First published in Cleantech magazine - Fuel Cell Special, Sept/Oct 2010
"Fuel cells may not be a reality in the PR-friendly, 'Jeremy Clarkson world' of cars, but fuel cells exist here and now - as unphotogenic boxes providing base load power for a range of services; and providing motive power for the ultimately unsexy application of forklifts"
By Dr Kerry-Ann Adamson, Fuel Cell Today
Analysis by the Fuel Cell Today team shows that during 2009 some 120MW of fuel cell technology was shipped and installed. A sizeable fuel cell sector is now a reality. The industry is comprised predominantly of stationary fuel cells: over 100MW of the 120MW shipped were for the stationary market. Kerry-Ann Adamson reviews the state of the market and assesses the prospects for fuel cells.
Fuel cells are now a reality. Since the crash of the last wave of hype regarding the ‘next big thing’ for fuel cells, a number of crucial factors have changed, enabling the start of real market penetration for the technology.
The fabled ‘window of opportunity’ for new ideas, technologies and trends, where factors come together and align to create an opportunity to drive change, is the subject of much discussion. It is debateable how many factors need to align to create such a window. However, with respect to fuel cells, it is clear that over the past couple of years certain key elements have gained strength, which in turn have driven change. One key change has been the development of the technology to the point where it can start to address a handful of markets. Simultaneously, we have seen the associated appearance of the ‘Innovator set’; a shift in company requirements driven by market dynamics and multiple policy changes.
‘Greening’. The so-called greening of companies and technologies is not a new concept. Often, when you scratch the surface, ‘greening’ has very little to do with the environment. The difference now, from a decade ago, is the impact which a company’s level of ‘green’, real or perceived, has on a range of hard metrics - including insurance premiums and share prices.
‘Green’ more often than not can be translated into energy cost savings through increased efficiencies, carbon cost savings through either the ability to trade carbon permits (i.e. Tesla) or decreased insurance premiums.
A prime example is the push for the ‘greening’ of data centres, which are highly energy intensive buildings. According to a 2007 report by Gartner, data centres that require energy to run servers and provide cooling account for 23% of global carbon dioxide emissions from information and communications technology.
The Environmental Protection Agency (EPA) has estimated that by 2011 server room energy requirements could reach 100 billion kWh per annum in the US alone. This mammoth draw of power has been somewhat wrongly tagged as a need to ‘green’ data centres and server rooms, the premise being that energy demand equals carbon emissions, which is bad. So in order to reduce carbon emissions, a good green thing to do, we need to green data centres. In fact, it is a basic efficiency drive. Decrease energy use, increase energy provision from efficient, clean, cheap sources of electricity, and in the process reduce operating expenses for the companies running the data centres. As part of this so-called ‘greening’ many companies are looking to employ a range of cleaner distributed generation technologies, including fuel cells. At present data centres must be sited close to both large sources of water (data centres consume large amounts of water) and to power plants which can supply the electricity. This is increasingly a major ask.
By producing some of the electricity themselves, companies are able to broaden the range of potential locations where they can erect new server centres. Again not very green, but acutely important for business.
Policy. Increasingly policy is forcing companies to do something. What that something actually is may be open for debate and confusion, but what is certain is that something has to be done. Countries which have economies with a high level of central planning, such as South Korea and Japan, often have clear roadmaps with a limited number of technological choices laid out. In the US or Europe, however, the route forward is much less clear and much more open to interpretation.
Good Enough. It is no illusion that over the past five to ten years fuel cell technology has improved substantially. Fuel cell technology is now good enough for a number of markets. It is not perfect and, as with any other technology, more R&D will result in improved efficiency and further cost reductions. But early markets such as back-up power for base stations and large combined heat and power units for buildings such as hospitals and hotels are adopting the technology. Fuel cells already provide a real value add to the adopter, including in some cases reduced overall costs.
As the technology improves and standardisation kicks in then we will see diffusion of fuel cells into more applications. This virtuous circle will help to drive further improvements and cost reductions.
Innovators and Early Adopters. Studies of innovation show that society is not a homogenous blob of adopters that can be forced to change with mandates from government, but rather it is made up of a number of groupings. These are Innovators, 2.5% of the population, Early Adopters - 13.5%, Early Majority - 34%, Late Majority - 34%, and finally the Laggards, who make up 16% of adopters1.
The Early Adopters are the category of people/companies now using fuel cell technology. They include companies adopting fuel cell forklifts and the aforementioned hospitals, hotels and telecoms companies.
We believe that the transition from Innovator to Early Adopter is taking place as more applications see the start of mainstream diffusion. Over the next handful of years this will include units for residential use; systems diffusing through a number of military applications; buses; and fuel cells acting as non-spinning spinning reserves for energy storage on the grid.
Early Markets
At present there are early markets, defined as markets with commercial shipments and repeat orders, for both stationary fuel cell applications and transport fuel cell applications, as well as specialist sectors such as the military.
Key early markets/applications include:
• Fuel cell forklifts;
• Off-line and on-line UPS systems;
• CHP units;
• Toys/education kits.
Of the 25,000 fuel cell systems shipped during 2009, 90% were made up of fuel cells for these four applications, representing some 100MW of installed power.
FORKLIFTS
Shipments of fuel cell-powered forklifts have already started to exhibit the S-curve of adoption expected for technologies entering a new market. Between 2007 and the end of 2009 we saw a doubling of shipments: it is anticipated the number of units shipped will triple from 2009 to 2010. This fast ramping-up of shipment numbers is expected to continue owing to early policy to de-risk order books for a number of companies, critically in the US.
The reason for the growth in demand for fuel cells for forklifts is that, in certain regions and applications, fuel cell-powered forklifts provide a genuine utility benefit to the adopter. As with all technologies, fuel cells are not a silver bullet. Although some regions find that the economics do not stack up so easily in favour of fuel cells, for others the benefits include:
• Removing the need for a battery room, allowing more usable space for storage;
• Faster refuelling/recharging time.
OFF-LINE AND ON-LINE UPS
Power demand from base stations has been reported as being up to 85% of a telecommunication network operator’s total energy consumption (the remainder includes retail stores, offices and transport)2. Deutsche Telekom, for example, reported energy consumption levels approaching 3,000GWh, of which some 2,500GWh were power demand from base stations. It is difficult to pin down the number of base stations owned by each operator, including Deutsche Telekom (operating as T Mobile). However, published figures are, per typical base station, some 26MWh per annum or 6kW per second per base station.
In addition, every base station emits 10 tonnes of CO2 annually3.
These two drivers alone are pushing companies to look at new technologies to power base stations either as the primary power source or for back-up power.
Other drivers towards fuel cell adoption at base stations include a move to extended run time, with up to 72 hours now being the de facto industry requirement for XRT and economics. In some areas, such as rural South Africa, running a generator and a back-up generator, for when the primary breaks down, can result in costs of a factor of ten times greater than in city environments - adding further to the drivers behind the development of alternatives.
The telecoms industry itself is examining a number of power options, with a core focus on some form of renewable/traditional technology mix and longer term renewable/fuel cell mix.
Our assessment of the current standpoint of the industry is shown in the table. Technology options are graded from 1, representing excellent, to 4, representing poor.
Once again it is clear that there is no silver bullet: in areas where factors such as the size of the footprint, emissions, extended run time and fast start-up are critical, a fuel cell/battery hybrid is already an option. In other locations, where the CAPEX cost is the critical component, then a more traditional generator is still a very good option.
Clearly, as reliability is further improved, proven and, critically, properly documented, and running costs come down, then due to the high demand for energy cost reductions from the companies we will see a speeding up of adoption of fuel cell technology in telecommunications. Also, once the Holy Grail of a grid-independent renewable/hydrogen/fuel cell system is on the market, then countries such as India, Kenya, South Africa, Zambia and the UAE, all of which have burgeoning requirements for new base stations, will, we believe, become lead adopters.
We estimate the current market size to be in the region of 1,000 – 3,000 units per year. The standard unit size shipped appears to be around the 5kW mark. Volumes are expected to ramp up fast over the next decade, with shipment numbers set to rise to the tens of thousands by 2013 – 2015.
MISSION CRITICAL UPS
As well as outdoor base stations, there are a number of other ‘mission critical’ applications for UPS systems, including military applications, company server rooms and government facilities. As these tend to be indoors, emissions and noise often influence the technology used and to date batteries, rather than diesel gensets, have taken the core market share. Issues surrounding battery lifetime, which is heavily affected by temperature, and space to store increased batteries for extended run time are playing a driving role for innovators to turn to fuel cell technology. Although there are not as many installations in this sector as with, say, base stations, those which are up and running are large scale units, from 10kW to MWs, with multiple electrolytes being used. One such installation, for Transport for London (TfL), is reviewed in the article later in this magazine by John Lidderdale of Logan Energy Europe (see page 35).
Interestingly, for such applications one of the major roadblocks to further adoption is not the technology itself, but rather a lack of good, experienced installers and unbiased advice and installation guides. It is very easy for a consultancy to set up and offer advice on fuel cell installation – but very difficult to provide a high level of service. Bad installations, especially involving early consumer innovators, have a negative impact on the entire industry.
COMBINED HEAT AND POWER
Companies such as UTC Power and FuelCell Energy have already made a good name for themselves providing fuel cells to many MWs of installations, primarily in the US. They have installed CHP units in markets as varied as prisons, a brewery, hotels, hospitals and universities. Each unit provides a proportion of the base load of power, with the waste heat being used for various functions. Their success to date, and the fact that the US has been the lead market for adoption, is due to the level of subsidies available in certain states, especially California.
California, through its Self Generation Initiative Programme (SGIP), has once again proven itself to be environmentally radical, leading the US in adopting a range of technologies and solutions to existing and future environmental problems.
The increase in subsidies, awareness and push for distributed generation (DG) solutions in the US are the reasons that the FCT analysts predict a sharp uptake of DG solutions from residential (5–8kW) right up to MW CHP installations in the US over the next decade.
These are just some of the initial markets for fuel cell technology which are now commercial. Others which we expect to become commercial over the next five years include sleeper markets such as unmanned underwater vehicles and unmanned aerial vehicles, smaller 10–20kW CHP units, some residential fuel cells and portable skid mounted power units for military and civilian use. The next five year period should also see the very start of the commercial launch of fuel cell vehicles (FCVs) with limited initial roll-out in California, Japan and Germany.
To reiterate, the reasons we have seen an increasing number of innovators turn to fuel cell technology already are that:
1. It provides them with a utility benefit over their current technological options;
2. The technology is good enough for an increasing number of markets.
FUTURE CHALLENGES FOR FUEL CELLS
As with any technology at the outset of its commercial trajectory, there are a number of outstanding issues yet to be resolved for fuel cells. Interestingly, these are not primarily technological issues. As we have mentioned, fuel cell technology is increasingly good enough for a number of early market sectors. And, as its gets further bedded down into the system, it will improve with incremental efficiency gains.
The key growing pains that the fuel cell industry must deal with are the challenges of:
• Standardisation;
• Manufacturing/quality control/cost reductions;
• Profits;
• Tiny industry problems/PR.
These four issues are clearly somewhat interlinked.
Without standardisation of fuel cell components and some form of standard reference design for fuel cells, the shift to mass manufacturing, with its associated cost reductions and improvements in quality control, will be slower and more painful. Without the cost reductions, fuel cells cannot grow as an industry, since the industry will fail to attract new companies and the existing players will fail to make profits.
The need to standardise a number of components is critical. The FCT team of analysts recently undertook research into the make-up of the industry. Of the sample set of companies measured it was found that nearly 60% were classed as component suppliers, i.e. pumps, blowers and other balance of plant. (see pie chart)
On the assumption that the industry currently has some 10,000 active companies worldwide, and presuming this sample holds true, then, of the 10,000, we can extrapolate to state that 6,000 are component suppliers. This means that just over 1,000 companies worldwide are manufacturers, a further 2,500 might be classed as fuel cell system integrators and/or distributors, with the rest being developers.
At present the industry is supporting this high number of component manufacturers due to high levels of bespoke componentry - the standard components that each system and stack manufacturer requires are still, to a large degree, being designed and built to different specifications. This is not a new phenomenon. Many revolutionary industries have gone through similar teething pains, most notably the microchip industry. The issue of standardisation is discussed in depth in an article from the US Fuel Cell Council on page 11 opposite.
A set of industry agreed standards – specifications for a number of components which can be manufactured in high volume and with high quality control – will not only drive down costs, but will also result in a shakeout in the number of companies working in the space. The 6,000 or so fuel cell component companies will be reduced to a much smaller and more sustainable number.
Standardisation is important not just for the industry structure but to bring down core costs. Each year the US Department of Energy undertakes an audited cost analysis of fuel cell stacks, systems and components under assumed high volume manufacturing. There is a clear trend for the cost of the stacks to fall each year, increasingly highlighting the cost of the ‘balance of plant’ (BoP). In fact, BoP components now constitute over 50% of the total system cost – which seems like a somewhat ludicrous situation: the cost of components such as blowers and pumps makes up over 50% of the total system cost!
A related key area that needs to be tackled head-on is profitability. To date no listed fuel cell company has posted a profit. The absence of profitability of the fuel cell divisions of larger conglomerates can be masked, but there is no hiding the fact that at present fuel cell companies have not been profitable.
There are a number of reasons for this, including the fact that expected market growth rates have not materialised; assumed rates of cost reductions have not been realised; and insufficient government support rates – at least in the West, where government backing has been somewhat patchy and sporadic. But the fuel cell industry is here for the long term. We are seeing an increasing number of companies publically publish paths to profitability statements. The million dollar question is - when will this profit materialise? Obviously, without a crystal ball it is impossible to answer that question. However, clearly it is important that markets continue to grow, unit shipments increase, and costs decrease - then eventually we should start to see reports of profits from the companies operating in the sector.
Finally, a somewhat esoteric point: one area where the fuel cell industry is definitely failing is in the PR war. And right now it is a war. Even more so than other technology types, the fuel cell industry in general appears to believe that its time will come simply because it is a good technology.
This techno-centric approach to technology adoption can often be seen at the start of a new paradigm - when a number of innovative technologies sharing some characteristics are in a race to secure competing market space. Think of Macs vs PCs; VHS vs Betamax videos; the QWERTY vs Dvorak keyboards. Logic might dictate that in each case the better technology should gain market dominance. In reality it is more often the first to market and the technology with better PR and lobbyists (with lobbying and PR being the flip sides of the same coin).
In the case of fuel cells the issues are manyfold, including the fact that in some instances the industry is fighting itself, with one company publically criticising the technology of another. Such behaviour only serves to convey the impression that none of them is any good. With respect to lobbying, it is fair to say that the activity taking place is very limited - just a drop in the ocean compared with other industries, including the battery industry.
Not only does the fuel cell industry need to wake up and work together, it must also stop looking at what little PR it does undertake as an opportunity for spin, lies and self criticism. The industry must start to focus on working to combat the negative impression that exists through the use of the PR machine by larger, more aggressive industries.
Ignore the perennial comment that “fuel cell technology is always ten years away”. Fuel cell technology is a reality today. It may not be a reality in the PR-friendly, ‘Jeremy Clarkson world’ of cars, but fuel cells exist here and now! They exist as unphotogenic boxes providing base load power for a range of services. They are also providing motive power for the ultimately unsexy application of forklifts. It’s time to stop looking at the cars and start looking at the existing high value markets that are a reality today.
1Rogers, E.M., 2003, "Diffusion of Innovations", Simon & Schuster International
2Lamour, C, 2008, "Energy Consumption of Mobile Networks" Base Station Newsletter, July.
3Schwartz, M., 2009 “Is your mobile network green?” http://www.developingtelecoms.com/content/view/947/59/ Normal 0 false false false EN-US X-NONE X-NONE /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-qformat:yes; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin:0in; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:11.0pt; font-family:"Calibri","sans-serif"; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-fareast-font-family:"Times New Roman"; mso-fareast-theme-font:minor-fareast; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin; mso-bidi-font-family:"Times New Roman"; mso-bidi-theme-font:minor-bidi;}
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