Study: ‘Hobbled by High Cost, Hydrogen Fuel Cells Will Be a Modest $3 Billion Market in 2030′

Capital cost, not hydrogen supply, will limit adoption to a mere 5.9 GW, dashing dreams of a revolutionary energy future, says Lux Research

As I’ve said for a decade now, hydrogen fuel cells are not going to be a significant, cost-effective CO2 reducer. In a 2005 journal article, “The car and fuel of the future,” I noted that:

Using fuel cell vehicles and hydrogen from zero-carbon sources such as renewable power or nuclear energy has a cost of avoided carbon dioxide of more than $600 a metric ton, which is more than a factor of ten higher than most other strategies being considered today….

A 2013 study by independent research and advisory firm Lux Research finds that despite billions in research and development spent in the past decade, “The dream of a hydrogen economy envisioned for decades by politicians, economists, and environmentalists is no nearer, with hydrogen fuel cells turning a modest $3 billion market of about 5.9 GW in 2030.”

Hydrogen fuel cells won’t be a major contributor to solving the problem of manmade climate change until the market is 100 times larger, which simply won’t happen fast enough to matter to the climate fight, even in the unlikely event they ever become a cost-effective CO2 reducer.

The Lux study, “The Great Compression: The Future of the Hydrogen Economy” (client subs. req’d),  finds that “hydrogen demand from fuel cells will total 140 million kg in 2030, a meager 0.56% of global hydrogen demand.” Looks like I’m going to win my big hydrogen bet!

Here’s the rest of the news release from Lux:

Although the cost of hydrogen impacts fuel cell market adoption, hydrogen fuel accounts for only 35% of the total cost of ownership (TCO) for stationary applications and 21% of the TCO for mobile applications, with fuel cell capital costs and membrane replacement costs making up most of the difference.

“The hydrogen supply chain is not the most critical bottleneck for fuel cell adoption,” said Brian Warshay, Research Associate and the lead author of the report titled, “The Great Compression: the Future of the Hydrogen Economy.” “High capital costs and the low costs of incumbents provide a nearly insurmountable barrier to adoption, except in niche applications,” he added. In order to determine the economic viability and potential of an expansive hydrogen economy in the energy sectors, Lux Research conducted a detailed analysis of the costs of hydrogen generation, distribution, storage, and consumption in an effort to find the greatest constraints and opportunities. Among their findings:

Hydrogen generation accounts for less than 33% of the cost at the pump. The costs of hydrogen compression, storage, and distribution make up the majority of the cost of hydrogen, offering the greatest opportunities for improvement and innovation.PEM cells will have a $1 billion stationary market. Proton exchange membrane (PEM) fuel cells for telecom power and backup will reach $1 billion in 2030, while fuel cells of all types for residential, commercial and utility generation will not prove cost-effective.Mobile applications will be worth $2 billion. PEM fuel cells will reach $2 billion on the backs of forklifts and light-duty vehicles, while buses will remain miniscule. A robust hydrogen vehicle fueling infrastructure is necessary but ultimately insufficient to overhaul the passenger vehicle market.Hydrogen demand from fuel cells will total 140 million kg in 2030, a meager 0.56% of global merchant hydrogen demand across all industries.

It is long past time to end the hype about hydrogen.

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Modest Steps Could Add Up To Big Success For Clean Energy In 2013

by Noah Ginsberg, via the American Council on Renewable Energy

Looking back at 2012, one thing is certain in the sea of the year’s uncertainty; renewable energy experienced significant growth.

The U.S. solar industry grew at a rate of 13.2%.  A global oversupply of solar panels lowered prices for American consumers, resulting in higher demand and greater profits for solar installation companies. SolarCity’s IPO proved to be successful despite claims that its stock would immediately plummet. And even with excessive political attacks by opponents of renewable energy – over $250 million spent in the 2012 election – the industry has gained strong public support across the country.  Industries such as wind, biofuels, geothermal, hydropower, electric transportation, and solar have achieved success in 2012 but the next step in supporting growth is creating a more stable policy landscape.

Creating a stable policy landscape should start with an extension of the Production Tax Credit (PTC), which expires at the end of 2012. The PTC has been very effective in bringing wind energy and other renewable energy sources to scale, unlocking billions of dollars in private investment for wind energy. It encouraged the development of almost 4 GW of wind energy in the first ten months of 2012 alone. The PTC has also contributed to a 38% drop in project development costs for wind farms in the past four years. In order to continue the strong trajectory the industry is on, an extension of the PTC for 2013 and beyond is needed, albeit with an appropriate timeline for a phaseout.

Adopting legislation to qualify renewables as Master Limited Partnerships (MLPs) would also attract additional capital into renewable energy development. According to Secretary Chu of the Department of Energy, if MLP legislation is signed into law and renewable energy is considered a “qualified” energy source under MLP legislation, there will be a significant increase in investments in renewable energy development. Furthermore, it will create a stable financial landscape for both small and large-scale investors who wish to enter the market. Senator Chris Coons of Delaware has proposed MLP legislation for renewable energy and his legislation may see bipartisan support in the early months of 2013.

Every year, critics of renewable energy get louder even as the prices of electricity generated from renewable sources decrease. Although 2012 was an election year and political attacks were targeted at renewable energy, the industry braved the storm. The business case for renewable energy has gotten stronger in 2012 and will continue to do so – even if there are some bumps on the horizon.

Now more than ever, the potential, production, and capacity for renewable energy are enormous, but with sound energy policy the potential is exponentially greater. Political gridlock is looming in 2013. The year may not start the way anybody wants it to, but it still has the potential to end on a very high note for American renewable energy.

Noah Ginsberg is a Communications Associate for ACORE. This piece was originally published at ACORE and was reprinted with permission.

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