- Overview on the industry
- Increase in demand for fuel cell powered vehicles
- Fuelling infrastructure will play a crucial role in deciding the future of the industry
Fuel cells are alternative energy solutions, which convert chemical into electrical energy by combining hydrogen and oxygen. The fuel cell industry witnessed a significant transformation in the past decade.
The present state of the industry can be described via pyramid formation. Hence, at the top there are a few players, they have the technology and products, which are commercial. These firms focus on curtailment of expenses and strive for innovations. The mid-segment comprises players which are nearing the commercial production and are seeking further investments for expansion. The last leg consists of players which are far away from the commercial production and mainly focus on the research and development. Overall, the industry is in its early stages and the players are trying to make their mark in the market while also taking advantage of the raw market as a solution provider.
The demand in the industry is broadly classified into three markets; stationary, portable and transportation from the product perspective. The stationary power covers those applications where fuel cells are operated from a fixed point, it is primarily used for power backup. Portable power products cover applications where a cell is used in portable devices, while transportation sector largely has its application in cars, buses, etc.
The fuel cell industry is growing at a very strong pace and is in the early stages of growth as mentioned above. It registered a CAGR growth of 30% (2009-16), wherein the shipments increased from 14.4 to 88 thousand units, while in MW terms the total shipments increased from 86.8 to 587.1 MW registering a CAGR growth of 31% in the same period. It is significant to note, that the use of fuel cell in the portable segment increased in terms of units but decreased in MW terms. However, the shipment to transportation sector increased from 2,000 to 9,000 units (approx.) registering a CAGR of 24%, while in MW terms, this increased from 49.6 to 367 MW registering a CAGR of 33%.
The automobile segment contributes a major portion of the fuel cell demand. The shipment to transport segment was 367 MW (2016) as compared to 178.1 MW (2015) and 40.7 MW (2014), respectively. The transport segment witnessed a CAGR growth of 200% in the last two years. The automobile industry started focusing on the alternative power vehicles such as hybrid cars, battery electric vehicles and fuel cell powered vehicles (FCPV). The industry saw the launch of certain FCPVs in the past three years from Toyota-Mirai, Hyundai-Tucson, Honda-Clarity and Riversimple Rasa. Although the alternate power vehicle shipments were a mere ~3.5% of the total automobile sales globally as per the latest statistics, the fuel cell powered vehicle sales to alternate power vehicle stood at barely 0.3%, which indicates towards the ocean of untapped potential. The recent increase of fuel cell powered vehicles in transport sector was backed by the huge demand from China. Additionally, the country currently holds the world’s largest fleet of fuel cell vehicles.
Fuel cell powered vehicles reduce pollution as these are powered by hydrogen and oxygen and benefit the environment. FCPVs are more than three times efficient to conventional vehicles and take a similar amount of time for refilling by hydrogen. The range of FCPVs is comparable to the conventional gasoline vehicles. This makes FCPVs better in relation to the electric powered vehicles. The range for battery-powered vehicles is relatively lower and these vehicles take more time for the charging of batteries. Hence, there is a possibility that automobile companies may gradually experience a shift from the battery-powered vehicles to fuel cell powered vehicles due to the above advantages.
However, the biggest challenge for the fuel cell powered vehicles is the lack of refuelling infrastructure as the number of hydrogen filling station is very low at 285 (2016). This is a grey area where the success of FCPVs will be tested. Moreover, the fuel cell Industry is in its initial stages, where only a handful of companies have commercial production and expenditure in R&D is huge and require much capital. The total cumulative investment in the fuel cell companies were $592.7 million ([2013-15] Source: Fuel Cell and Hydrogen Energy Association).
The performance of the companies operating in the fuel cell industry is shown in the below chart, the four companies namely; Ballard Power, Plug Power, SFC and Fuel Cell Power have a major market share within the industry and others are still at an elementary stage.
The decline in the companies’ revenue indicates towards a crucial stage for the industry as only Ballard Power posted an increase in revenue in comparison to 2015. The decline was mainly attributed to the uncontrollable market conditions such as customers choice, reduction in the prices of the crude oil from US$100/bbl (mid-2014) to lows of ~US$38/bbl (December 15) and US$55/bbl (December 16), respectively. There is a correlation between the crude oil prices and the fuel cell revenue, but the decline in revenue was mostly impacted by a company’s business structure and present standing.
Furthermore, most of the companies are going through a tough phase of the operational cycle, where these are unable to convert their technology into the commercial market. The EBITDA number of the companies is also supporting the fact that the industry incurred huge expenses and was inept to generate cash flows. The main reason behind the negative EBITDA margin was the R&D expenditure which was relatively high for most of the companies and especially, for those firms which were in the developmental stage.
Although the overall industry is picking up and the CAGR performance for unit sales and MW volume are a reflection of this phenomenon, but to convert this into a top and a bottom line is taking much longer. Presently, there are few companies at the top of the pyramid, while others invested heavily in the development of the desired technology.
Televisory believe, the future of the fuel cell industry depends upon how fast companies make their products marketable at the same time display the quality and dependency of products from short to medium term. In addition, the other major factor which is seen to be affecting the industry is the fuelling infrastructure as this would determine the actual consumption of products. Televisory is of the view that prima facie the technology is relatively advantageous as compared to battery-powered vehicles, though this requires a significant amount of investment and continued innovations to convert fuel cell technology as a viable commercial market product. Whether the product succeeds in the long-run or not will be known in the upcoming years.