Navigant Research Blog

With UTC Acquisition, ClearEdge Grows Fuel Cell Market

Kerry-Ann Adamson — January 3, 2013

In late December, ClearEdge Power announced that it had purchased the assets of UTC Power from UTC.

What we know about the companies is that both are fuel-cell developer firms, both are primarily U.S.  based, and neither is making a profit.  As far as the deal itself, we know little.  No terms were disclosed.

ClearEdge Power produces high temperature polymer electrolyte membrane fuel cells (HT PEM).  UTC Power produces primarily phosphoric acid fuel cells (PAFCs).  Looking at the current global stationary fuel cell marketplace of companies that are producing commercial systems, there are three companies producing HT PEM and two producing PAFC.  What this means is that the supply chain for both types of fuel cell is somewhat limited, and thus more costly, than the more mainstream types of fuel cell.

But an HT PEM stack is, in simple terms, half a PAFC and half a PEM fuel cell.  So by buying UTC Power, ClearEdge Power has acquired access to UPC Power’s supply chain.  Critically, this means that they now have the capability to order at much larger volume from suppliers, potentially at lower costs that on their own were not possible.

What else? ClearEdge Power produces 5-kilowatt (kW) systems, UTC Power produces 400 kW systems.  Both companies have flirted with the South Korean market but only UTC Power has signed a concrete deal in the country.

Under its new renewable portfolio standard (RPS), South Korea, it should be remembered, is offering double credits on fuel cells installations, representing a potential market of over 18 gigwatts (GW) by 2020.  The table below highlights what the RPS would look like if all the RPS installations in South Korea were fuel cells.

South Korea % Renewable Energy Generation under RPS: 2012 to 2012


(Source: Pike Research)

The only other fuel cell company capable, at present, of selling at volume and size into this market is FuelCell Energy.  In effect, ClearEdge has bought into a potentially large, repeatable, revenue stream.  This clearly can complement its presence already in the country, in terms of staff and of its relationship with LS Industrial Systems, which was spun out of LG Corp, allowing ClearEdge to sell into the Korean market more quickly than before.

These are some of the main synergies of the deal.  The implications, as I see them, include:

  • Costs coming down per unit at ClearEdge Power due to its stronger supply chain;
  • A number of deals released in the next quarter in South Korea;
  • New systems sold in California under an independent power producer model, supplying utilities including Southern California Gas Co., an investor in CleanEdge Power;
  • A new focus on New York state; and
  • A new finance round during 2013 for ClearEdge, or potentially an IPO.

 

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