Sinolink: breakthrough in fixed application scenarios, overseas solid oxide fuel cells enter commercialization.

Sinolink released a research report stating that under the trend of distributed energy applications, solid oxide fuel cells (SOFC) with higher energy conversion efficiency and a wider range of fuel options have broad prospects for applications in scenarios such as combined heat and power in data centers, ship power supply, and coal gasification power generation. Countries such as the United States, Europe, and Japan have basically achieved commercial operation of SOFC. China's SOFC industry is in the transition phase from industrial demonstration to commercial application, with the dawn of commercialization beginning to emerge. Enterprises with the development potential in SOFC industry are those that have the capability of producing SOFC raw materials, single cell production, or the design and development of SOFC overall systems, such as Chaozhou Three-Circle(Group) (300408.SZ) and Weichai Power (02338). Sinolink's main viewpoints are as follows: Solid oxide fuel cells (SOC) have high energy conversion efficiency, wide fuel adaptability, and reversible reactions, making them an indispensable part of future energy systems. SOC is a high-temperature all-solid-state device with dual functions of solid oxide fuel cells (SOFC) and solid oxide electrolysis cells (SOEC). It can convert the chemical energy of fuels such as hydrogen, natural gas, and other hydrocarbons into electricity, and can also store renewable energy such as CECEP Solar Energy and wind energy as hydrogen fuel. In terms of electrochemical energy conversion and storage technology, SOC is the cleanest and most efficient, with unique dual-function properties. Compared to other energy conversion technologies, SOC has many advantages such as low material costs (no need for precious metals), high efficiency (its own power generation efficiency is nearly 60%, energy efficiency can reach up to 85% with recycled heat), and fuel flexibility for combined heat and power and stationary power. The current focus of development is on reliability, lifespan, and cost. Breaking through from fixed applications, there is vast application space. With its high efficiency and advantages in power generation with multiple fuels, SOFC has become one of the fastest-growing alternative backup power options. According to Grand View Research, the global solid oxide fuel cell market is expected to reach $620 million in 2023, with a compound annual growth rate of 36.8% from 2024 to 2030, reaching a scale of $4.054 billion. The largest and fastest-growing markets are the United States, followed by Europe and China. The main application scenarios are concentrated in combined heat and power and data centers, with SOFC accounting for 81.49% of the fixed market applications in 2023. Furthermore, SOFC technology has become a popular choice for data center backup power in the market due to its high energy conversion efficiency, potential for large-scale power generation, and ability to provide continuous power supply. According to Grand View Research, in 2023, 51.9% of SOFC terminal applications are used in the commercial sector (for heating and hot water supply), approximately 40% are used for data center power, corresponding to a market size of about $250 million. The market size for data center power in 2023 is about $22.92 billion, so the share of SOFC applications in the data center power market in 2023 is approximately 1.1%. As battery technology advances and costs decrease, the penetration rate of SOFC applications in data centers is expected to increase. Key elements for commercialization include high reliability, long lifespan, and low cost. The selection of core component materials is crucial in determining the performance of the battery. By using specialized processing techniques, special equipment, and expensive materials, costs can be rapidly reduced after material breakthroughs and scaled production. Currently, the cost of the stack accounts for about 40% of the total system cost, and it is expected that when the production capacity of the stack reaches over 100MW, the cost will only be 20%-30% of the current cost. It is expected that with scaling and technological progress, costs will decrease significantly when annual production reaches over 100MW. We believe that when the lifespan of solid oxide fuel cells reaches 50,000 hours and system costs fall below $10,000/kW, they will become competitive in the market. In addition, increasing lifespan and moving towards high-power flat metal support are the development trends for the commercialization of SOFC in the future. Foreign countries have entered the early stages of commercialization, while China is still in the industrial demonstration stage. There is a significant technology gap between domestic and foreign countries in the field of SOFC technology. Countries such as the United States, Japan, and Europe have matured their technologies and have started entering the early stages of commercial application. However, there are not many companies that can truly achieve large-scale commercial supply. Relevant companies include Bloom Energy and Fuel Cell Energy from the United States, Ceres Power from the UK, Sunfire from Germany, Elcogen from Estonia, Bosch from Germany, Mitsubishi Heavy Industries, Kyocera, and Aisin Seiki from Japan, and Doosan Group and SK E&C from South Korea. In terms of annual power generation, there are no more than 10 global SOFC companies that can reach the megawatt level. China is restricted by foreign countries in terms of key technology blockades, and there is a certain technology gap in overall technical level. In an environment where policy support is limited, industrial chain development is immature, and the market has not been launched, the domestic SOFC market application has not yet truly started. However, in recent years, domestic SOFC companies have begun to gradually exert their efforts, such as Chaozhou Three-Circle having mass production capabilities and being a supplier of Bloom Energy's membrane plates; Weichai Power has laid out a strategy by acquiring Ceres Power, among others. As for SOEC, it is a new type of electrolysis technology with good development prospects, but its current maturity level is low, and domestic demonstrations have only been completed in laboratories, not yet widely commercialized. Risk warning: Policy support and capital investment intensity are lower than expected, slow technological development, and commercialization processes are slower than expected.