstration trial vehicles. A commercial rollout of FCEVs in 2015 will require the opening of a number of new hydrogen 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 projected areas of initial sales.
The start of this trend of returning interest in FCEVs appearing has already been seen with the 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 quantify the potential emissions benefits Review the investments required to commercialize the technology, including the needed 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 Will Continue
The fuel cell industry is in a very interesting period. It is (slowly) transitioning away from being primarily an R&D-based industry to becoming a commercial industry. As part of this transition, normal industry consolidation is already being seen, with a number of companies 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 given by BIC for this move is that it had been developing fuel cartridges for fuel cell for a number of 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 its supply 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 and Constraints in Early Market Applications, only 70 companies with commercial product related to PEM fuel cells can be identified. The geographic spread of these companies for 2011 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

25
(Number of Companies)
Rest of World
20
North America Europe Asia Pacific
15
10
Membrane Catalyst MEA Suppliers Gas Diffusion Bipolar Plates Gaskets, Other, Layer & Stack Assembly
Since more companies in the fuel cell industry are looking to roll out in volume, the low number of companies that manufacture the critical components is likely to lead to either direct 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 benefits from adoption. In the past, breakout markets have included fuel cell forklifts and unmanned aerial vehicles (UAVs). In 2012, Pike Research forecasts that the breakout market for fuel cells will be remote sensing (or remote monitoring). To put the size of this market in context, within the United States alone, more than 94,000 sites can be easily identified use remote monitoring 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 market for 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 number of watts, but require lengthy continuous runtime.
Table 2.1
Example U.S. Civilian Applications Using Remote Sensing Equipment Number of Sites 1,500 3,000 7,000 82,600
Type of Site Weather Station Wildlife Monitoring Seismic Monitoring Dam Monitoring
Although Pike Research does not forecast adoption in the high thousands in 2012, it does see increasing interest in the remote monitoring market and increasing focus on ensuring fit-for-purpose products from the fuel cell industry.
2.8
Renewables, Storage, and Fuel Cells Will Converge in the Off-Grid Power Market
Convergence has recently become a hot topic. Realistically, convergence is about putting the pieces together to make a whole. In other words, it refers to a systems approach to the provision of power. This white paper focuses on the convergence of renewables with hydrogen and fuel cells and batteries for remote and off-grid power. A number of companies have broken through the 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 the provision of power to remote, island, and off-grid communities. Moreover, there will be an increased interest in putting a number of building block technologies together to enable the development of stranded renewable assets.
2.9 IPP and ESCO Tie-Ups with Utilities Will Increase
Specifically in regards to the deployment of stationary fuel cells, Pike Research forecasts an increase in the number of IPPs and ESCOs leveraging fuel cells for baseload power production 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 this type of deal. The benefits of this form of relationship are clear for utilities, in that it de-risks any use of new technology. In addition, utilities can specify, in the form of buyout rates, the price they will pay for the power. Like most of the trends identified in this report, this is a global trend. However, the key regions to watch in 2012 are the United States (California and Ohio), Germany, and South Korea.
2.10
Fuel Cell and Hydrogen Industries Will Generate $785 Million in Revenue During 2012
Finally, in this white paper 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.
Section 3
TABLE OF CONTENTS
Section 1 ...................................................................................................................................................... 1 Executive Summary .................................................................................................................................... 1 1.1 Introduction.................................................................................................................................... 1 Section 2 ...................................................................................................................................................... 2 Ten Key Trends in the Fuel Cell and Hydrogen Industries .................................................................... 2 2.1 The resCHP Market Will Gather Momentum ................................................................................ 2 2.2 Rhetoric and Reality Will Diverge in the Hydrogen Energy Storage Market ................................. 3 2.3 Flight to Third-Party Countries for Manufacturing Will Increase ................................................... 5 2.4 Hype Will Be Followed by Disappointment in the Portable Fuel Cell Sector ................................ 5 2.5 Interest in FECVs Will Reemerge as the Limitations of BEVs Are Realized ................................ 6 2.6 Buyouts and Corporate Investments in Both Fuel Cells and Hydrogen Will Continue ................. 7 2.7 Remote Sensing Will Be the 2012 Breakout Fuel Cell Market ..................................................... 8 2.8 Renewables, Storage, and Fuel Cells Will Converge in the Off-Grid Power Market .................... 8 2.9 IPP and ESCO Tie Ups with Utilities Will Increase ....................................................................... 9 2.10 Fuel Cell and Hydrogen Industries Will Generate $785 Million in Revenue During 2012 ............ 9 Section 3 .................................................................................................................................................... 10 Table of Contents ...................................................................................................................................... 10 Section 4 .................................................................................................................................................... 11 Table of Charts and Figures..................................................................................................................... 11 Section 5 .................................................................................................................................................... 12 Scope of Study .......................................................................................................................................... 12 Sources and Methodology ....................................................................................................................... 12 Notes .......................................................................................................................................................... 13
10
Section 4
TABLE OF CHARTS AND FIGURES
Chart 2.1 Chart 2.2 Chart 2.3 Figure 2.1 Table 2.1 resCHP Systems by Technology Type, World Markets: 2010-2012 ....................................... 2 Cumulative Energy Storage Capacity by Technology, World Markets: 4Q 2011 ................... 4 Geographical Location of Commercial Supply Chain, World Markets: 2011 .......................... 7 The myFC Powertrekk External Recharger Portable Fuel Cell ............................................ 6 Example U.S. Civilian Applications Using Remote Sensing Equipment ................................. 8
11
Section 5
SCOPE OF STUDY
Pike Research has prepared this report to provide current and interested stakeholders at all levels of the fuel cell and hydrogen industries, including developers, analysts, investors, and policy makers, with an overview of ten key trends that will affect the fuel cell and hydrogen industries during 2012. Its major objective is to provide an understanding of some of the key market developments and movements that are likely to happen over the course of 2012. The reports purpose is not to offer an exhaustive assessment of the trends and their impacts, as Pike 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-person interviews with industry leaders including executives, engineers, and marketing professionals. Analysts are diligent in ensuring that they speak with representatives from every part of the value chain, including but 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 firms staff of research assistants. Where applicable, all secondary research sources are appropriately cited within this report. These primary and secondary research sources, combined with the analysts industry expertise, are synthesized into the qualitative and quantitative analysis presented in Pike Researchs reports. Great care is taken in making sure that all analysis is well-supported by facts, but where the facts are unknown and assumptions must be made, analysts document their assumptions and are prepared to explain their methodology, 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, unbiased view of market opportunities within its coverage areas. The firm is not beholden to any special interests and is thus able to offer clear, actionable advice to help clients succeed in the industry, unfettered by technology hype, political agendas, or emotional factors that are inherent in cleantech markets.
12
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 are given, the CAGR is for the range presented. Where relevant, CAGRs for shorter timeframes may be given 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 expressed in year 2012 U.S. dollars unless otherwise noted. Percentages may not add up to 100 due to rounding.
13
Published 1Q 2012 2012 Pike Research LLC 1320 Pearl Street, Suite 300 Boulder, CO 80302 USA Tel: +1 303.997.7609 http://www.pikeresearch.com
This publication is provided by Pike Research LLC (Pike). This publication may be used only as expressly 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 of Pike. Notwithstanding the foregoing, Pike makes no claim to any Government data and other data obtained from public sources found in this publication (whether or not the owners of such data are noted in this publication). If you do not have a license from Pike covering this publication, please refrain from accessing or using this publication. Please contact Pike to obtain a license to this publication.
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The Fuel Cell and Hydrogen Industries:

Ten Trends to Watch in 2012 and Beyond

Fuel Cell Non-Fuel Cell

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

Traditional Pumped Storage, 112,830

(Source: Pike Research)

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

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

Geographic Location of Commercial Supply Chain, World Markets: 2011

North America Europe Asia Pacific

(Source: Pike Research)

Remote Sensing Will Be the 2012 Breakout Fuel Cell Market

SOURCES AND METHODOLOGY

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