The fuel cell supply chain, made up of companies that provide high-quality, economically competitive critical components for the fuel cell stack, is an area that has been somewhat overlooked. Indeed, the fuel cell industry faces a fundamental quandary: without a growing industry, the supply chain cannot benefit from component standardization, volume manufacturing and cost-downs.

In terms of cost-downs and volume manufacturing, however, the fuel cell industry has limited growth potential, which could limit the development of a robust and expanding network of suppliers. The entire fuel cell stack supply chain was worth only a little more than $200 million in 2011, according to a new report from Pike Research. By 2017, however, that figure will grow to $2.2 billion, representing a compound annual growth rate (CAGR) of 58.5%.

“The development of a thriving supply chain for fuel cell technology is not a given,” said Kerry-Ann Adamson, research director. “While the focus of R&D in the fuel cell industry has expanded to include deployment and performance issues, such as durability and startup time, the supply chain has been assumed to be able to meet demand when and as needed. This could be a dangerous assumption as the industry continues to expand.”

Assuming the availability of significant investment for capital equipment, growth in the supply chain for fuel cells is expected to be spread evenly across the globe, Adamson said. Leading the world in absolute numbers will be Europe, with $944 million in revenue forecast for 2017. This industry, however, is some years from internal cash generation that can sustain the anticipated sales growth without external financing. Beyond the next three years, continued growth in manufacturing capacity and further progress down the cost curve will require significant investments in capital equipment to support advanced manufacturing processes.

Pike Research reportedly anticipates significant attrition among fuel cell developers and suppliers over the next 3-5 years. Those companies that survive this shakeout will likely emerge stronger and better prepared to take on the challenges of building a multi-billion-dollar global industry.

For additional information, visit www.navigant.com/pikeresearch.