Traditional business model is broken

The traditional business model of centralised power generation, that has dominated the world for more than a century, is gradually being disrupted. E.ON’s recent decision to split its business in two, spinning off its fossil fuel and nuclear business to focus on renewables and distributed generation, is a clear example that things may never be the same again.

Johannes Teyssen, E.ON’s Chief Executive, has been quoted as saying that the traditional business model for utilities has ‘broken apart’. He cited the main reason for this change as being technology, which has lowered the barrier of entry to the energy market, hence undermining the traditional role of the utility.

And Tesla’s recent announcement that it intends to enter the consumer battery storage market shortly is another indication that organisations are starting to think ‘outside the box’.

Disruptive technology

Fuel cells are one of the disruptive technologies that, at the right cost point, can enable a further shift towards highly efficient distributed generation.

Used in distributed energy products, fuel cells offer consumers the ability to generate power efficiently in their homes and businesses, giving them more control over their energy use while reducing demands on the electricity grid, and easing the strain on grid stability and the ageing infrastructure.

By generating power at efficiencies of around 50% at the point of use, with no transmission and distribution (T&D) losses – and 90% if operating as a combined heat and power (CHP) system – fuel cells can provide a tipping point for distributed generation, by generating power more reliably, efficiently, and at lower cost to the grid.

Recent studies in the EU have shown that fuel cell CHP systems save 27% of a typical home’s energy consumption, 30% of its CO₂ emissions, and eliminate other pollutants such as NOx almost entirely.^[1] If every home or business owner could generate the power they need, combined with the ability to reduce their energy bills and carbon emissions by at least 25%, then surely this game-changing technology will achieve mass adoption?

Cost reduction through technology innovation

Fuel cell technology is not new, but it has come of age, following decades of development and billions of dollars invested by world-leading OEMs in bringing fuel cell products to market.

There are historic parallels with other disruptive technologies that have brought about significant change in our everyday lives, such as the move from fixed-line to mobile phones, or from mainframe computing to PCs.

It is often cost reduction through technology innovation that has proven to be the big tipping point. Fuel cells work – the only thing that has historically held back widespread adoption has been high cost and the lack of infrastructure, as most people associate fuel cells with hydrogen.

Ceres Power fuel cells meet the cost challenge

The fuel cell technology developed by Ceres Power runs on conventional fuels such as natural gas, biogas and LPG (liquefied petroleum gas), and meets the cost challenge by using low-cost steel and conventional manufacturing techniques adopted from the solar industry. This means that it can be affordably mass-produced, and use the existing gas infrastructure in the most efficient way possible.

Some of the world’s leading power system and manufacturing companies are working with us to develop and commercialise the next generation of power products using our Steel Cell technology.

UK lacks early exposure

Often in the UK we lack early exposure to new technologies, because we have lost the home-grown companies that develop life-changing new products, and rely on the latest technologies to come our way from Asia or California.

In many ways this is happening again with fuel cells. In Japan fuel cell products are advertised on TV and widely available, whereas in the UK most people are unaware of their growing adoption around the world. I spend most of my time selling leading British technology to the global power systems companies – and once products using the technology are established in Japan, South Korea, and the US they will start coming back into Europe.

The shift towards distributed generation

So how is the shift towards distributed power generation playing out around the world?

Japan and South Korea, which depend on imports for over 90% of their primary energy demand^[2] and are the world’s biggest importers of liquefied natural gas (LNG),^[3] are leading the way in fuel cell commercialisation. They are closely followed by the US, as it moves towards energy independence based on its plentiful shale gas reserves.

By the end of 2014 the number of fuel cell micro CHP (mCHP) systems installed in Japan had reached 138 000, and the Japanese government has a target to have 1 million homes powered by fuel cells by 2020, and 5 million homes by 2030.

Progress in US and Germany

In the US, centralised generation is now expected to produce less power in 2015 than it did in 2007, despite significant economic growth, due to the combined impact of energy efficiency and distributed generation. This backward trend is without precedent in recent history.

Unreliable power supply cost the US economy an eye-watering $150 billion in 2013,^[4] and companies are inevitably looking for solutions to ensure the reliability of supply to their businesses. Generous state and federal subsidies have encouraged the adoption of MW-scale fuel cell installations, and companies such as eBay, Google and Apple are already deploying fuel cells for power generation to ensure security of supply to their mission-critical data centres.

What about Europe? Germany provides the most supportive policy and subsidy structure for fuel cell development. Extensive uptake of wind and solar renewables has left the German electricity grid struggling to balance power outputs, and to secure low-carbon, flexible energy supplies the government has given its support to fuel cell mCHP.

Fuel cells in the UK market

Finally, turning to home, what’s the current picture in the UK? We will lose around a quarter of existing electricity generation capacity over the next decade, as retiring nuclear, coal, and oil power plants close. There is growing concern from the Department for Energy and Climate Change (DECC) that the nation could face serious power cuts through a combination of power station closures, and a decline in the resilience of ageing electricity networks – and renewables alone cannot make up this shortfall, due to their intermittent nature.

Fuel cells would remedy many of these issues. If the same targets for fuel cell adoption that, for example, Japan is advocating were implemented in the UK, domestic energy bills would be reduced by 27%, nationwide gas savings would equate to 7% of total UK gas imports, 5 GW of new flexible distributed capacity would be added into the energy system (equal to 14 new gas power generation units), and the CO₂ emissions saved every year would be equivalent to 10 carbon capture and storage (CCS) plants.^[5]

Fuel cells are a viable solution

Alongside renewable energy sources, we can help achieve a future of distributed power generation using fuel cells as a viable solution to the world’s need for cleaner, lower-cost, and more reliable energy.

Cost reduction through technological innovation is bringing fuel cells closer to commercialisation, just as it has done with wind and solar power. With greater investment in transformative technologies, supportive government policies, and industry leaders and policy stakeholders working together, the fuel cell industry can help to shape the future of the global energy landscape to meet the twin requirements of reliability and sustainability.

References

1. Advancing Europe’s energy systems: Stationary fuel cells in distributed generation. Published by Fuel Cells and Hydrogen Joint Undertaking (FCH JU)/Roland Berger Strategy Consultants, March 2015.
2. World Nuclear Association, April 2015: Japan and South Korea.
3. US Energy Information Administration, January 2015: Japan.
4. Fuel Cell Annual Review 2013. Published by 4th Energy Wave, 2014.
5. Fuel cells the smart power revolution – Placing power into the hands of consumers. Published by Ecuity Consulting, August 2014.

About the author

Phil Caldwell is CEO of Ceres Power, a UK-based developer of low-cost, next-generation, intermediate-temperature solid oxide fuel cell technology. Ceres’ unique patented Steel Cell technology operates on mains natural gas, and is manufactured using standard manufacturing processes and conventional materials such as steel, meaning that it can be mass-produced at an affordable price for domestic and business use.