Fuji Keizai Group Predicts Fuel Cell Market Growing 135.5 Times by 2025

The Fuji Keizai Group on November 17th released details of market analysis that suggests the potential for an explosion in the fuel cell market. OK, perhaps “explosion” is not the right word. Let’s call it “rapid growth” instead.

Fuji Keizai expects growth in vehicle fuel cell applications to be a powerful driving force in expanding the market 135.5 times from its 2010 level of 35 billion Yen (455 million USD at current exchange rates) to 4.739 trillion Yen (61.5 billion USD) by 2025.

Fuji Keizai’s numbers predict that about 85% of this market will be home and automotive applications, along with PEFC (polymer electrolyte fuel cells). In 2010, housing applications accounted for 13.5 billion Yen (175.4 million USD) and the automotive fuel cell market for 5.6 billion JPY (72.7 million USD).

However, the introduction of  PEFC for automotive applications is expected to reverse this order by 2020, with the expected market sizes at that time being 556.8 billion Yen (7.23 billion USD) for automotive applications and 523.7 billion Yen (6.8 billion USD).

Automotive applications are then expected to accelerate sharply between 2020 and 2025, with the automotive fuel cell market reaching a peak of 2.51 trillion Yen (32.6 billion USD) by that time. Unsurprisingly, the market for the hydrogen fueling stations that these future vehicles will require is expected to grow 22.9 times from its 2010 level to reach 93.8 billion Yen (1.22 billion USD) by 2025.

Now, much as I love futurology, I have to say that I find a lot to be skeptical about in these figures.

First of all there is that classic error were all warned about back in grade school – the fewer the data points, the more cautious you should be extrapolating the data. To put it another way, if you have a small number of points clustered in the bottom left corner of your graph, you really need to think about just how far you can realistically extend the line you plot.

The fact that market for home and automotive fuel cell applications is so small at present, the technology is so new and – in reality – even the current commercial applications have more of the feel of  large-scale field trials more than a genuine roll out all point to this market being in its infancy.

So in the same way as you would be foolish to predict the future career of your typical 5-year-old, so it also seems unwise to speculate with too much certainty about the future growth of this fuel cell market. And let’s face it, any prediction that speculates growth of 135.5 times (even predicting to one decimal place!) is surely falling foul of this basic error.

Secondly, there are foreseeable potential externalities that could really drive or hinder the growth of this market. The most obvious of these is technological innovation.

Let’s suppose a breakthrough in nanotechnology in 2014 results in a completely new kind of battery that can be made from cheap and abundant materials, that has an energy density many times the best current EV batteries, and which can be recharged to 90% capacity in 10 minutes. If we suppose that fuel cell development remains iterative, it is clear to see how demand for this new kind of EV battery would easily start to draw market share away from fuel cell alternatives. Equally a surprise breakthrough in fuel cell and hydrogen production and storage technology could have the opposite effect and drive demand for fuel cells to even higher levels.

So what can we really draw from this report? Putting the speculative figures aside, I think it is realistic to say that the coming decade plus is likely to see a strong growth in demand for fuel cells. Whether they will become the dominant power source, or whether they will prove to be an “evolutionary dead end” in the longer term is yet to be determined. This is why canny car manufacturers like Honda are hedging their bets with development teams working in parallel on hybrid, EV and fuel cell vehicles.

Sources: MSN, Fuji Keizai Group (both Japanese)