The fuel cell market is expected to grow at a CAGR of 25% during the forecast period. Growing demand for efficient and clean energy sources, Growing incentives to increase adoption of fuel cell vehicles, and Supportive government policies for adoption of fuel cells are some of the significant factors fueling fuel cell market growth.
Growing demand for efficient and clean energy sources
High cost of fuel cell
Fuel cells have been in use for decades and were initially used to power space missions during the 1960s. Fuel cells for commercial and industrial locations were developed during the 1990s. However, they have not been able to penetrate the market due to their lower end-user acceptance compared with other technologies such as batteries. Though fuel cells have higher efficiency and environmental benefits, they were not fully commercialized.
The price of fuel cells dropped significantly over the recent years due to factors such as high natural gas production in the US (natural gas is a source of hydrogen used as fuel in a fuel cell) and ongoing R&D activities on fuel cell technology. However, the cost is still a primary factor affecting the acceptance of the technology, as both a fuel cell system and its fuel are expensive when compared with alternative technologies such as gas generators and lithium-ion batteries. For instance, the cost of energy generation from a fuel cell is double the cost of energy generated using conventional means. This huge price gap has made subsidies a necessity for fuel cells to stay competitive with other technologies. The subsidies lower the initial costs and increase the adoption of fuel cells. However, subsidies will gradually reduce, fueling the need for increased investments in technology that would help reduce the overall cost and support its adoption.
Challenges associated with hydrogen refueling facilities
Unlike EV chargers, hydrogen refueling stations are not conveniently accessible. According to the IEA, in 2017, there were about three million private chargers at residences and workplaces globally. Additionally, in 2017, there were about 430,000 publicly accessible chargers across the world, a quarter of which were fast chargers. These chargers are important in densely populated towns. The availability of these chargers makes EVs suitable for long-distance travel. As a result, the adoption of EVs is increasing globally, thereby increasing the competition for FCVs.
However, there are limited hydrogen refueling stations globally. According to the US EIA, as of January 2019, about 60 hydrogen refueling stations for vehicles were operational in the US. About 40 of these stations are available for public use, and nearly all of these are located in California. Hence, the customers outside California may find it difficult to access the hydrogen refueling stations, thereby hindering the adoption of FCVs. Thus, the production of hydrogen-fueled cars has reduced as customers are reluctant to purchase such cars as there are limited hydrogen refueling stations. As a result, companies are not willing to invest in building refueling stations due to a lack of sufficient customers with hydrogen-fueled vehicles. Hence, the availability of hydrogen refueling stations is critical for the adoption of FCVs.
Moreover, the most challenging aspect of building hydrogen refueling stations is the capital cost associated with construction. Prior to the commencement of constructing a hydrogen refueling station, several factors such as accessibility, site conditions like safety and design, and regulatory and customer requirements need to be considered. These factors might vary across the regions. For instance, in Japan, hydrogen is classified as an industrial gas; hence, hydrogen refueling stations need to comply with strict safety regulations. Furthermore, the installation of the dispenser at a hydrogen refueling station is highly expensive and can amount to an average of $66,410. Also, sourcing hydrogen is a major challenge. As pure hydrogen is not available directly on the Earth, producing hydrogen for fueling FCVs is expensive as well as energy-intensive. Moreover, this hydrogen should be cost-effective compared with other fuels such as gasoline to ensure large-scale adoption. Also, hydrogen storage tanks are expensive and require maintenance. For instance, TOYOTA MOTOR’s Mirai FCV has hydrogen storage tanks, which are made of carbon fiber, while the onboard fuel cell, which generates electricity, is made of platinum. These factors increase the cost of fueling FCVs, and these costs are passed onto the customers. Hence, the high costs and complexities associated with the development of hydrogen refueling stations might limit the development of FCVs, thereby restricting the growth of the global fuel cell market.
Competition from alternative technologies
Fuel cell technology faces stiff competition for power generation from alternative technologies such as solar energy, energy storage applications such as batteries, and diesel generators, which are used in prime power applications. Batteries and renewable sources of power generation have established themselves, while the fuel cells are still struggling for widespread adoption. Energy storage systems (ESSs) and solar photovoltaics (PVs) also provide clean energy and have undergone significant price reductions in recent years. Therefore, they are available at a lower price than fuel cells. In addition, battery energy storage systems (BESSs) have gained high adoption in the residential sector, as these are simple to operate and do not require any refueling, unlike fuel cells. BESS-based, utility-scale projects are also being installed due to their compatibility with renewable sources of energy and power management support. For instance, in September 2018, Narada Power Source inaugurated 15 MW grid scale BESS project in Leipzig, Germany. Fuel cells in the residential sector are relatively new and thus lag behind other technologies. Fuel cells are generally more suitable for dwellings, which have high power requirements.
Conventional technologies such as diesel generators for prime power in C&I sector or rooftop solar PV systems for generating power have gained huge prominence, owing to their availability at various power ranges and the scalability factor. Hence, these factors affect the deployment of fuel cells in most of the sectors.
