When people talk about a 'new' technology, they usually mean one that was invented in this century. Or the last one. Fuel cells, however, were first conceived in 1839 by Welsh scientist Sir William Robert Grove. At the time they did not produce nearly enough electricity to be considered useful, and, in the 179 years since, the technology has continually struggled to reach mainstream acceptance. However, a growing mass of research is pointing to fuel cells and other hydrogen-based energy technologies – which we will refer to as 'the Hydrogen economy' – as an important contributor to the ongoing push towards decarbonisation and pollution reduction.
As governments and companies have ramped up efforts to curtail carbon emission in recent years, technologies such as solar panels, wind generation and battery electric vehicles have become a growing part of everyday life – but they have their limitations.
For commercial electric vehicles, lithium-ion batteries are the most common source of energy. However, that appears to be changing. A recent survey by consultant KPMG found most automotive executives around the globe thought the rise of fuel cell electric vehicles would be the number one trend in the sector until 2025. A report by the Energy Transmissions Commission argued hydrogen technologies such as fuel cells could play a "vital" role in decarbonising heavily polluting industries such as chemicals, fertilisers and mining, leading to an up to 11-fold increase in demand for hydrogen by the middle of the century. Closer to home, UK-listed fuel cell group Ceres Power (CWR) this month announced an increased investment from Chinese energy group Weichai Power – merely the latest bet on the sector from the world's ascendant superpower.
Yet hydrogen technology has had false dawns. Shares in Canada-based fuel cell company Ballard Power (US:BLDP) traded above $100 (£79.60) in 2000, but now languish below $3. So what is driving the renewed interest? And should you be investing in it?
How does it work?
Simply put, fuel cells take in oxygen and a gas – usually, hydrogen, although others can be used – and combines them through an electrochemical reaction, creating water and electricity. As nothing is burned, no pollutants are released.
There are a number of different types of fuel cell, each with differing advantages. Ceres Power, for example, makes a fuel-flexible cell that can run on natural gas, biogas, hydrogen or other fuels. AFC Energy (AFC) makes an alkaline fuel cell that uses lower-cost components and runs at a lower temperature.
However, the hydrogen economy extends beyond fuel cells. Electrolysers, such as those made by UK-listed ITM Power (ITM), split water into oxygen and hydrogen, allowing it to supply hydrogen refuelling stations for fuel-cell vehicles. It can also convert surplus electricity into hydrogen and methane, which can be stored in existing gas networks.
Better than batteries – for some things
Power storage is a crucial part of the solution to two of the most pressing issues facing the move towards renewable energy: electric vehicles and the intermittency of renewable generation.
Electric vehicles need a way to store energy that is cheap, effective, holds sufficient charge and is light in weight. Likewise, many of the most efficient forms of renewable energy such as solar and wind are intermittent – less electricity is generated when the sun isn’t shining or the wind isn’t blowing – so finding a way to safely store surplus energy for when it is most needed is key.
Lithium-based energy storage is already used in the world’s most popular electric vehicles such as the Jaguar i-Pace, the Nissan Leaf and the Tesla. However, its energy density presents challenges for vehicles that are exceptionally heavy or need to travel long distances.
Limitations on energy density mean that in order to double the range of a car, it would need a battery roughly twice the size, the same applies if the car was required to carry twice the weight. This creates bottlenecks for the size and weight of the battery itself. Lithium-based batteries also carry a range of other potential challenges such as performance degradation over time, the time required to fully charge and the tendency to heat up.
Fuel cells, on the other hand, do not require recharging and can be refuelled with hydrogen in much the same way as a conventional car is with petrol. What’s more, they do not face the same weight constraints. For this reason, fuel cells and hydrogen-based energy are likely to be better suited to vehicles that need to travel longer distances, carry heavier weight or refuel quicker, such as lorries, buses or even cars used in the gig economy such as Ubers.
The need for infrastructure
One major obstacle in the development of the hydrogen economy is the lack of infrastructure, especially when it comes to refuelling. A report by the Hydrogen Council – a coalition of chief executives from hydrogen technology companies that, tellingly, has quadrupled in size over the past 18 months – estimated the cost required to build a hydrogen economy would be roughly $280bn between now and 2030, including $80bn for infrastructure to store, transport and distribute hydrogen.
However, development has already begun. ITM Power and Royal Dutch Shell (RDSB) opened the first forecourt hydrogen fuelling station in the UK at a service station on the M25 in early 2017.
Adam Forsyth, an analyst at Cantor Fitzgerald, noted that much of the recent investment in companies such as Ceres and Ballard had some from Chinese bus companies. Buses typically refuel at depots, so fuelling infrastructure can be centralised. Weichai Power, which recently doubled its stake in Ceres Power to 20 per cent, has a 32 per cent share in the Chinese heavy-duty truck engine market. Indeed, fuel-cell buses are already in operation in the UK, in both London and Aberdeen. In October 2017, transport secretary Chris Grayling told the transport select committee the government was "looking to get the first hydrogen trains on our network within a very short space of time".
As well as transport, hydrogen technology has the potential to decarbonise the heating grid. Roughly 40 per cent of the UK’s greenhouse gas emissions come from heating, and the massive seasonal variation in demand makes storage a major obstacle to electric heating becoming more prevalent. In its report the Hydrogen Council said hydrogen-based solutions could incorporate the existing gas infrastructure for storage, allowing governments to decarbonise the heating system without the need to install new equipment or make any changes to heating patterns.
So is it safe to invest?
Despite the strong driving forces backing hydrogen, Mr Forsyth noted the companies involved remain early stage. "There is still execution risk," he said, although he added the sector was appealing to some retail investors interested in impact investing based on its low-carbon credentials.
Perhaps the best way to think of hydrogen technologies is as part of a larger array of renewable energy technologies. It has the potential to make a significant contribution in a number of areas, such as those discussed, but it is just one of many promising areas being developed.
Adam Collins, specialty chemicals and new energy analyst at Liberum, said that while fuel cells looked unlikely to replace battery electric vehicles as the predominant technology in electric cars, it still had a number of potentially appealing applications such as long-distance freight, ships and in data centres. However, he added carbon-neutral hydrogen production – known as 'blue hydrogen' – remained high versus fossil fuels.
Counterintuitively, he said the problems faced by fuel cell companies in the past could turn out to be a good thing, clearing the field for the current players. "Fortunately, a few [fuel-cell] companies have fallen by the wayside in recent years... so those left [such as] Ceres Power and Bloom energy have a clearer run," he said. "It is a matter of timing and selecting the right companies."
