An attendee walks past Aisin Seiki Co.'s "Ene Farm" household fuel cell cogeneration system at the Cutting-Edge IT & Electronics Comprehensive Exhibition in Chiba, Japan, on Oct. 7, 2014. Photographer: Kiyoshi Ota/Bloomberg
Japan is working on doing for the hydrogen fuel cell what it accomplished with computer chips and cars in the last century, slashing costs to make them more appealing to consumers.
As fuel-cell technology finds its way into factories and commercial buildings, Japanese manufacturers including Panasonic Corp. (6752) are working to make them small and cheap enough for the home. The country has set a goal of installing them in 5.3 million homes by 2030, about 10 percent of all households.
With 100,000 already installed, residential fuel cells fit into Prime Minister Shinzo Abe’s vision of a “hydrogen society,” using the most abundant element in the universe as an alternative to nuclear power and fossil fuels. The systems produce electricity through a chemical reaction that also generates heat, which is captured to make hot water for homes.
“Home fuel cells are one strong weapon to improve energy efficiency,” said Chihiro Tobe, head of a Ministry of Economy, Trade and Industry office promoting fuel cells. “The use of hydrogen can contribute to saving energy, tackling environmental issues and increasing energy security.”
After shutting down its nuclear reactors following the 2011 Fukushima disaster, Japan is applying decades of experience in slashing manufacturing costs to become the first major market where residential fuel cells are taking hold.
The systems, known generically in Japan as Ene-Farms, are about the size of a refrigerator and run on hydrogen extracted from city gas that’s delivered through existing pipes.
Wider use of fuel cells promises to change the standard home-energy model by generating electricity close to where it’s consumed. That’s a shift from using giant generating plants, such as the Fukushima reactors that suffered meltdowns in March 2011 after a tsunami slammed into the facility.
One result is more efficient use of power that may reduce carbon dioxide emissions, helping Abe meet pledges in the global fight against climate change. Delegates from more than 190 nations, including Japan, are meeting in Lima for a United Nations conference on curbing global warming.
“Hydrogen is the energy of the future,” the prime minister said in a Sept. 29 policy speech to the Diet. “We’ve deregulated rules involving various ministries that used to hinder hydrogen development. The hydrogen society used to be a dream, and now it is about to become reality.”
Tokyo Gas Co. began selling home fuel cells for condominiums in April. The model is designed so the fuel cell unit, hot water unit and backup heat source can be stored in the pipe shaft of a typical apartment building.
Large fuel cells are already powering factories and commercial buildings. FuelCell Energy Inc. (FCEL:US), based in Danbury, Connecticut, has installed systems at breweries, office buildings and data centers in the U.S. and Europe. Its largest shareholder, the South Korean steelmaker Posco, has licensed the technology and is building systems for the Asian market.
Smaller fuel cells are powering telecommunications towers in remote locations, andPlug Power Inc. (PLUG:US) was the third-best performer on the Nasdaq Composite Index in the first quarter after announcing deals to supply fuel cell-powered electric forklifts to companies including Wal-Mart Stores Inc. Ballard Power Systems Inc.(BLDP:US), another fuel-cell supplier, was eighth.
Meanwhile, Japan’s focus has been on residential fuel cells which have been available in the country for several years. The first systems were set up at the prime minister’s official residence in 2005, and after pilot projects, commercial sales began in 2009.
Sales have been slow, in part because they are expensive. After more than five years on the market, the devices are installed in just 0.2 percent of Japanese households. One model sold by Tokyo Gas goes for about 2 million yen ($16,600).
The New Energy and Industrial Technology Development Organization, which promotes research and development of new energy sources, said in a July report that the combined market for fuel-cell and hydrogen technology, including Ene-Farms and hydrogen-powered cars, may reach 1 trillion yen ($8.35 billion) a year by 2030, and 8 trillion yen by 2050.
High costs, though, remain a problem, said Ali Izadi-Najafabadi, an analyst at Bloomberg New Energy Finance in Tokyo. “The cost of the device needs to be significantly reduced,” he said.
The systems also require additional equipment including battery storage units costing more than 600,000 yen for the systems to work in a blackout.
Nevertheless, for a country like Japan where space constraints limit the number of solar panels that can be installed, apartments may prove an attractive market for fuel cells, said Masami Hihara, a trade ministry official.
“But they need to be cheaper and smaller,” he said.
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