Fuel Cell in Aerospace and Defense Market

Market Overview

The global fuel cell in aerospace market size is expected to expand at a CAGR of 29.1% during the forecast period (2023–2031).

The global fuel cell in defense market size is anticipated to expand at a CAGR of 9.1% over the forecast period (2023–2031).

A fuel cell is an electrochemical system that converts the chemical energy of a fuel, commonly hydrogen, and an oxidizing agent, typically oxygen, into electrical energy through two redox reactions. Fuel cells differ from most batteries because they require constant fuel and oxygen (typically from the air) to sustain the chemical reaction. In contrast, chemical energy originates from already present substances in a battery. Fuel cells can continuously generate electricity when fuel and oxygen are provided.

In 1838, Sir William Grove developed the first fuel cells. Following the 1932 invention of the hydrogen–oxygen fuel cell by Francis Thomas Bacon, the first commercial use of fuel cells occurred almost a century later. The alkaline fuel cell, commonly called the Bacon fuel cell in honor of its inventor, has been employed by NASA space programs since the mid-1960s to produce electrical power for satellites and space capsules. Since then, fuel cells have been utilized in numerous additional applications. Fuel cells are utilized as primary and backup power sources for commercial, industrial, and residential structures in remote or inaccessible locations. 

Market Dynamics

Global Fuel Cell in Aerospace and Defense Market Drivers

Increasing Focus on Decarbonization in the Aerospace Industry

The aerospace sector was responsible for 2.0% of global CO2 emissions in 2020, according to the Air Transport Action Group. In 2020, the International Air Transport Association (IATA) observed a notable decline in air traffic, primarily attributed to the impact of the COVID-19 pandemic. Consequently, stakeholders within the aviation industry have actively pursued initiatives to reduce carbon emissions and achieve decarbonization in this sector. Countries such as Germany, the U.K., the U.S., and France have formulated their National Hydrogen Strategies focusing on decarbonizing transportation and aviation sectors. For example, Airbus focuses primarily on using hydrogen fuel cells and sustainable aircraft fuels (SAF) to decarbonize its business in commercial aircraft.

Additionally, direct combustion of hydrogen in the turbofan or turboprop engine is used as one of the technologies to decarbonize the aviation industry. Companies across the globe are collaborating among themselves to accelerate the process of decarbonization in the aviation industry. For instance, TotalEnergies and Safran entered into a strategic partnership agreement in September 2021 to jointly develop commercial and technical solutions for the decarbonization of the aviation industry. The abovementioned factors are expected to propel the growth of decarbonization in the aerospace industry over the forecast period.

Rising Spending on Military Drones/UAVs

Military drones have become the weapon of choice in modern warfare, deployed by government and non-governmental units. Factors such as a high level of effectiveness, growing demand for intelligence, surveillance, and reconnaissance, lower prices of UAVs, and high denial on the battlefield are expected to drive market growth. As per the Teal Group, R&D and procurement spending on military drones are projected to increase from USD 11.1 billion in 2020 to USD 14.3 billion by 2029.

Furthermore, vendors are operating to launch fuel cell military drones to penetrate the market. For instance, in May 2021, LIG Nex1, a defense contractor, was selected for South Korea's state project to provide a heavy-duty cargo drone propelled by hydrogen fuel cells for military and civilian applications. An investment of about USD 39.3 million was incurred to develop the drone by 2025. The drone can fly longer compared to the existing battery drones due to the high energy density of fuel cells and other advantages such as low noise and low vibration compared to gasoline drones. These factors are expected to drive the market over the forecast period.

Global Fuel Cell in Aerospace and Defense Market Restraints

High Cost of Fuel Cell Systems Resulting in High Cost of Military Vehicles

The elevated cost of fuel cell systems has a detrimental effect on the overall vehicle cost. Hence, a major challenge market participants face is the development of technology or systems that can effectively handle fuel cell stack and balance of plant (BOP) expenses while also prolonging the lifespan of these components. Implementing suitable policies that will help manufacturers achieve economies of scale is expected to play a key role in making this technology economically viable.

In addition, electrolysis is an extremely inefficient process for hydrogen production and consumes a lot of energy. Therefore, hydrogen produced is required to be compressed and then filled in a vehicle tank. This process makes fuel cell electric vehicles (FCEVs) cost-ineffective, restricting market growth.

Global Fuel Cell in Aerospace and Defense Market Opportunities

Increasing Aerospace and Defense Spending

Aerospace and defense spending continues to rise despite the COVID-19 pandemic, which resulted in a 66% decline in passenger air traffic in 2020. Global defense spending is expected to grow by 2.8% in 2021 as countries continue to strengthen their militaries due to geopolitical tensions intensifying in light of the global pandemic. Major countries have announced to increase their military spending despite the economic impact on fiscal deficits due to the COVID-19 pandemic.

Furthermore, China announced a military budget of USD 178.2 billion in May 2020, 6.6% more than the previous year. Japan also announced a budget of USD 51.6 billion, nine times more than the previous year. Similarly, zero-emission-powered fuel cells deliver high efficiency and are more reliable for long-distance flights and military surveillance. Therefore, increasing aerospace and defense spending allows fuel cell technology to evolve and penetrate the market.

Regional Analysis

Based on region, the global fuel cell in aerospace and defense market is bifurcated into North America, Europe, Asia-Pacific, Central and South America, and the Middle East and Africa.

North America Dominates the Global Market

North America is the most significant shareholder and is expected to grow significantly during the forecast period. This can be attributed to the implementation of policies aimed at mitigating carbon footprints within the region, coupled with the allocation of financial resources towards the advancement of fuel cell research and development. Vendors such as Bloom Energy have driven the installation of fuel cells for application in sectors such as defense, aerospace, data centers, sports stadiums, and commercial buildings in the U.S. The North American fuel cell market is extremely advantageous for investments in various commercial research projects.

Additionally, the United States has emerged as a prominent market for fuel cells and has demonstrated pioneering efforts in innovation, with substantial support from the U.S. Department of Energy (DOE). The United States Army and Navy are fuel cell users in North America. Rotorcraft fuel cell components are being developed continuously by market-active vendors. These factors collectively contribute to the growth of the market.

Europe is expected to grow significantly over the forecast period. The European Commission's goals and projects for fuel cell vehicles in major European nations have increased the growth and deployment of fuel cell systems in Europe. Organizations help conduct research activities and provide the necessary support for developing and deploying fuel cell projects. Some major European organizations include Fuel Cells and Hydrogen Joint Undertaking (FCH JU) and Hydrogen Europe. In addition, the European government has plans to decrease GHG emissions considerably. Therefore, several European nations have designated implementing innovative technologies, like fuel cells (primarily PEMFC), to achieve these goals. This is anticipated to create a significant opportunity for manufacturers of fuel cells over the forecast period.

In Asia-Pacific, the market is primarily boosted by the ascending demand for the product in various defense and aerospace applications, including commercial aircraft, rotorcrafts, military drones/UAVs, and military vehicles. Increasing spending on defense in countries such as China, India, Japan, and South Korea, coupled with an increasing number of air passengers, is anticipated to augment the growth of defense and aerospace applications, thereby creating demand for fuel cells. China led the Asia Pacific market in terms of revenue. As per the Stockholm International Peace Research Institute (SIPRI), China accounted for approximately 13% of global military spending in 2020. Thus, rising spending on the military and defense sector is fueling the demand for military drones/UAVs and military vehicles, which is anticipated to create significant opportunities for fuel cells.

Fuel cell deployment is expected to increase due to the growing need for alternative energy sources across Central and South America's emerging economies due to rising environmental concerns. This is paving the way for the growth of the fuel cell market in Central and South America. The involvement of both government and private organizations in the research, development, and implementation of fuel cells across numerous industrial segments in Central and South America points to the development and adoption of the technology in the region.

In the Middle East and Africa, the oil-producing companies in concept are focusing on clean energy sources due to increasing environmental concerns relating to fossil fuel-based energy sources. Moreover, many OPEC countries implemented production cuts to mitigate lower oil demand following the coronavirus pandemic. Many oil producers in the Middle East have turned to hydrogen as a clean fuel in response to falling oil demand caused by the COVID-19 pandemic, which is expected to propel the fuel cell market in the aerospace industry.

Segmental Analysis

The global fuel cell in aerospace and defense market is segmented by product and application.

Based on the product, the global market is bifurcated into Proton Exchange Membrane Fuel Cell (PEMFC) and Solid Oxide Fuel Cell (SOFC). 

The PEMFC segment dominates the global market and is expected to grow significantly over the forecast period. PEMFC requires pure hydrogen, oxygen, and water for its function. It operates at a comparatively lower temperature of around 80°C, making it eligible for quick start and less prone to wearing of system components. As a result, PEMFC is more durable than other product types. It also provides advantages such as low weight and volume compared to other fuel cell types. In addition, PEMFC is extensively used for transportation applications in the aerospace industry due to its efficiency, compactness, temperature range, and durability. According to Honeywell Aerospace, air-cooled PEMFC is optimal for aerospace applications due to its superior thermal management, lighter balance of plant, shortened stack service life, and restricted integration flexibility.

PEMFC is also utilized in various defense applications, including military vehicles and drones. The PEMFC product segment has experienced significant growth and recognition due to the rising demand for fuel cells in unmanned aerial vehicles (UAVs), which has resulted in increased sales and prominence.

Solid oxide fuel cells produce electricity from hydrogen, natural gas, and other renewable fuels. Therefore, the power generated does not result in the emission of environmental pollutants in most cases. Solid oxide fuel cells produce power through a chemical reaction, generating little or no noise. In addition, the integration of fuel cell vehicles or other mobile applications can mitigate noise levels during driving. Solid oxide fuel cells have significant growth opportunities in stationary applications in residential and commercial sectors. Bloom Energy has emerged as a major company that utilizes SOFC in fuel cell-based power generation.

Based on application, the global market is segmented into aerospace (commercial aircraft and rotorcrafts) and defense (military drones/UAVs and military vehicles). 

The commercial aircraft segment owns the highest fuel cell in aerospace and defense market share in the aerospace segment. Fuel cells powered by hydrogen are installed on aircraft with a passenger capacity of up to 20. Nevertheless, aircraft manufacturers are currently conducting feasibility studies for larger commercial aircraft. For instance, in January 2021, Airbus established the ZEROe program, which consists of six eight-bladed pods powered by hydrogen fuel cells and affixed beneath the wing of a large commercial aircraft. The system comprises a propeller, electric motors, fuel cells, an LH2 tank, a cooling system, and auxiliary equipment.

In addition, in September 2020, hydrogen-electric engine manufacturer, ZeroAvia completed the world's first commercial flight powered by fuel cells. The efficiency of hydrogen fuel cells in commercial aircraft reached up to 60% compared to 25% in a standard combustion engine. In February 2021, Slovenia's Pipistrel Aircraft announced plans to launch lightweight, hydrogen fuel cell-powered 19-seat hybrid aircraft to revolutionize the commuter category segment. Such factors are expected to augment the demand for fuel cells in the commercial aircraft segment over the forecast period.

The military vehicles segment accounted for a dominating market share in the defense segment. A military drone is a cutting-edge system in the defense industry that has gained much popularity in applications such as surveillance and monitoring. The adoption of fuel cells and military unmanned aerial vehicles to decrease the dependency on imported oil is expected to emerge as a key trend in the market. Despite the growing technological advancements, the development of lightweight UAVs is a market challenge. It has been observed that a typical UAV's power source and fuel typically account for about 35%–65% of the vehicle's weight, whereas for small UAVs, it is closer to 38%–40%. However, manufacturers are strategizing to cope with the market challenges. For instance, in May 2021, the South Korean Air Force collaborated with Doosan Mobility Innovation, Inc. to purchase hydrogen-powered fuel cell drones to boost its surveillance capability.

Recent Developments

• June 2023- Intlvac Thin Film, a Canadian advanced manufacturing company with a thirty-year history in the thin film deposition and materials science industries and clients in aerospace and defense, medicine, telecommunications, energy, optics, and photonics, began selling vacuum systems to the fuel cell research and manufacturing industries.

• March 2023- ZeroAvia announced that its High-Temperature Proton Exchange Membrane (HTPEM) systems had attained record-breaking performance in testing. Early testing of the pressurized 20kW HTPEM stack power module at ZeroAvia's UK R&D facility revealed a record 2.5 kW/kg specific power at the cell level, paving the way for 3+ kW/kg system-level densities within the next 24 months.