PowerLines by Linnea Brush

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PowerLines by Linnea Brush

Linnea Brush December 7, 2009

The Fuel Cell Industry Needs to Reinvent Itself

Power Channels: Batteries and Portable Power, Energy Efficiency, Renewable Energy, Switch-Mode Power

In my last column, I talked about the fuel cell industry’s sobering self-portrait. A survey of companies making fuel cells showed a small industry (over 50% have fewer than 10 employees), with 80% saying their division was not profitable. When asked when their company was expected to achieve profitability, the largest percentage (35%) said “5 years+”. Another 30% said “within 4 years.”

Reflecting this state of affairs are the reports that Medis Technologies and MTI Microfuel Cells – both companies making portable fuel cells – could be shutting down soon due to lack of funding. On the face of it, fuel cells are facing an uphill battle that is unlikely to provide opportunities any time soon. Or are they?

As I noted previously, fuel cell companies don’t seem to understand what the true value of their product is. They are trying to market fuel cells as a replacement for batteries, which is difficult at the consumer product level. Batteries do have their problems, but they are ubiquitous and cheap. They also have lots of battery management IC companies working hard to address their problems. Fuel cells trail this improvement or, at best, simply keep up with it but at a higher price. (For example, a fuel-cell-powered vehicle is currently valued at around US$1.1 million. Toyota leases its FCV for US$9,400 a month, or US$110,000 a year.)

Fuel cells have had success in military applications (indeed, this is where many of them got their start), but this is a very limited market with lots of barriers to entry – especially for companies hoping to expand out to commercial applications. “Niche” products like auxiliary power units have done okay, but they are… well, niche products. Fuel cell companies want a decent-sized, commercial market where their value (i.e. cost) proposition is competitive or superior to existing products.

Where is this market? First of all, there are more than one, but like most applications, certain segments offer better opportunities than others. Stationary power has always been a good, but smaller, opportunity for fuel cells. That application has crystallized over the years into a larger – and growing – opportunity: cogeneration and on-site power plants. More specifically, the heat-to-power ratio lends fuel cells to combined heat and power (CHP) applications, such as hot water, space heating, and steam generation. They could even replace low-tech boilers. But CHP is where fuel cells “get interesting.”

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We would like to hear your comments on the topics discussed in this column. We welcome the opportunity to publish opposing opinions. Please email Jeff Shepard at jshepard@darnell.com.

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