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Building a Market

Issue 11 and Volume 109.

Fuel cell technology is one promising alternative source to conventional electric power generation and is expected to build market share in global power markets.

By Kenneth Long, The Freedonia Group

Most electricity is generated using conventional technologies, but the use of alternative power sources is rising. Fuel cell technology is one promising alternative to conventional electric power generation. Fuel cell systems are being developed for a broad range of power ratings, including both micropower and larger utility-scale applications.

Although they won’t supplant conventional electric power generation technologies for a very long time, if ever, fuel cells are becoming an attractive option in some settings. As a result, fuel cells are forecast to account for a small but rapidly rising share of total power generation over the next decade.

Fuel cells generate electricity through a chemical reaction that combines atmospheric oxygen with hydrogen or hydrocarbon fuels and directly converts chemical energy into electrical energy. Operationally, fuel cells are essentially electrolysis (the splitting of water into hydrogen and oxygen) working in reverse, with water and heat being the only byproducts of the electrical generation process.


Fuel cell installation at the Sheraton San Diego Hotel & Marina.
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As a fuel cell fuel, pure hydrogen offers maximum energy efficiency and minimum negative environmental impact, but virtually any material that contains hydrogen can be utilized. For stationary power applications, natural gas or propane have generally been used.

However, natural gas and other hydrocarbon fuels for fuel cell operation result in the emission of greenhouse gases, although typically in much lower quantities than if conventional present-day power generation and heating technologies were used. For example, a recent demonstration project in Japan showed that a residential fuel cell cogeneration system using natural gas as a hydrogen source emitted 23 percent less carbon dioxide than a home using central grid-supplied electricity and a conventional natural gas furnace.

Product Types

Although all fuel cells operate in fundamentally the same way, a number of different types have been developed. Fuel cells can be categorized into six major types:

  • Alkaline
  • Molten carbonate
  • Phosphoric acid
  • Proton-exchange membrane (PEM)
  • Solid-oxide
  • Regenerative and other

All the major types of fuel cells have been investigated for possible use in power generation applications, and each of them has certain advantages and disadvantages.

Alkaline

Alkaline is the oldest fuel cell chemistry and was the first to achieve significant utilization in practical applications, being used as an onboard power source on U.S. Apollo manned space flights in the 1960s and 1970s, as well as on Soviet Soyuz and U.S. Space Shuttle missions. Alkaline systems have also been used in some stationary power settings. In December 2003, for example, Astris Energi unveiled its 2.4 kW Model E8 portable generator, designed for use in applications such as on-site emergency power.

Alkaline fuel cells start quickly, are lightweight and can operate at room temperature and pressure. However, they require the use of pure hydrogen and oxygen as fuels because any carbon dioxide that may be present reacts with the electrolyte, poisoning it and severely degrading fuel cell performance. These limitations make alkaline fuel cells cost-prohibitive for many applications, and as a result a number of fuel cell proponents have abandoned the technology.

Molten Carbonate

Molten carbonate fuel cells (MCFCs) operate at high temperatures (approximately 1,200 F), which is both an advantage and a disadvantage. On one hand, MCFCs are able to internally reform hydrocarbons, allowing a variety of fuels to be used, and waste heat can be used for cogeneration, effectively raising the system’s overall energy efficiency. On the other hand, the need for high temperatures results in a lengthy start-up delay as the fuel cell warms up.

The use of MCFCs in power generation applications has grown substantially (although from an extremely small base) in recent years. For instance, in November 2004 the city of Westerville, Ohio, brought online a 250-kW Direct FuelCell (DFC) power plant manufactured by FuelCell Energy, and in September 2005 FuelCell Energy announced plans to install a 250-kW DFC unit to supply electricity for a 650-bed hospital in Kwangju, South Korea.

MTU CFC has also installed Hot Module MCFC power stations at a number of test sites, principally in Europe, with series production scheduled to begin next year.

Phosphoric Acid

Most of the power generation fuel cells installed to date have been phosphoric acid systems. Phosphoric acid fuel cells (PAFCs) operate at much lower temperatures (about 400 F) than MCFC or solid-oxide fuel cell (SOFC) systems and are able to use a broader range of fuels than either alkaline or PEM cells, because PAFCs are better able to tolerate carbon dioxide.

However, the types of materials that can be utilized in PAFC construction are restricted by the presence of a highly corrosive acid electrolyte, and these systems are large, complex, expensive and subject to contamination from carbon monoxide, and they require a warm-up period prior to operation.

Because of these drawbacks, phosphoric acid technology development efforts have slowed considerably in recent years, although Fuji Electric has announced plans to unveil an upgraded PAFC system with a fuel cell stack and reformer that lasts seven and a half years, twice as long as earlier versions.

Proton-Exchange Membrane

The polymeric material utilized in proton-exchange membrane (PEM) fuel cells is able to operate at much lower temperatures (typically around 175 F) than most alternatives and allows them to be fabricated in multiple sizes and shapes. PEMs offer quick start-up (a major advantage in backup power applications) and operability over a wide range of power outputs.


The Sheraton San Diego Hotel & Marina generates 1.5 MW of electricty from fuel cell installations.
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Their shortcomings include the need for expensive precious metal catalysts (although the amount of material required is being reduced and less expensive alternatives are being developed) and high sensitivity to contamination from carbon monoxide and other impurities, requiring PEM fuel cells to either run on pure hydrogen or employ fuel reformers.

Solid-Oxide

Advantages of solid-oxide (or solid-oxide ceramic) fuel cells (SOFCs) include high power output potential and the ability to use multiple fuel types because hydrocarbons can be reformed internally. In addition, these systems’ high operating temperatures eliminate the need for precious metal catalysts, and the excess heat can be utilized for cogeneration, bolstering overall system efficiency.

High internal temperatures are also the major disadvantage of SOFCs. They require a lengthy warm-up period on start up, as well as the use of expensive alloys and other materials that can withstand the heat, which adds to system cost, although advances continue to be made in this area.

Ceres Power, for example, has developed a solid-oxide system that operates between 1,000 F and 1,100 F – roughly 700 F less than conventional SOFCs – enabling components to be made from less costly materials. SOFCs are well suited for stationary applications like electric power and heat generation.

Regenerative and Other

Other types of fuel cells under development include regenerative and direct methanol systems, both of which are derived from basic PEM chemistry. Regenerative (or reversible) fuel cells are so-named because the reactants are regenerated, allowing energy to be stored, similar to the situation with a battery, although with a much larger capacity.

One example is the UNIGEN regenerative fuel cell system developed by Proton Energy. In September and October 2004, Proton Energy received orders from the Connecticut Clean Energy Fund to design and build three demonstration regenerative fuel cell systems in Connecticut. These units will serve as backup power supplies and peak shavers for the local grid during high-demand periods, utilizing off-peak power to produce hydrogen fuel.

Current Market Size

Results of a Freedonia fuel cell study published in 2005 indicate that in 2004, the commercial market for fuel cells (including revenues associated with prototyping and test marketing activities, as well as actual product sales) used in electric power generation applications totaled $220 million worldwide, accounting for well over half of all commercial fuel cell demand.

As Table 1 illustrates, systems based on PAFC technology accounted for much of the initial product demand in the power generation market. UTC Power, a unit of United Technologies Corp., for example, has delivered more than 270 PAFC power plants to customers around the world since 1991.

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Most recently, in September 2005, a fuel cell power plant composed of seven UTC PureCell 200 PAFCs was commissioned at a Verizon Communications call center and administration building in Garden City, N.Y. This system can generate 1.4 MW of primary electrical power and provide 6.3 million Btus of usable heat, which Verizon reports will save the company $250,000 annually in commercial power costs.

In addition, a larger number of PEM fuel cells have been installed in recent years, and the use of MCFC and SOFC systems has grown rapidly. Table 1 illustrates the dollar value increase for these installations.

To date, most commercialization activity in the power generation market has focused on micropower applications. Product examples include the 5 kW GenSys 5P PEM fuel cell made by Plug Power, the 10 kW RP-SOFC-10000 SOFC system offered by Acumentrics, the 200-kW PureCell 200 PAFC power plant manufactured by UTC and the 250-kW DFC 300A MCFC system available from FuelCell Energy.

Firms currently offering or developing larger-scale (1 MW and above) fuel cell power generation systems include Ansaldo Fuel Cells, FuelCell Energy and General Motors. For example, in February 2004 General Motors and Dow Chemical began a two-year test of PEM fuel cell technology at a Dow manufacturing facility in Freeport, Texas. If tests proceed as planned, up to 400 fuel cells could eventually be installed at Dow facilities, generating 35 MW of electricity.

Market Outlook

According to Freedonia’s study, the world market for fuel cell products and services used in commercial electric power generation applications is projected to grow sevenfold through 2009 to $1.5 billion and then rise to $7.0 billion in 2014. Demand for fuel cells used in portable electronics applications will expand at a faster rate, but power generation will continue to account for more than half of all fuel cell demand through 2014.

A number of system developers and manufacturers are targeting end users in this sector, which will help drive demand as additional products become available. Suppliers will also benefit from the comparatively low hurdles that fuel cells have to overcome to achieve cost competitiveness in this market (compared to say, automobiles), as well as their more efficient utilization of energy (useful power output per unit of fuel input) compared to conventional power sources.

PEM fuel cell systems will represent over half of the market total in 2009, but their share of product sales is expected to decline after that, as further technological advances and cost declines lead to stronger increases in SOFC and MCFC system demand from 2009 to 2014.

To provide a recent example of MCFC market activity, in September 2005 Starwood Hotels and Resorts announced plans to install a 500-kW FuelCell Energy DFC power plant to provide baseload electricity and heat at the West Tower of the Sheraton San Diego Hotel & Marina. Combined with the 1 MW of capacity installed earlier in 2005 at the facility’s East Tower, fuel cells at this location will generate a total of 1.5 MW of power.

The use of other fuel cell types is also expected to climb, although PEM, SOFC and molten carbonate systems will dominate overall power generation sales.

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As Table 2 illustrates, the Freedonia study reports that the United States, which accounted for 30 percent of all demand in 2004, will remain the single largest market for power generation fuel cell products through 2009 and beyond. Sales gains will be fueled by high energy prices and environmental concerns, and supported by government funding and subsidies.

Table 2 also illustrates that Japan will maintain its position as the second largest market, with growth in system use spurred by an intense national effort to develop and commercialize fuel cell technology, and aided by government financial incentives for fuel cell use.

Fuel cells will also find some use as a source of electricity in developing countries with inadequate central power grids, although product demand is not expected to reach its full potential for some time, most likely not until well into the next decade or beyond. This is because competitive distributed energy technologies such as conventional engines and turbines will remain more attractive alternatives from a purely economic standpoint.

On the other hand, competitive power sources have environmental shortcomings that could hasten the deployment of fuel cell systems in developing areas if cost hurdles can be overcome or mitigated, for instance, with financial assistance from international aid organizations.

Micropower applications will continue to account for the vast majority of power generation fuel cell demand globally, although product use in large-scale, utility type applications will expand as well, stimulated by the greater efficiency of fuel cell systems.

The energy efficiency of current-generation MCFC and SOFC systems, for instance, is 50 percent to 60 percent, and energy efficiency increases to more than 80 percent for SOFCs that use waste heat for cogeneration. This can be compared to older coal-powered turbines, which can be as low as 25 percent energy efficient or modern coal-powered turbines, which are roughly 35 percent to 40 percent efficient. Nevertheless, fuel cell system costs are expected to remain high, and end-user concerns about reliability and longevity will also dampen future market gains to some extent.

Author

Kenneth Long is an analyst with The Freedonia Group, an international business research company that publishes more than 100 industry research studies annually.