Clean energy: two for one
In recent time, attention has naturally turned to the clean energy sector to provide a stimulus to wealth and job creation. Clean energy offers the potential for economic growth and a chance to fulfil international climate change obligations – a ‘two for one’ offer that has not been wasted on leaders such as President Barack Obama of the USA and Sheikh Nahyan of the United Arab Emirates (UAE).
The fuel cell sector in particular is faced with a once in a lifetime opportunity to make a viable business case for its role in climate change mitigation, increasing energy security and reducing urban air pollution. And making a successful case for this in Europe, Japan and North America while creating wealth will be key to widespread adoption in these ‘emerged’ markets.
However, in so-called emerging markets, drivers for fuel cells may be more localised, for instance focused on bringing power to all inhabitants. In this article, we examine the potential for fuel cells to contribute to economic and environmental sustainability worldwide through an analysis of two key drivers – job creation and emissions reduction.
We then turn to look at two emerging market regions where fuel cells may see significant uptake and adoption in the next five years: India and the Middle East.
The outlook for the fuel cell industry is positive, with a range of emerging market regions looking to be active adopters of fuel cells as well as developing their own domestic manufacturing capacity. With strong central Government support, a number of these economies could challenge North America and Europe as centres for fuel cell manufacturing.
Fuel cells and emissions reduction
A fuel cell is an electrochemical device which, at its simplest, converts hydrogen and oxygen into water, along the way generating electricity and water. As such, fuel cells can be used to power any device which requires electricity.
Common fuel cell applications to date include auxiliary power for leisure and camping, zero-emissions forklift trucks, uninterruptible power for telecoms and combined heat and power for residential settings.
Fuel cells for portable devices show a great deal of market potential, particularly in ensuring a long running time and grid-independence of consumer electronics gadgets. Longer-term, large-scale fuel cell power plants offer low emissions and very high efficiency power generation for a range of applications while fuel cell cars, when fuelled with renewable hydrogen, offer zero emissions (other than water).
Fuel cells can contribute to CO2 and regulated pollutant (SOx, NOx, and Particulate Matter) emissions reduction across a number of sectors, and may enable significant emissions reduction without requiring substantial lifestyle changes by consumers. Where fuel cells are fuelled by pure hydrogen, the only emission at point of use is water, although life-cycle emissions will be dependent on whether the hydrogen is produced renewably or from fossil fuel sources.
Where hydrocarbons are used directly in a fuel cell, for instance in a natural gas-fuelled micro combined heat and power (mCHP) unit, such as those currently being deployed in homes in Japan, there will clearly be some CO2 emissions associated with the reforming of the natural gas. However, given that the electrical and thermal efficiency of fuel cell mCHP units are higher than combustion units, less CO2 is generated per unit of electrical or thermal output, meaning that CO2 emissions from a PEM mCHP unit – per unit of electrical output – are around one third less than emissions from a Japanese thermal power plant.
Fuel cells have a significant efficiency advantage over internal combustion engines (ICEs) in the way that they can recover heat, allowing fuel cells to exceed the theoretical maximum Carnot efficiency that limits ICE efficiency.
Even when fuelled by hydrocarbons, fuel cells typically emit negligible amounts of NOx and SOx, and no particulate matter. Our projections suggest substantial CO2 emissions reductions could be achieved through the widespread adoption of stationary and transport fuel cells, an important consideration as world leaders work out a new strategy for dealing with climate change in Copenhagen.
A final ‘emissions’ reduction which fuel cells have the potential to deliver is noise reduction which, like the reduction of regulated pollutants, has an important impact on quality of life, particularly in urban areas.
Fuel cells and green-collar jobs
In addition to their role in improving the efficiency of energy generation; reducing CO2 and regulated emissions; and reducing noise in a variety of applications; fuel cells can be seen as a major contributor to economic wellbeing. In a continuingly uncertain economic climate, fuel cells may offer a stimulus to the economies of various countries, and the potential for significant job creation.
In Europe and North America in particular, the political focus has been on job creation for economic growth and also to compensate for jobs being lost in declining industries, especially in regions severely hit by the current economic recession. These 21st century versions of the ‘New Deal’ policies of 1930s’ USA are firmly aimed at creating jobs in potentially high-growth areas of the economy.
Legislation such as the US Renewable Energy and Job Creation Act 2008 specifically emphasises the creation of ‘green collar’ jobs – manufacturing jobs focused on new, clean technologies. Similarly, the American Recovery and Reinvestment Act (ARRA) 2009 has also provided a conduit for job creation, with billions of dollars being invested in the energy sector, with US$42 million of ARRA funding going to fuel cells [development].
Based on our global job creation projections in our 2010 Industry Review, over 1 million jobs could be created in the next decade in fuel cell manufacturing, installation and maintenance as fuel cells are adopted worldwide.
The stationary fuel cell sector is likely to see the most growth as jobs are created in the manufacturing of stacks for mCHP and uninterruptible power supplies, and associated installation, with transport and portable applications creating fewer, though still substantial, numbers of jobs. It is likely that there will be a number of fluctuating trends regionally and over time as productivity improvements and mass manufacturing in various application sub sectors are achieved.
Contrary to the direction of government investment in Europe and North America, the majority of fuel cell manufacturing jobs will be created in Asia, as the supply chain accrues around a number of manufacturing centres in China, India, Japan, South Korea, and Taiwan. This development is key, and if we take out Japan (as an ‘emerged’ market for fuel cells), we see a good deal of potential growth driven in part by the global mega-trends of economic and environmental sustainability, which will drive manufacturing for export for many of these emerging markets.
And a deeper analysis reveals a set of unique drivers for each emerging market, which is powering uptake of fuel cells within these countries.
Enter the dragons: emerging markets
FCT defines an emerging market as a non-traditional region or country which could see significant fuel cell diffusion and uptake within the next five years. In our 2009 Industry Review we looked at a range of emerging markets including Argentina, Brazil, China, India, Poland, Russia, South Africa, and the UAE.
So what are the key drivers and barriers in some of these potential markets, and how could uptake in these countries have implications for the wider fuel cell industry?
Crouching Tiger: India
India has a unique energy landscape: a booming economy (even in the midst of a global recession) with average GDP growth rates of 6-8% which is lifting millions out of poverty each year.
Critical to maintaining this significant rate of growth is the continuing provision of affordable, reliable energy both for manufacturing industry and, crucially, for the tertiary service sector. The country has an imminent energy supply gap: the country’s coal-fired electricity generating capacity is only increasing at around 4,000 MW per annum, compared with the estimated 15 GW annual increase required for India to maintain economic growth.
On top of this, certain sectors of the economy are growing even faster – mobile telecommunications is seeing 8 million (or more) new subscribers per month. The unreliability of the grid – with typically 6-10 hours of power outages per day in urban areas in up to 20 separate power cuts – means that telecommunications infrastructure providers are reliant on other forms of power generation.
Fuel cells are part of this mix, as evidenced by Plug Power and Tata Teleservices’ recent deal for 200 LPG fuelled units, as well as IdaTech and Acme Telepower’s ongoing distribution agreement for natural gas fuelled units. The hundreds of thousands of new telecommunications base stations required over the next few years gives a sense of the scale of potential demand for fuel cells in India.
In the area of large stationary power, several of the larger corporate entities in India are looking to become vertically integrated energy service providers, dealing with the upstream end of natural gas extraction and the downstream end of delivery to customers.
Companies such as Reliance Industries and Tata are looking to develop large stationary fuel cells running on natural gas and providing tri-generation for their large portfolio of property, including shopping malls, luxury hotels and private hospitals. Furthermore, these companies have their own R&D labs for fuel cells and are looking to buy or license the best available current technology and adapt it for the Indian market. In this, they will be looking to manufacture systems in India, just as Plug and IdaTech will be doing systems integration and final assembly in India.
Manufacturing in India will take advantage of high volume, low cost manufacturing and could see India as a manufacturing base for products sold into other parts of South East Asia, the Middle East, and sub-Saharan Africa. This process, which we term ‘reverse import substitution’, will have implications not only for other emerging market region adoption, but also for cost reduction, manufacturing and development of the fuel cell supply chain worldwide.
Solar to hydrogen power
|As the Middle East’s power demand is growing at a rate which is outstripping the capacity to meet it, there is growing interest in alternative generation techniques such as solar PV and concentrated solar arrays.
A problem with solar technology is its intermittency, with fluctuations on diurnal, seasonal and annual cycles. Storage of solar energy is limited to large battery systems, which has cost and physical infrastructure limitations. This means that electricity grids typically have reserve capacity (usually fossil fuel-based) for times when renewable sources are unavailable.
However, generating hydrogen via electrolysis from renewable energy sources, then storing that hydrogen as a gas to be used in a fuel cell when renewables are unavailable overcomes the problem of intermittency. This may help level grid electricity supplies without reliance on fossil fuel reserve capacity.
To date, renewable electrolysis has been limited to small scale demonstrations and micro-grids; however, the carbon reduction potential of using fuel cells and renewables in this way is clear. Furthermore, since the energy produced is from a zero carbon source, the conversion efficiency of turning renewables into hydrogen then into electricity through a fuel cell is not critical since, whatever the efficiency is compared to other technologies, this method has the crucial advantage that it has zero-carbon emissions.
A range of companies are currently working with local partners in the Middle East to develop solar electrolysis-fuel cell systems for distributed and grid-tied power generation.
The Middle East
The key driver for fuel cells in the Middle East is the region’s desire to diversify their economies. Until recently this largely meant construction and tourism, with an associated increase in demand for power and water.
Since the worldwide economic downturn, renewed focus has been on developing a renewable resource base for a post-hydrocarbon world, building on existing plans for large sustainable energy projects, as exemplified by the Masdar initiative, a zero-carbon, zero waste city in Abu Dhabi.
Given the Middle East’s vast hydrocarbon reserves, to date there has been relatively little focus on clean energy technology including fuel cells, although there has been some research on petroleum reformers for fuel cells and small solar hydrogen projects.
However, there is now a clear focus on clean technologies as a wealth generator, backed by strong political will. A number of fuel cell companies have begun to do business in the Middle East, with P21 and Altergy in the vanguard of companies entering the uninterruptible power sector for telecommunications and mission-critical infrastructure. Other companies, such as Hydrogenics, are focusing on developing solar electrolysis as a way of load-leveling and balancing the intermittency of solar PV.
Longer term, the development of large stationary fuel cells for combined cooling and power of buildings (particularly offices and apartments) is a distinct possibility, as is large stationary fuel cells for water desalination (using reverse osmosis as part of a combined water and power (CWP) plant).
Water desalination is potentially a very energy intensive process and is a growing consumer of power in the region. Fuel cells could act as a distributed generator of combined water and power (CWP) in the 1-2 MW range, when new cities or islands are being created.
Another application where fuel cells could see uptake in the next few years is in luxury yachting, where fuel cells can provide silent, low-emissions high efficiency operation. The proliferation of low emissions yachting marinas in the Middle East could drive further uptake in this area.
- The fuel cell sector faces a once in a lifetime opportunity to make a viable business case for its role in both economic and environmental sustainability. This is primarily in ‘emerged’ markets such as Europe, Japan and North America where job creation and emissions reduction are key;
- Fuel cell technology has the potential to reduce CO2 and regulated pollutant emissions, as well as improve operating efficiency of various applications. In job creation terms, on current projections the industry is capable of generating over 1 million new jobs, although some of these may be in non-traditional regions;
- India, along with certain other emerging markets, has the low cost, high volume manufacturing, domestic market size and the potential to export that could make it a significant challenger to North America and Europe as centres for fuel cell manufacturing;
- The Middle East, driven by a desire to diversify its economies, could also be a substantial adopter of fuel cells, particularly as part of renewable energy systems.
FCT Consulting will be exhibiting at the 2010 World Future Energy Summit, where the 2010 Industry Review, Fuel Cells: Sustainability will be launched on 19 January. All three volumes of the FCT Industry Review (Commercialisation; Emerging Markets; Sustainability) are available from: www.fuelcelltoday.com/events/industry-review
About the authors
Dr. Jonathan Butler is senior market analyst, Asia, and works on a range of projects at FCT Consulting. Jonathan's emphasis is on portable applications of fuel cells. His current focus includes supply chain developments, legislation, policy and intellectual property (IP) aspects of fuel cell technology, particularly patent and patent opposition analysis, and their commercial implications. He is also interested in the development of fuel cells in the Middle Eeast.
Dr. Kerry-Ann Adamson is principal analyst and manager of FCT Consulting. With over 10 years experience in the fuel cell industry, she specialises in transport and distributed generation applications for fuel cells. Kerry-Ann has worked with both the private and public sector on a variety of fuel cell projects, with a regional focus mainly on North American and the Rest of the World region (excluding Europe and Asia).
About FCT Consulting
FCT Consulting is a dedicated consulting company with a unique positioning covering the global fuel cell and hydrogen industry. It was formed to help companies, governments, and NGOs navigate their way around or over these obstacles by providing high quality, independent, and rigorous information on a variety of issues currently facing the fuel cell industry. Since its formation, FCT Consulting has worked with a growing list of clients from around the world including major Western governments, start-up SMEs, household-name multinationals and a number of key players already established in the industry.