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‘Micro-CHP Annual Roundup 2012’ reveals promising jump in annual sales – but market polarises further as Japan and Germany grow in dominance

We knew 2012 was going to be a bumper year for micro-CHP sales – with continuing concerns over power supply in a post-Fukushima Japan and increasingly attractive market conditions for cogeneration in Germany.  

And in collating our latest edition of the Delta-ee ‘Micro-CHP Annual Roundup 2012’, we learned that global sales leapt by more than 50% in 2012.  This means almost 44,000 units were sold around the world – compared with less than 29,000 the previous year.

The value of the market increased again, this time to almost €700 million[1] – with the increasing popularity of expensive residential fuel cell in Japan being the main reason. We predict growth in global market value to just less than €900 million for 2013.

So what do our latest figures on the global micro-CHP market actually mean? Has micro-CHP finally ‘crossed the chasm’ and is now on its way to commercial success?

Not quite, yet.  Our recently published ‘Micro-CHP Annual Roundup 2012’ (available to Micro-CHP Research Service Members) found that, while Japan smashed records with residential fuel cell and Germany continued to attract a wave of engine-based product launches, activity shrunk back elsewhere. We see no sign of Japan and Germany’s dominance in these markets dissipating over the near term, and other countries will have a serious job if they are to catch up with the global market leaders anytime soon.  However, growth in other markets will be key if product prices are to ever come down.

 Click here for more information on the Micro-CHP Research Service. For further information about how to become a member and gain access the ‘Micro-CHP Annual Market Roundup 2012’ report, contact scott.dwyer@delta-ee.com +44 (0)131 625 3213



[1] Delta-ee sales figures and market values for 2012 were actually lower than our previous year’s projections. This was down to smaller growth than predicted outside the key markets of Japan and Germany – and the assumption that all the allocated fuel cell micro-CHP subsidy budget in Japanese would be exhausted.  

 

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E.ON invests in fuel cell company - a Bloom-ing good idea?

As part of a wider programme of venture capital activities, E.ON has recently announced that they have bought a stake in Californian fuel cell developer, Bloom Energy.

Bloom Energy has forged a name for itself by securing high-profile clients such as Google and Coca Cola for its large fuel cell products. Now, it seems, E.ON wants to get in on the act.

The deal undeniably demonstrates a willingness within E.ON to build momentum in the field of decentralised energy following last month's announcement of small-scale CHP installations in Germany and Russia. The move is likely to open the door to bringing larger, stationary fuel cells to Europe over the coming years, and E.ON is well positioned to establish routes-to-market throughout the continent. Recent Delta-ee analysis suggests that the European market size for 100 to 200 kWe distributed generation products is currently less than 1,000 unit installations per year. Presently, this is dominated by the incumbent decentralised energy technology in this size range, the gas engine. So the big question is: How will this market evolve over time and what share of the market can E.ON hope to capture with this new venture?

Today, larger fuel cell installations are likely to be limited to demonstration projects and some ‘early adopters’ who are not put off by the upfront costs or longer pay-back periods. Over time, though, with energy efficiency increasingly high on the agenda, rising electricity prices, tighter emissions controls within some built up areas and product costs gradually coming down, the market could shift in favour of fuel cell technology within some applications. Indeed, fuel cells could open up new opportunities which are not currently accessible by  gas engines. So, E.ON may have been savvy here and seen a long-term opportunity to capitalise on first mover advantage. We shall certainly be keeping a close eye to see how this develops over the coming months and years.

Coming back to Bloom: Delta-ee has been observing fuel cell developments on the other side of the Atlantic for some time. Certain states like California have support mechanisms in place which have served to jump-start the industry. This state funding, coupled with deep-pocketed blue chip companies who are willing to pay a premium to be 'seen to be green', has enabled Bloom to build up an enviable amount of venture capital –  $1.1 billion over the last decade. And last month, it was announced that Bloom Energy had raised a further $130million in VC funding from Credit Suisse and other sources. 

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Micro-CHP and CHP – Front & Centre at Hannover Messe 2013

Delta-ee attended the Hannover Messe 2013 last week. The Messe is a leading global trade event, held annually in north Germany. It is actually 11 trade fairs held concurrently on the same exhibition grounds.  Energy is just one of these 11 trade fairs, focusing on renewable and conventional power generation, power supply, transmission, distribution and storage.  

From our Delta-ee decentralised energy perspective, Hannover Messe is a really interesting event for both micro-CHP and CHP, and it was great to talk with some of our clients and contacts while we were there, and discuss latest developments.  Here are some of our observations from our time at Messe 2013.
  • In overall terms the event seemed much quieter and less well attended than previous years.  The Messe was only a month after ISH so perhaps this had an impact on attendance, but the nervous economic climate can’t be helping much.
  • It was also very noticeable that none of the big German utilities had any major presence or large exhibition stands, a marked contrast to previous years.  We see this as a symptom of the crisis these companies are facing in Germany, with the phase out of nuclear power and growing impact of decentralised power generation on their core business.
  • Wind had a very strong presence in the Energy fair, as in previous years, but there was less evidence of solar PV and nothing significant on heat pumps.  The smart grid forum felt quite different to 2012, with the focus being on grids/network/smart metering, and there was minimal presence of HEM vendors.  This could be a reflection of the Messe 2013 overall theme of “Integrated industry” but may also indicate that many companies at the Messe see the best near term ‘smart’ opportunities on the utility side of the meter.  This made an interesting contrast to the ISH fair a month earlier where it was ‘apps galore’ - see Top 5 Takeaways from ISH 2013
  • For micro-CHP, the focus of the Messe is primarily on fuel cells.  Many of the micro-CHP developers are participating in the Callux and/or Ene.field field trials, and some claim their product is ‘ready’ for market launch.  I say ‘ready’ because this doesn’t mean we expect to see a wave of fuel cell micro-CHP products to hit the market this year.  There will be some launches but these may be quite selective as some companies need to scale up production capacity and supply chains before they are really ‘ready’.  Also some manufacturers are still working hard to make their products as ‘plug n play’ as possible.  This is to try and negate the risk that installers will charge customers very high fees for installation.  But we sense that developers who have been collaborating through the Callux programme are now gently starting to think about how they can differentiate their own fuel cell product, what makes their product special and what customers they will focus on – indicative that market competition is getting closer.  For example, CFCL, which is already active in the market with its Bluegen product, is particularly focusing on maximising sales into the small, commercial market in the German state of Nordrhein Westfalen, where incentives are now available.  See our latest micro-CHP research for more details on this topic. 
  • For CHP, the Messe provided further evidence to support our view that economic and policy drivers are helping the sector to recover from the doldrums of 2009-2010.  This is especially true of mini- and small-scale CHP (in our eyes 5 to 100 kWe and 100 to 400 kWe, respectively). This increasingly dynamic sector has witnessed a number of product launches recently which are likely to challenge the incumbent ‘main players’. For example, EC Power has recently expanded their portfolio of products to include smaller 6 and 9 kWe CHP units which will surely be in direct competition with the current market leader in this segment - the 5.5 kWe Dachs unit from Senertec. Interestingly, Senertec appear to be returning fire; they are due to launch a new 20 kWe product later this year. To help our clients understand the opportunities and changing dynamics in this space, Delta-ee have recently commenced a new multi-client study focusing on gas engines (CHP and power-only applications) in the 10 to 400 KWe size range throughout Europe; you can find out more about the research here.
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ISH 2013 - Germany emerges as a hot bed of activity for small cogen, including a sneak peak at new residential fuel cells

For me, two main trends seemed to stand out at ISH this year:

1. Residential fuel cell micro-CHP part of major players future vision – two new products from two market leaders – Bosch and Viessmann - means fuel cell should now appear in the future product portfolios of all the major OEMs.

Both manufacturers have partnered with major Japanese corporations in order to “jump the queue” and attain the technology that can offer homeowners the highest electrical efficiencies of any of the cogeneration technologies. Bosch has partnered with Aisin (a manufacturer with strong links to Toyota) to bring an integrated system - similar in size to an American fridge-freezer - to Europe. Offering 700W of electrical power and an electrical efficiency of 45% (90% overall), this uses solid oxide technology and is not so different from some of the ENE-FARM systems that are proving massively popular in Japan at the moment.


Viessmann on the other hand, has paired up with Panasonic to bring a different fuel cell technology – proton exchange membrane – to Europe, with a higher electrical output of 750W but slightly lower electrical efficiency of 37% (also 90% overall). This co-branded product is again quite large – similar in size to the Bosch unit – but slightly smaller due to the lower volume hot water and buffer tanks. It can be split into two separate units.

Time will be needed to optimise the products for European conditions and each pairing will begin field trials over the coming years, targeting a commercial launch from around the middle of the decade.

2. Increasing competition in the German mini-CHP arena – not just from the established OEMs but also from a huge range of new players in the 5kW – 20kW range, using engines from Toyota, Kawasaki, Yamaha, and a host of others.

We were already seeing the small commercial cogen segment getting more competitive in Germany before “Der Energiewender” – or “The Energy U-turn”. Since then, there has been an explosion in the number of companies targeting this sector, where customer decisions are typically more based on economics and energy prices. We’ve seen major OEMs getting involved too, with Vaillant and Remeha launching new product. Major players from other industries have also started launching mini-CHP products, such as Volkswagen. Finally, established CHP companies have been expanding their range of systems - like EC Power, Kirsch and SenerTec - who all launched new product in smaller size ranges suitable for multi- and even single-family homes, as well as small commercial applications.

All this means that the product choice for customers is expanding, as are the number of buildings types that are suitable for all the various cogeneration products and technologies out there.  

These are important steps being made on the road to market success for these small cogen systems, although most will have availability limited to within Germany’s borders. I think it’s becoming clear that Germany will emerge as the key battleground market for the companies selling and installing these products. 

What’s not so clear, is how long customers in other markets will have to wait for the same product choice, or how quickly prices will come down.
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Guest — Guest
Just a small correction regading similarity to the ENE-FARM systems. As the vast majority of the ENE-FARM systems is based on PEFC... Read More
Friday, 26 April 2013 10:44
Jan Hughes
That's a good point and we would agree - PEFC is driving the success of the ENE-FARM in Japan. Although it's interesting to note ... Read More
Thursday, 11 July 2013 08:57
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Will FC Expo 2013 mark the start of Japan’s second wave of residential fuel cell products?

When I attended FC Expo 2013  - Japan’s largest international fuel cell conference and trade show - in Tokyo last week, a number of people I spoke with mentioned how they thought the Expo had shrunk for the second year running. However, this was not to say there was less fuel cell micro-CHP on show as well as some interesting newcomers…

Five years on from the launch of the initial launch of the ENE-FARM by JX, Panasonic, and Toshiba – and with sales expected to have grown to exceed 50,000 systems in FY2012 – the manufacturers may feel like their initial awareness raising job is complete. Likewise, the deals that will enable the manufacturers to access the potentially lucrative European market are most likely done and dusted (e.g. Panasonic and Viessmann), or at an advanced stage.

So while Toshiba and Panasonic plumped for low key displays - JX avoided putting their wares on show as they did at their large exhibition booth like last year – and Aisin didn’t exhibit their new ‘Type S’ SOFC ENE-FARM developed in conjunction with Osaka Gas and Kyocera - we saw some new pretenders take up a place to show what they have to offer to the international community.

NGK/NTK were there for the second year running. A market leading global manufacturer of components for the automotive industry, they were there showing off their 1kW SOFC system. Admittedly this was the same “display unit” they had on show last year, and there were no obvious signs of the partnership with Honda as was announced late last year. However, this could be a promising move if the Nagoya-based corporation applies to fuel cell stacks the same “high quality, low price” ethos that made them so successful in their core businesses.

Miura Kogoyo and Sumitomo Precision were a newcomer with their 4.2kW SOFC micro-CHP system on display. The former is a major Japanese heating equipment manufacturer - the latter originally an aerospace manufacturing company who branched out into other technologies (e.g. heat exchangers and semiconductors). Predicting commercialisation from 2015 and aimed at the small commercial sector, the compact nature of their system and the ambitious price and efficiency targets means it could be an exciting new product on the market.

And in the technical forums, we heard from TOTO about their plans for residential fuel cells. Another corporation who dominate their “traditional business” space of bathroom equipment, they are another company who can find synergies between the industrial processes they already use – and the ones that can be applied to the manufacturing of ceramic fuel cell stacks.

These newcomers will have a way to go until they’re at the same stage as the current ENE-FARM manufacturers. But while JX, Toshiba, Panasonic, and Aisin may be the only shows in town right now, it won’t stay that way.

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Steven Ashurst
Scott, You could say we’re in the eye of the storm as far as the fuel cell micro-CHP market goes. We had all the noise and furore... Read More
Friday, 08 March 2013 14:49
Jan Hughes
I think many people are HOPING that the new entrants will challenge those companies who were the first to launch products under th... Read More
Sunday, 17 March 2013 18:23
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3 ways you’ll know that Europe’s residential fuel cell market is ready to take off….

“Will fuel cell micro-CHP ‘make it’ by 2020?”. This was the first question we posed to our contacts and network in the European fuel cell micro-CHP industry.

“What does ‘making it” actually mean?”. This was the second – and arguably more interesting – question we asked the same group.

We have our own view. But what did the industry say?

Well, there was some consistency with the majority defining ‘success’ as at least 70k - 100k annual sales by 2020.

At Delta-ee, our own annual sales forecasts out to 2020 put fuel cell mCHP sales in Europe closer to the low tens-of-thousands.

To get to the bottom of the more likely truth, we focussed our analysis on 3 main points:
  • the market growth rates in the increasingly successful market of Japan,  
  • a close study of the cost curves,
  • and an assessment of manufacturer/developer plans.

Gradually it became clearer that something “out-of-the-ordinary” would need to happen if fuel cell mCHP was to reach annual sales in the region of 70 – 100k.

But what exactly?

Here is our list of the top 3 things that would tell us that the residential fuel cell market is about to take off in Europe…  

1.    Innovative business models appearing and thriving

There will need to be some success stories soon if the products are to be incorporated into a successful model in time. There are still doubts about how much value is actually in virtual power plant and utility ownership models. However, if we see one business model taking off, this could quickly spell a wave of similar offerings and get to volume sales very quickly.

2.    Low cost product hitting the market

A race to volumes will help bring cost down – but there remains the tricky step of transforming from a ‘high-cost, low-volume’ product into one that will appeal to the wider market – not just the innovators. If we see a proven low-cost product (from Europe, Japan, US, or elsewhere) hitting the market, this could be a sign that a market is about to take off.

3.    Seeing European Energy companies /and or Governments throwing their full weight behind the technology

Energy companies and the national Government have been a major factor behind Japan’s success with fuel cell mCHP. In Europe, energy companies certainly have the ability to tap into their customer base and use their resources to drive fuel cell mCHP into people’s homes. But European Governments are becoming sensitive about backing a “single technology”, while most energy companies are remaining cautious and are still waiting to see what the others do. If an energy company makes a success of mCHP – or if a Government decides to introduce policies to stimulate the market (for example, a fuel cell micro-CHP specific incentives or legislation) - this could be the spark needed to start something promising for fuel cell mCHP in Europe.
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