Softbank’s fuel cell move highlights upswell in Asia

The announcement of Japan’s telecom and Internet giant, Softbank, signing up with US-company Bloom Energy to distribute stationary fuel-cell technology belies a cleantech sector that is quietly flourishing in Asia.

Softbank and Bloom have created Bloom Energy Japan, a 50/50 partnership in which each is investing USD10 million. While sales of the new venture have not been projected, research from Navigant earlier in the year points to annual revenue from stationary fuel cells to grow from USD1.7 billion in 2013 to USD9 billion in 2022, with Japan and South Korea being seen as particularly healthy markets.

Bloom’s solid oxide fuel cell technology converts fuel into electricity through a clean electro-chemical process rather than dirty combustion. They are like batteries except that they always run. Other technologies like hydrogen fuel cells are also competing in this sector.

While fuel cell technologies virtually wipe out carbon emissions, they remain an expensive way to produce electricity compared to more traditional methods. However, they have attractions that traditional back-up and on-line systems don’t and large Asian corporations are recognizing that.

The recent series of natural disasters in Asia has highlighted the flexibility of stationary fuel cells, which are completely independent of centralized grid systems and capable of running full-time and using non-fossil fuels. Softbank itself plans to install a 200-KW fuel cell unit at one of its buildings in Fukuoka. Like many other major companies, Softbank was affected by the blackouts that followed March 2011’s Fukushima accident.

During Thailand’s severe floods Sharp, Nikon, Toyota, Honda, Nissan, all lost global output because of the effective shut-down of Bangkok factories, in most cases due to blackouts rather than flooding. Japan’s carmakers lost 60,000 cars per day in output.

Solutions like stationary fuel cells can bring longer-term energy security to critical operations with the added benefit of a green stamp in the sustainable passport.

It has been tough few years for the fuel cell market, with a jumble of mergers and acquisitions and even some of the larger players exiting the field altogether. United Technologies and Rolls Royce sold up, with the later passing its interests to Korean conglomerate LG. Unrealistic expectations lead to the shake-out in manufacturers but the shock seems to have brought a great pragmatism to the sector.  In addition, the sector has seen a sharp increase in demand created by government policy initiatives.

“Through late 2011, many fuel cell providers continued to assume that if they created a product, the market would change its requirements and adopt the new system. This unrealistic assessment of the market has subsided and companies are creating products for markets where real needs exists — using locally available fuels, systems created to be maintained by local engineers and systems that do not require very limited operating temperature ranges,” observed Navigant in an analysis at the beginning of the year.

It says the number of stationary fuel cells shipped annually will increase from 21,000 in 2012 to more than 350,000 by 2022. A breakdown of who’s buying is more difficult to analyze but Japan and South Korea emerge as the region’s leaders, in term of both use and companies with viable technologies. Figures projected from the end 2011 show that the stationary fuel cell revenue generated by manufacturers in Asia Pacific will reach over USD2.6 billion by 2017. Japan will have the largest market share, surpassing USD2.1 billion in 2017.

While US companies, like Bloom are regarded as being at the cutting edge of some technologies, they are competing with Asian players. Navigant identified, Eneos Celltech, Fuji Electric, GS Caltex, JX Nippon, Panasonic, POSCO Energy and Toshiba Fuel Cell Power Systems as leading the Asian charge for market.

Their technological direction has, however, been influenced by government policies. Both Japan and Korea pushed research in residential combined heat and power (CHP), with Japan pushing into commercial solutions in 2009. The Korean government has followed a policy of government-academia-enterprise collaboration in fuel cell projects for the residential sector since 2006, including its One Million Green Homes program. By mid-2011, the Korean fuel cell industry began to commercialize its residential CHP and off-grid power plants.

Meanwhile China’s interest in stationary fuel cells remains mostly academic, with limited applications thus far centered on back-up power for the telecommunications industry. The primary commercial focus of China’s fuel cell technology development is being applied to the transport sector.

As Japan strives to fill its power shortages with many nuclear plants still off-line and a greater national emphasis on renewable supplies, business could bloom. Softbank and Bloom’s venture will sell energy under contracts lasting at least 20 years, with unchanging charges, and Bloom will set up units at customers’ locations and keep them fueled.

Bloom, a Californian, company has raised over USD1 billion in venture capital financing, and has customers like Apple, Google, and Coca-Cola.

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