The Impact of the Top 3 Strategic Imperatives on the Stationary Fuel Cells Industry

Transformative Megatrends

why

Increasing concerns over climate change and carbon emissions have put enormous pressure on countries to reduce emissions and move toward carbon neutrality. Decarbonizing the transport, heating, and energy industries has become a crucial goal, making it imperative to act to reach climate targets and prevent environmental damage.

Scaling up electrolyzer capacity will increase the volume of green hydrogen (H2) available in the market.

Frost perspective

Fuel cells are fuel-flexible, allowing them to run on natural and liquefied petroleum gas (LPG). However, H2's potential as a zero-carbon energy source has driven interest in the technology since 2020.

Fuel cells will compete with other power sources that support decarbonization, but they still have potential uses in hybrid power applications.

Disruptive Technologies

Why

Renewable energy (RE) technologies have disrupted global energy markets, with wind and solar photovoltaics (PV) now mainstream energy solutions. Additional disruption is likely, with a decade of forecast high-capacity investment for both technologies, with the support of high levels of investment in energy storage.

Decentralized energy investment will double during this decade, with 25% of global investment addressing decentralized energy sources—principally distributed solar—by 2030. The hybridization of these technologies will similarly see significant investment.

Frost perspective

Fuel cells have great deployment potential in hybrid systems with other solutions, as they can provide continuous power to match the intermittency of solar and wind. This would enable a degree of decarbonization, even if natural gas is the primary fuel.

However, fuel cells will compete with other technologies, such as battery energy storage, which, in conjunction with renewable technologies, provides a continuous power solution.

Internal Challenges

Why

Raw material pricing and sourcing have improved, but challenges remain for fuel cell manufacturers, creating cost uncertainties.

The lack of high-volume demand makes reducing costs via economies-of-scale manufacturing a significant challenge.

Some manufacturers exclusively target the automotive segment while deprioritizing the stationary market.

Frost perspective

Fuel cell manufacturers are attempting to diversify supply chains, but material substitutability is not possible in some cases, as certain materials are necessary for the catalyst, and changes these would involve design alterations. Manufacturers must hope that mining investments result in higher volumes of crucial materials.

Key Competitors

United States

• Bloom Energy
• HyAxiom (Doosan)
• FuelCell Energy
• Plug Power
• Ballard Power Systems
• Accelerate (Cummins)

South Korea

• Doosan
• Bloom Energy
• FuelCell Energy

Japan

• Panasonic
• Toshiba
• Aisin Seiki
• Fuji
• Kyocera
• Bloom Energy

Europe

• Plug Power
• Bloom Energy
• Sunfire
• Ceres Power
• Intelligent Energy

Stationary Fuel Cell: Revenue Forecast, Global, 2022–2035

Average system prices will fall for the remainder of the decade, driving greater adoption. As manufacturers scale up operations, they will have the opportunity to improve margins. The revenue estimate of the base year is 1.42 billion dollars, with a CAGR of 10.5% for the study period.

Key Findings

1. Market Growth: The global fuel cell market will grow at a compound annual growth rate (CAGR) of 10.5% between 2023 and 2035, with revenue increasing from $1.42 billion to $4.71 billion. The United States, Japan, and South Korea will remain the leading markets. Government subsidies and incentives have been vital to success in Japan and South Korea. US companies have benefited from Department of Defense projects and funding to pursue net-zero carbon emissions.
2. Short-to-Medium Term Challenges: In the short-to-medium term, the growth pathway faces challenges. Natural gas prices have declined significantly from the highs in 2022, but the volatility and potential for future increases have deterred potential investors. Natural gas is the main feedstock for fuel cells, making them more expensive to operate. Green H2 investment has been lower than forecasts, and heavy industrial applications will consume most of the pre-2030 production. However, the potential H2 offers in the longer term (as supply chains mature) is a major driver of widespread fuel cell adoption.
3. Raw Material Costs: An additional challenge is the cost and supply of raw materials. Prices for raw materials (particularly platinum and iridium, which are vital components of proton exchange membrane fuel cells (PEMFCs)) have been volatile, and 2022–2023 saw significant cost inflation for materials and plant components. This pressure has now eased significantly, but per kilowatt (kW) costs will only begin declining in 2026. As manufacturers scale up their production capacities, costs will fall; however, it will take until 2029–2030 for fuel cells to reach the lows of 2021. Manufacturers are focusing on building margins, reducing the likelihood of dramatic declines.
4. Technology Leadership: Solid oxide fuel cells (SOFCs) are the leading technology for stationary applications and are excellent for continuous power supply. Phosphoric acid fuel cells (PAFCs) are a strong second, with PEMFCs in third, offering an advantage in intermittent power supply situations. For non-stationary fuel cells, PEMFCs dominate. Increased production in the automotive space for PEMFCs will lead to spillover into the stationary sector as companies seek to push products into new verticals.
5. Competitive Intensity: The level of competitive intensity in the fuel cell industry is moderate. While companies competitively tender for projects, successfully completing them at realistic price points is a common benefit, as badly executed projects reflect negatively on the whole industry. Asian players aim to partner with Western manufacturers to gain product and technology expertise.