The weather is starting to warm up, the days are getting longer, and there might even be lambs gamboling in the fields, but for energy professionals, on April 8 through April 12, there’s only one place to be: inside the hall of the Hannover Fair, Europe’s largest trade show.  Last year 185,000 people descended on the old World Fair site.

Hall 27, now the home of the expanded Hydrogen and Fuel Cell Group Exhibit, will be a mix of the usual buyers, analysts, students, and vendors, as well as people who are, frankly, lost.  As always I have a hit list of the companies I want to meet with and the trends I need to explore further.

In the fuel cell and hydrogen sector I see two key trends emerging this year, and Hannover provides a concentrated opportunity in advance of the production of our Fuel Cell Annual Report for 2013 to track down the data to back up (or not) what I am seeing.  So far the two big trends are:

Hydrogen from electrolysis.  This suddenly ubiquitous technology includes using methanated hydrogen to produce synthetic natural gas.  Companies at the Fair with product in this area include:  Acta (Italy), Ceram (France), CETH2 (France), Giner (USA), H Tec, H2 Nitidor (Italy), iGas (Germany), ITM Power (United Kingdom), McPhy (Germany).  MicrobEnergy (Germany), and Next Hydrogen (Canada).

The stationary sector strengthens.  Stationary applications still don’t attract the type of PR that vehicles do, but an increasing number of companies are on the verge of profitability.  Companies at the Fair that I will be looking for include: Ballard (Canada), Bosch Thermotechnik (Germany), Ceramic Fuel Cells (Australia), ClearEdge Power (United States), Convion (Finland), Elcore (Germany), Foresight Energy (China), and MVV Energie (Germany).

Also interesting is the rise in companies at the Fair with fuel cell-powered portable power products.  This market seemed to drop off a cliff a few years ago, but companies like myFC (Sweden), Lilliputian Systems (United States), and Horizon Fuel Cell (Singapore) could be driving a resurgence of interest in this area.

In our recent white paper, “Smart Energy: Five Metatrends To Watch in 2013 and Beyond,” Navigant Research forecast that, in terms of economic development, the area in the Southern Africa Power Pool (SAPP) will be the next high economic powerhouse, akin to Brazil, Russia, India, and China (BRIC).  A March article in The Economist seemed to agree with me.  With booming economic growth, an appetite for energy and new technologies, fast liberalizing markets, and encouraging overseas investment, many companies are lining up to export to Africa.

However, Africa is not going to be just a passive adopter of overseas technology.  The governments of South Africa and Kenya, among others, aim to turn their countries into high innovation and IP generating economies, with local value-added manufacturing.

Innovation can be measured by a number of metrics, including IP generation, the amount of government funding allocated to R&D, the number of PhD students, and the number of limited liability companies created.  As each of these grows, in theory, the dependence on imported products decreases.  A prime example of this is the transformation of the South Korean economy from heavy importer to leading exporter in under two decades.

As more and more developing economies seek to follow this path, moving away from being passive importers of new technology (especially in the cleantech space), companies will need to develop long term market entry strategies that involve local partners, local offices, and, increasingly, local manufacturing.

The economics of the United States, Germany, South Korea, and Japan are “old world” examples of this type of market.  The new generation ‑ Brazil, Chile, India, Indonesia, South Africa, Kenya, and of course China – has a high potential for rapid adoption of cleantech, including renewable energy, fuel cells, and advanced batteries.

Together these Tier 2 economies represent billions of dollars in potential revenue for cleantech companies, but they are not pots of gold.  The people of these countries are looking for partners to create local wealth , not multinationals that want to leverage the market and export the wealth.

Shifting from exporting to local production will require extra resources, a deep and realistic understanding of the markets, strong IP protection, and a high degree of flexibility.  Those who succeed will find new partners, rapidly growing markets, and access to highly educated workforces.  Those who fail will have to face the economic reality of limited markets with limited growth potential.

March was a big month for Canadian fuel cell stack and system supplier Ballard, with a number of major deals edging the company closer to profitability.  Not only did it announce its move into the Chinese market, through its distributor Azure, for its large scale distributed generation system ClearGen, it also signed an agreement with Volkswagen to develop fuel cell stacks for the automaker’s fuel cell vehicle program.  The most interesting – if least valuable in terms of upfront money – development was the announcement that the South Africa-based PGM Development Fund will make a strategic $4 million investment into Ballard.  In the scheme of things, $4 million is not a huge amount, but the move is significant nevertheless.

The PGM Development Fund is a vehicle for Anglo American Platinum (AmPlat) to make strategic investments into technologies it sees could help the South African economy, and the wider economic development of Africa.  South Africa is the largest producer of platinum-group metals in the world and AmPlat, along with Impala Platinum and Lonmin, controls over 75% of the world platinum market.  These three companies have a long-term view of world development.  If it takes up to 20 years to open a new mine shaft, the planning horizons involved have to be similarly long term.

According to the Johnson Matthey publication “The Platinum Book,” the current demand for platinum comes from four main sectors: auto-catalysts, jewelry, industrial applications, and precious-metals investing.  Longer term, the platinum industry is looking to the fuel cell sector for increased demand.  Navigant Research calculates that today the use of platinum in the fuel cell sector is less than 1,000 ounces annually, but that is growing.  Within the next 10 to 15 years it is unlikely that demand from the fuel cell sector will reach a large bar on a graph like this one, but it will increasingly soak up excess platinum from the market, with companies moving to lending platinum, as is the current norm in the automotive sector. Lending of platinum is when companies pay to loan the metal, instead of outright ownership. At the end of the use of the material it is returned to the owner company, often for refining, and loaned out again. This works with platinum in a number of industries as it does not dissociate over time.

Market Interests

Ballard is the globally dominant low-temperature fuel cell stack supplier.  It controls over 60% of all PEM stacks worldwide, excepting Japan, and it is likely to remain the leader for some time to come.  By taking a stake in the leading supplier of platinum-loaded fuel cell stacks, AmPlat is securing market access for its product.

The funding will also buy AmPlat influence in the future development of Ballard.  We will almost certainly see increasing interest from Ballard in the South African market: within the next 2 years or so a joint venture, based in South Africa, and then longer term manufacturing capability located in-country.

After all, through clear marketing and promotional activity, platinum miners have been manipulating market interest and uptake in platinum for decades.  It was only a matter of time before they started to influence the fuel cell sector as well.  We suspect this is one of the opening salvos in an increasing interest and activity from platinum miners in this sector – and don’t be surprised if Ballard starts more aggressively promoting fuel cells in general.

Synthetic natural gas (SNG) has been around for a few decades now, primarily using coal as an input, but SNG version 2.0, being developed in Germany by companies including Audi, is different.  It is not renewable natural gas (RNG), which is made from biogas; SNG is made from the methanation of renewably produced hydrogen.

My colleague Mackinnon Lawrence explains that RNG is produced by collecting raw biogas from anaerobic digesters, landfills, wastewater treatment facilities, etc., then stripping out the CO2 and other trace gases.  This yields pipeline quality, purified methane.  The new form of SNG, on the other hand, uses excess wind power to produce electrolytic hydrogen, which is then combined with CO2 (the methanation step) to produce another stream of pipeline-quality natural gas.

So we have one process of producing natural gas that has as a by-product CO2 and one that requires CO2 to produce natural gas.  Handy! But why could SNG be so important in the coming decades?

Out of Love

Europe is falling out of love with natural gas – at least the stuff that is extracted from the ground and tends to be imported from outside the EU.  However, one legacy of the continent’s 30-year love affair with natural gas is a very substantial natural gas infrastructure.  At the same time the European Commission has stated, without yet forming a concrete policy plan, that the entire 27 nations of the European Union will decarbonize by 2050.

EU GHG Reductions Compared to 1990 (% Reductions; 1990 = 100%):  2005-2050

(Source: Pike Research)

Long term, the European economy could well be hydrogen-based.  A recent report from the H2Mobility grouping in the United Kingdom, for example, shows that there could be 1.5 million hydrogen fueled cars on the road in the United Kingdom by 2015.  But any significant energy transition takes decades to accomplish, and there is no black and white switch approach to this.  We must move step by step and plan for the transitional steps.

Although in 2013 electrolysis is not new technology, the storage of large volumes of hydrogen, in any size and scale, is still tricky.  There are research and pilot schemes to store hydrogen at volume in salt caverns, but the scale of inter-seasonal hydrogen that could be needed to store and balance out seasonal demand is beyond the levels that we can currently achieve – that’s where SNG could come in.  Producing large volumes of hydrogen, cheaply from electrolysis using excess wind power, and then turning this into easy to store and transport natural gas, could well be the key stepping stone from the 2013 fossil fuel-based economy to the 2040 hydrogen-based economy.