Could the United States Lose Its Share of the Global Fuel Cell Market?

In my last post, I opined that the United States was at risk of losing its share of the global fuel cell market to Germany, South Korea, Japan, and perhaps China. Unfortunately, this is a story that the United States knows all too well. For example, in solar and wind, the United States had an early advantage, only to see its leadership position fade away to Europe and China. Some of this is due to forces beyond government control, such as China’s significantly lower manufacturing labor costs, but it was also the result of a lack of sustained government commitment in the United States. By contrast, the Chinese government developed a long term strategy to create a successful domestic solar industry and provided sustained support for adoption and for solar companies. For example, through innovative financing mechanisms.

Could we see this story repeated with the fuel cell industry? There are differences. For one thing, the United States already shares the front stage with several other countries such as Germany , Japan, and South Korea. Still, the U.S. Department of Energy’s fuel cell vehicle development program was the standard for this industry, but has now been all but abandoned under the Obama administration. Even more worryingly, the administration seems to view cars as the sole measure of fuel cell technologies, even though, as my colleague Kerry-Ann Adamson pointed out, fuel cell cars are going to be one of the last to go fully commercial while applications such as powering base stations are seeing real traction.

If the U.S. government is stepping back on fuel cells, governments in Germany, Japan, South Korea, China, and Scandinavia are stepping forward with long term subsidies and other support. This could mean not only that the United States will fall behind in developing a domestic fuel cell market, but also that U.S. companies will have trouble exporting into these foreign markets. For example, take Japan’s Large Scale Residential Stationary Demonstration program. This program, developed jointly by government and industry in the early 2000s, has subsidized thousands of mCHP units deployed by Japanese PEM companies. Now, these subsidies are shifting to adopters in order to spur demand. While US products can qualify for the subsidies, the Japanese companies have already formed local distributor partnerships, possibly squeezing out U.S. companies from the distribution supply chain. These partnerships also have an early foothold in the market so may gain a permanent “first mover” advantage.

I’ll admit, I am not entirely comfortable with the idea that the U.S. fuel cell industry must have direct government support in order to succeed. There can be something of an unspoken assumption in the clean energy field that these technologies have a “claim” to taxpayer support. Certainly, fuel cell technologies have to prove that they offer a real value proposition and companies need to be able to transition from technology development to sales, production, and service. But it is also realistic to note that conventional energy receives significant subsidy in the US, and that even well-managed, nimble new technology companies face a very real challenge in crossing the “chasm of death”, something that programs like Japan’s residential stationary fuel cell program acknowledge and seek to address.

Article by Lisa Jerram, appearing courtesy the Matter Network.