Navigant Research Blog

Japan Doubles Down on Fuel Cell Vehicles

— July 13, 2014

Two recent announcements out of Japan have dramatically cut the price that Japanese drivers will pay for a fuel cell car.  Toyota unveiled its completed design for the fuel cell vehicle (FCV) it will put on the market in 2015.  More importantly, the company revealed the price would be around ¥7 million, or $70,000.  This is a big drop from the $100,000 price tag floated, alarmingly, a few years ago.

A day earlier, Japan’s prime minister Shinzo Abe called for subsidies of FCVs beginning next year.  A part of the government’s economic growth strategy, these incentives reflect the hydrogen energy roadmap adopted by Japan’s trade ministry.

As described in my Fuel Cell Vehicles report, I’ve long said that the two impediments to fuel cell cars taking hold in the market are cost and infrastructure.  Automakers like Honda and Daimler have already shown that the technology works, resolving early issues such as cold-start capability.  FCVs will also deliver on the key performance characteristics that make them intriguing, as compared to battery electric vehicles: range and refueling.  The Toyota FCV will have a 420-mile range and refuel in 3 minutes.

The Post-Fukushima Strategy

For longtime fuel cell technology followers, I am stating the obvious.  The potential benefits of fuel cells in transportation have been well-understood for years.  Honda, General Motors (GM), Daimler, Hyundai, and Toyota have all shown they can make cars that meet those performance targets.  Nevertheless, in the U.S. media, the perception persists that fuel cells were made obsolete by the successful introduction of plug-in electric vehicles (PEVs).  In Navigant Research’s recent white paper, The Fuel Cell and Hydrogen Industries: 10 Trends to Watch, I noted that the U.S. media would continue to tie these two technologies together – and would misunderstand the rationale for pursuing them both.  Sure enough, this article asserts that the Japanese government’s goal is to crush Tesla.

Not quite.  The Japanese government’s plan is to promote technologies and fuels that will help ensure the country never has another experience like the Fukushima disaster in 2011.  The Japanese government also wants to grow the economy by supporting domestic industries.

The Market Will Decide

To take a phrase from President Obama, Japan has taken an “all of the above” approach in pursuing these two goals.  Nissan and Toyota have done well in the PEV market.  But fuel cells offer an alternative for consumers who may find that a plug-in car doesn’t meet their driving needs.

Japan has also made a huge commitment to fuel cells that provide residential power.  The country’s residential fuel cell program has supported the deployment of over 42,000 combined heat and power (CHP) fuel cells in Japan.  Manufactured by Toshiba, Panasonic, and Eneos Celltech, these residential units are sold through gas companies like Tokyo Gas.  After Fukushima, when the plant’s backup diesel generators were rendered useless and employees scavenged car batteries to power monitoring equipment, the Japanese government set a requirement that the fuel cells be capable of starting up when the power is off.  While these fuel cells employ a different technology from automotive fuel cells, the CHP program demonstrates both Japan’s commitment to pursuing whatever technology the country believes will support its energy resiliency (utilizing domestic expertise) and its willingness to support that technology in its early market introduction.

Japan has already committed to building 100 hydrogen fueling stations in key metro areas.  The country’s energy companies are partnering in that effort.  Note that the Japanese government is also supporting the automaker deployment of 12,000 charging stations in Japan.  Again, it’s not an either/or prospect for Japan.  The announcement on the FCV subsidies will put the cars at a price point where they might have a chance in the market.  If the infrastructure is in place to make fueling reasonably convenient, then it will be up to consumers to decide whether FCVs will succeed in the market or not.  Success will be measured over many years, not in 18 months.


Japan Fuel Cell Project a Big Step for Bloom

— November 27, 2013

Since coming out of stealth mode in 2010, fuel cell manufacturer Bloom Energy has never been far from the headlines.  Generating more press inches than most other fuel cell companies put together, Bloom has played a careful, and strategic, game with the press and the industry.

With rumors building, again, that Bloom will go public, the timing of this week’s press release stating that Bloom Energy is entering the Japanese market is attention-grabbing.  The installation, a 200 kW solid-oxide fuel cell Bloom Box, is located at SoftBank’s M-Tower in Fukuoka, Japan.  There are no details of follow on orders or scale-up in the country, so this announcement has to be taken at face value: a single initial installation in Japan.

With an investment of over $100 million by European utility E.ON earlier this year, the European market was ticketed by some as the likely first baby step out of the United States for the company.  E.ON, however, made a strategic investment, while Softbank earlier this year formed a JV with Bloom Energy, creating a separate company Bloom Energy Japan Limited.

A Hard Nut

To date Japan has proven a notoriously hard market for non-Japanese fuel cell companies to break into, with companies such as Ballard and Ceramic Fuel Cell having tried in the past.  Alongside South Korea, Japan is still ranked as the most open to fuel cell power generation of any country in the world, and Navigant Research, in the forthcoming white paper entitled “The Fuel Cell and Hydrogen Industries: Ten Trends to Watch in 2014 and Beyond,” forecasts that as of 2014 there will be over 70,000 homes in Japan with a residential fuel cell system installed.  Although the country has been actively developing larger systems, only Fuji Electric with its 100 kW phosphoric acid fuel cell system is currently commercially available in the country.

Going forward in 2014, we can expect more small-scale installations in Japan and a number of high profile announcements from the company.  Outside of Japan and with the resignation in July of Girish Paranjpe, the company’s head of its international operations, it’s anyone’s guess where next for Bloom.  Potential markets include Germany, Russia, and South Korea, alongside India – if another JV is in the cards.

Interest in the stationary fuel cell sector is climbing high again, and companies such as Bloom Energy are at the vanguard of establishing this industry. A successful project in Japan will validate both the technology and the business model.


Fuel Cell Industry Needs Products, Not Education

— November 21, 2013

For years the nuclear industry has suggested that if only the consumer were better educated then the purported benefits of nuclear would then become obvious and public opposition to new reactors would evaporate.

Worryingly, this claim is now beginning to be raised within the fuel cell sector.  At a recent industry event in Brussels, the fuel cell program director of BMW claimed that the industry needs more public education on the benefits of the technology.  This claim was mirrored a number of times during the day – in essence, reflecting the blame away from an industry that in Europe is significantly underperforming onto its potential customers.  Interestingly, of the panel of high-level European bureaucrats, each espousing of the need for the industry to step up, only one of them had actually bought a fuel cell.

Buy, Play, Break, Improve

To be sure, the consumer is a real area of concern.  Not in terms of needing better education, but in terms of needing more product that is available to buy.  Intelligent Energy, which recently announced the release of the Upp portable fuel cell charger, claims that the unit will not be available in the Europe until sometime in 2014.  This was after it was shown to millions of potential adopters via a television slot on the BBC.   There is, in fact, no commercial fuel cell product widely available across the EU28.  FuelCell Energy, an import from North America, is making large strides to being available but is not there yet.  The Horizon fuel cell recharger can be ordered from their website for most countries – but not all – and there is a long way to go before any type of residential or light commercial system is broadly available.

The theory is that if customers understand the benefits of fuel cells but have nowhere to actually go and buy the product, this will create a large pent-up demand.  But, as I have written before, the product buying cycle cannot be shortcut.  By not getting the products in the hand of early adopters, the industry is pushing out its entry into the the mass market even further.  Education and product availability go hand-in-hand.  Buy, play, show, tell, and yes, break, is all part of this.  Show and tell – and shifting responsibility to the customer – is simply not enough.


Fuel Cell Market Gets Real

— November 5, 2013

Is there such a thing as “the fuel cell industry”? The industry is really a collection of disparate applications and markets.  What exactly do companies focused on passenger cars, uninterruptible power, energy storage, residential power, or forklifts have in common? One thing that the hosts of this year’s Fuel Cell Seminar & Energy Exposition, in Columbus, Ohio, hoped they had in common was the supply chain, which is Ohio’s strength in this sector.  And, one thing I learned at the Seminar’s plenary sessions is that there is there is no fuel cell in the world that doesn’t have an Ohio component in it.

Beyond that, these markets have quite different stories to tell on where they are in the technology development timeline and where they are going.  But the one theme I heard repeated in Columbus was realism – realism about the need to reduce costs to compete in the commercial market.  Two companies, Honda and American Electric Power, stressed that fuel cell technology is ready, but the costs must come down to compete against the many other clean, efficient options available.  Honda’s Bill Konstantacos spent much of his talk  touting the advantages of its gas and hybrid vehicles, which seemed rather off topic, until the point was made that fuel cells have to compete with these technologies, and will not be adopted just because supporters think fuel cells are the best zero-emissions option.  Reducing costs brings us back to the supply chain, since that is where the costs are going to come out at this stage, more so than from any basic research and development.

New Markets for Natural Gas

Other speakers also veered off-topic, promoting their own fuel or technology in addition to fuel cells.  Thus, we had Kathryn Clay of the Drive Natural Gas Initiative touting natural gas vehicles – and, in spite of claims that natural gas infrastructure might be a pathway to hydrogen infrastructure, this does not seem likely.  That said, I credit H2USA, the group developing a road map for U.S. hydrogen infrastructure rollout, for getting the natural gas industry on board with its efforts.  Fuel cell vehicles that use hydrogen from reformed natural gas can offer another domestic market as U.S. gas supplies increase.  It will not be until the latter part of this decade at the earliest, but the U.S. natural gas industry has to be making long-term plans on how to utilize the supplies from the U.S. shale gas boom beyond the export option.

I was surprised to see fuel cell vehicles (FCVs) placed in a very prominent role in the seminar’s plenary sessions.  FCVs have long played an outsized role in the public face of fuel cells, thanks to the (mostly contrived) battle between FCVs and battery electric vehicles, and because the media finds it more exciting to talk about cars than power boxes.  Frankly, this is not helpful to the rest of the fuel cell world because it creates an impression that the technology is not yet ready for prime time when, in fact, more than 28,000 fuel cell systems were shipped in 2012.  Still, there was some news on the FCV front – Honda has finally committed to introducing a new FCV in 2015 (its FCX Clarity is from 2008) and Toyota has said it is on track to produce its first production FCV in 2015.  Add to that the commitment in California to fund hydrogen fueling during the next 10 years, and there is continued momentum in the FCV arena.  It just requires being realistic about the timeline: Navigant Research’s report, Fuel Cell Vehicles, marks 2020 as the tipping point for this market.  In the meantime, other fuel cell applications are quietly making inroads into their respective markets.


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