In Bloom Energy’s latest fundraising round of $130 million, it was revealed that one company alone – E.ON – invested €91.5 million ($120 million at the going exchange rate).  Setting aside the fact that this takes Bloom Energy’s private investment levels to an eye-watering $1.2 billion for a company that has yet to make a profit, the signal that E.ON is sending is staggering.

The skeptics continue to sharpen their knives on the future of the fuel cell industry, pointing out that no U.S. fuel cell company to date has made a profit, but serious players like E.ON clearly see a strategic play in the sector.  Here, the Navigant Research fuel cell analyst team of Lisa Jerram and I hypothesize what this could be.

In our white paper, “Smart Energy: Five Metatrends to Watch in 2013 and Beyond,” we pointed out that the role of the traditional utility was changing and that the energy sector had the potential to be democratized through distributed generation.  The traditional role of utilities centered on the control of two types of assets: power generation and grid control. With the development of small-scale generation, microgrids, and virtual power plants (VPPs), the control of power generation was starting to shift away from the utility to the hands of, well, anyone. Traditionally, solar and small-scale wind systems were not powerful enough to fundamentally disrupt this model – then fuel cells came along. From ClearEdge’s 5 kW residential / light commercial systems to Bloom Energy’s 100 kW system, right up to FuelCell Energy’s 400 kW system, these are all available to plug into your home/building /school/campus/swimming pool to generate power – and feed excess into the grid when you are not using it. And “you” refers to anyone with enough money or determination to control their own power generation, from homeowners to hospitals to office managers. In theory, as long as you were in the right geography, you could buy a system. That essentially had the effect of throwing the utilities into a head spin and raised the all-important question: What is the future role of the utilities in this emerging energy economy?

E.ON, which will at least have bought one seat on the board with this investment and some direct control into the direction of the company, seems to be taking a punt of carrying on along the traditional role – ownership and critical control of generation assets.  Control, or partial control, of the company is a step in the direction of controlling generation assets. Is it an out-and-out technology land grab? Not yet.  Could it be? Yes. Whoever controls the flow of technology into the marketplace will control the use of the technology. But E.ON’s war chest is actually not bottomless. A growing number of stationary fuel cell companies have low enough costs to potentially ship a serious number of systems over the next 5 years. This market will not be controlled by any one company. The game is still afoot!

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.