Cleantech Market Intelligence
Fuel Cells and the Cost Curve
In my last blog I argued that volume, not R&D, is needed to bring down the costs of proton exchange membrane (PEM) fuel cells. In this blog I will outline the two phases in which this process will unfold.
Phase 1: 1997-2017
The chart below, mined from Navigant Research’s database, shows that, in terms of adoption, we are still clearly in the first phase of ramp up with very low volumes, and associated high costs. This forecast data comes from our Fuel Cells Annual Report 2013. Even though the volumes grow slowly, each step-up produces a steep cost-drop. This mirrors the cost out that was shown by the solar PV sector in the 1970s and early 1980s.
The majority of adoption during this period is from the stationary sector, predominantly small PEM systems of 5 kilowatts (kW) or less. Applications including residential combined heat and power and both backup and primary power for telecom base stations are already starting to see volume shipments.
A new generation of PEM technology, forecast by Navigant Research to reach the market around 2017, should be less expensive, with producers nearing a profit on each system sold.
Historical and Projected PEM Fuel Cell Adoption and Cost Curve
(Source: Navigant Research)
Compare this to the solar PV market at a similar point in its evolution: at 13 GW cumulative shipped as of 2008, the cost of solar PV was approximately $3/watt. From the chart, it can be seen that Navigant forecasts the PEM fuel cell cost will be at around $5/watt by 2017. Higher, but not by that much. It should be noted that this is also higher than the study on PEM fuel cell costs, sponsored by the U.S. Department of Energy, which used best-in-class components to build a theoretical model of cost reductions at different volumes of manufacturing.
Phase 2: 2017-2030
The period 2017–2030 will see a much steeper cost curve than the solar PV industry, as synergies across sectors kick in and PEM fuel cells for cars and stationary applications begin to be shipped at large volumes. The current Navigant Research forecast for 2030 sees an impressive 300 GW annually by 2030, a level that the solar PV sector is not close to reaching.
A number of factors could completely derail this adoption, or even speed it up. The table below shows our matrix of events that could influence these forecasts. Navigant Research fuel cell forecasts are built around the first two of these: predictable events and predictable events with uncertain timing. The biggest impacts would come from the not predictable and the “black swan” events. New IP, a natural disaster, or even a change in government direction could all change the market’s direction.
Event Types That Influence Fuel Cell Forecasts
(Source: Navigant Research)
The bottom line: costs are coming down, but it will be a prolonged process. We expect low-temperature PEM costs to reach a level enabling mass adoption by the second half of the 2020s.