Investing In Hydrogen & Fuel Cells

A concise guide to the technologies and companies for investors

Nick Hanna

• Publisher: Harriman House
• Year: 2011
• eBook ISBN: 9780857190758
• Topic: Business
• Subtopic: Investments & Securities
• Index: Business

This reference guide provides a detailed perspective on the investing opportunities in hydrogen and fuel cell technologies and services, as well as an indication of the direction of trends in the sector. Significant attention is also given to the companies operating within the sector.

Investing in Hydrogen and Fuel Cells

Introduction

Before the low-carbon economy, there was the hydrogen economy. In fact, supporters have been predicting the arrival of the hydrogen economy for decades, with its promise of clean, green power from hydrogen-powered fuel cells. But it always seems to be just over the horizon, tantalisingly out of reach. Even large companies that have poured millions into R&D have failed to come up with a commercially viable product.

Take Rolls-Royce, for instance. The engineering group, better known for its turbines and aircraft engines, has been researching fuel cells since 1992. At some point they announced that they would produce a prototype hybrid power plant by 2004, but that didn’t happen. The company pumped $100m into a joint venture with a Singapore-based consortium in 2005, still with no result. From 2006 to 2009 Rolls-Royce made further investments in America, buying up an Ohio-based developer of fuel cells and spending $3m upgrading their R&D facilities. Currently, Rolls-Royce is planning to complete the design of its utility-scale fuel cell in 2012. No date has been given for a commercial launch.

Sceptics say that the hydrogen economy is a distant fantasy, claiming that producing hydrogen and building the infrastructure is just too expensive, so fuel cells will never make it onto the mass market. Even so, there are signs that the balance has now shifted in favour of hydrogen’s proponents. The same drivers that are propelling other clean technologies – climate change, peak oil, and energy security – are having an impact, and the logic behind hydrogen energy looks increasingly compelling.

Investing in fuel cells

Overview

Bull points

• Rising energy prices.
• Synergies with the growth in renewables.
• New low-cost production techniques.

Bear points

• High cash burn rates in some companies.
• Cost of raw materials (catalysts such as platinum).
• Cost of hydrogen infrastructure.
• Cost of the finished products.

Investment summary

Media headlines over the past couple of years are indicative of the general feeling about the fuel cell sector. They include: “Fuel Cell Fervour Goes Flat”, “Fuel Cells a Damp Squib”, “Fuel Cell Uncertainties”, and “Fuel Cell Maker Closes Shop”. The last of these headlines refers to PolyFuel, a California-based developer of methanol fuel cells which launched on AIM in 2005. Despite injections of more than $40m in venture capital and winning $5m in US federal funding, the company went bust in 2009.

Part of the problem is simply the cost of fuel cells. Current system costs are still too high by a factor of at least ten for widespread uses, according to the Carbon Trust. These costs could be brought down in the future through volume production, but projections show that even then, with today’s technology, costs would remain too high for most markets by 30-40%. For instance, the projected cost of residential micro-CHP (combined heat and power) is said to be around £5500-£6500 per unit, which is £2000 more than a condensing boiler. ^[4] The fact that it gives you electricity as well as heat is of course the justification for this premium.

Analysis from the Carbon Trust shows that if substantial cuts can be achieved, the global market could be worth over $26bn in 2020 and over $180bn in 2050. ^[5] The UK share of this market could be $1bn in 2020 rising to $19bn in 2050, they say.

Fuel cell companies had a good year in 2009, with firms including AFC Energy, Acta, Ceramic Fuel Cells and Ceres Power showing strong gains. “All of these companies are nearing the point when they should have commercial products,” noted Andrew Hoare in Quoted Cleantech in January 2010. “After years of cash outflows, they will need to show that these products are successful and generating revenues and profits.” ^[6]

Finance and investment specialist David Stevenson is less positive about the sector. “My brutally honest assessment of fuel cells is that I’ve given up waiting. I will believe it when I see it – it always seems to be just around the corner … and then is not. It may all work out but my suspicion is that when that day comes investors will have lost patience and run away”. He counsels extreme caution for private investors.

Government support

The European Union is investing over €1bn in a programme involving 64 companies and 54 universities with the aim of speeding up the commercialisation of fuel cells and hydrogen technologies in the next decade.

The UK is one of the leading fuel cell research hubs in the world, drawing on the country’s strong materials science and chemistry research. The government’s Technology Strategy Board has invested around £9m in projects designed to lower the cost of fuel cells and improve their reliability, durability and performance. The Department of Energy and Climate Change has launched a separate £7.2m Hydrogen and Fuel Cell Demonstration programme and the Carbon Trust has weighed in with its Polymer Fuel Cells Challenge, which aims to make polymer fuel cells an everyday commercial reality.

Speaking about the Carbon Trust’s programme, Dr Robert Trezona of the organisation said:

“Fuel cells have been ten years away from a real breakthrough for the past 20 years. This is a critical moment for UK fuel cell technology as emerging markets combine with technology cost breakthroughs to create a golden opportunity to launch world-beating products onto a massive global market. Our initiative aims to drive forward the commercialisation of the UK’s unique fuel cell expertise.” ^[7]

The programme aims to deliver breakthroughs which will bring costs down by a factor of around 35% in order to make producing fuel cell systems more attractive for mass markets.

Germany is running a national programme to test residential fuel cells. In Japan, the government’s Hydrogen and Fuel Cell Demonstration Project has b...

Table of contents

• Cover
• Publishing details
• Risk warning
• About the Author
• Preface
• Introduction
• Investing in Hydrogen and Fuel Cells
• Directory of Listed Companies
• Resources
• Guides in this Series