Sealand: The SOFC economic turning point is in sight. Stable zirconia with high chromium solution is the future mainstream.

Sealand released a research report stating that there is a significant gap in market expectations for the potential applications of SOFC beyond AIDC primary power supply. The bank believes that the economic inflection point for SOFC is within sight. Based on Sealand's LCOE model calculations, the current cost of electricity for SOFC is approximately 0.59 RMB per kilowatt-hour; as scale advances, there is significant room for a decrease in cost per kilowatt-hour through improving internal restructuring rates, fuel utilization rates, and optimizing BOP systems. In addition, by combining the savings in AC-DC losses brought by the new generation AIDC architecture, and incorporating waste heat recovery measures (such as absorption refrigeration and comprehensive steam heat recovery), the overall system efficiency is expected to increase to 90%, thereby establishing a more significant advantage in total lifecycle costs. Sealand's main points are as follows: Five Opportunities for SOFC 1. AIDC primary power supply - driving cost reduction. As the demand for AIDC power grows rapidly, the natural direct current output advantage of SOFC can be directly adapted to the new NVIDIA generation direct current architecture, reducing inversion losses and further improving efficiency; high-pressure central bus trays and DC distribution architectures are likely to be used in the new batch of data centers to be constructed by 2026; by adding waste heat recovery technology with absorption refrigeration, SOFC is expected to reduce the electricity consumption of data centers by at least 20%, which is significant for GW-level energy-intensive data centers. 2. Increasing decarbonization demand under domestic carbon constraints, converting carbon dioxide into fuel through SOEC + green electricity, significantly reducing carbon trading costs. SOEC electrolysis can use renewable energy sources such as wind, solar, and nuclear energy to convert the carbon dioxide emitted by industrial enterprises in the chemical industry into a synthesis gas (CO + H2) through green electricity co-electrolysis. The synthesis gas can be converted into gasoline, diesel, and other synthetic fuels through Fischer-Tropsch synthesis, as well as methanol and dimethyl ether as raw materials for basic chemical products, reducing coal and petroleum industry carbon emissions while obtaining fuel products. This not only meets the needs of companies to reduce carbon emissions, but also aligns with national energy security strategic requirements. 3. Efficient utilization of coke oven gas in coal chemical industry through SOFC systems. Coke oven gas, a by-product of the coal chemical industry, is an ideal fuel for SOFC. Using it as a direct fuel only requires purification and refinement, significantly simplifying the process. The hydrogen-rich characteristics of coke oven gas are highly compatible with SOFC, enabling efficient power generation. 4. Becoming the main power source choice both domestically and internationally, opening up a market space of thousands of gigawatts. The U.S. Department of Energy has specific goals for SOFC: achieving a system cost of $900 per KW. In the natural gas market, when the equipment cost of SOFC is lower than $1900 per KW, it will be more economical than combined cycle gas turbines; in the coal market, synthetic gas produced from coal gasification can be directly used as SOFC fuel, constructing a coal gasification fuel cell power generation system (IGFC) with significantly higher efficiency than traditional coal-fired units. Under carbon emission constraints, SOFC has the advantage of carbon capture and better economics, and is expected to become an important pathway for future upgrades and transformations of coal-fired and natural gas-fired units. 5. Reversible Solid Oxide Fuel Cell (RSOC) is expected to become an ideal solution for future energy storage. Reversible SOFC can freely switch between electrolysis mode (hydrogen production/storage) and power generation mode (fuel cell power supply). When renewable energy is abundant, hydrogen production/storage is carried out, and when it is insufficient, hydrogen is burned for power generation, allowing a single device to achieve complete energy storage loop. Compared to alkaline, PEM, and other low-temperature solutions, RSOC operating at high temperatures has higher electrolysis efficiency and is expected to have lower system costs in the future, providing a technical route for large-scale and long-term energy storage and green hydrogen production. SOFC technology roadmap: Three supporting solutions each have their own advantages The electrolyte support structure represented by Bloom Energy is strong and stable, with low failure rates and strong stability; the metal-supported solutions represented by Ceres Power/Weichai Power can reduce the system operating temperature, use low-cost materials, and have good thermal cycling and emergency shutdown performance; the anode-supported solution has good conductivity and can achieve lower operating temperatures. Material end: Sealand believes Scandium-stabilized Zirconia + high chromium scheme will be the mainstream in the future In terms of electrolyte materials, the ScSZ (Scandium-stabilized Zirconia) material represented by Bloom Energy has higher electrical conductivity at the same temperature compared to Yttria-stabilized Zirconia (YSZ); the connector materials matched with the electrolyte require an excellent coefficient of thermal expansion, which decreases as the chromium content increases. The thermal expansion coefficient of the 95% chromium connector material scheme is the lowest at 10.5 ppm/K. On the other hand, whether it is the 3YSZ, 8YSZ, or ScSZ scheme, the thermal expansion coefficient is around 10 ppm/K, so Sealand believes that the high chromium connector material scheme will be the mainstream technological route for future iterations, and the demand for chromium metal will not decrease with the advancement of SOFC technology. Relevant targets: Sealand recommends focusing on companies related to SOFC materials, systems, and companies with a comprehensive layout of materials + systems Recommended focuses: 1. Metal raw materials: Hubei Zhenhua Chemical (a global leader in chromium salt, a supplier of key raw materials metal chromium / chromium salt for connectors, has established a stable partnership with BE supply chain, and the future chromium salt supply and demand gap is expected to reach 32%); 2. SOFC industry chain / BE industry chain: Chaozhou Three-Circle (Group) (core supplier of BE fuel cell diaphragm plates, with a comprehensive layout of materials + systems), Zhejiang Chunhui Intelligent Control (deeply linked with BE core supply chain, SOFC + commercial aerospace + semiconductor three-track layout), Shenzhen Uniconn Technology (deeply cultivating power connection components, has obtained bulk orders from BE), Hunan Corun New Energy (successfully developed cathode foam copper manganese alloy materials, has provided samples to 7 SOFC customers, and one of them has installed a 50KW stack and delivered it), Shenzhen Kaizhong Precision Technology (has supplied SOFC heat exchanger components in small batches to customers); 3. SOFC system end: Bloom Energy, Chaozhou Three-Circle (Group), Anhui Estone Materials Technology, Weichai Power, Foran Energy Group, etc. Risk warning: AI capital expenditure is lower than expected, SOFC system cost reduction is lower than expected, risks of key raw material supply and price fluctuations, emergence of alternative technologies, slower than expected technology iteration speed, discrepancies between calculations and actual results, domestic and foreign companies do not have complete comparability, information and data related to targets are for reference only, some key materials in the industry rely on imports, such as special electrolytes.