Innovative applications of Fuel Cells

About 5 years ago, I was told by a friend who's an equity analyst for clean technologies, that Ceres was a fantastic company with a great product and that I should put some money into it before the share price exploded.  Well, I looked into the company, but held off from investing and I have watched the share price over the years bouncing up and down without ever breaking out of the range.  The reason I held off was not because I couldn't see the merit in the product, it is a very clever idea, but I think it is too clever for its own good.  Just imagine for an instance that you were a door-to-door salesman for the company, traipsing up and down the land, trying to sell the product.  In my view, the problem would be it's too complicated for the average punter and it's not particularly exciting.  Add to that, there is a high initial install cost and the payoff is about 4 years, but you have to take their word for it.  

These sorts of ideas seem to become more popular when we have high energy prices, but people lose interest when prices fall.  If we see a plan from say BG to subsidize the equipment, it could do well, but as it stands, not interested.

Oh, and from a financial perspective, market cap £125mm, turnover, £700,000.

It's a great example of the problems with many environmental technology company - "great idea, how's it going to make a profit?"

The environment angle is secondary, if this is to work it must stand alone as a cost saving device.

I am more optimistic about the market for it, Gradders. Given a 3-4 year pay off and good reliability then i think these things would really fly, especially if as you say they are subsidized by BG. I could even envisage such great uptake that utility companies started subsidising conventional water heaters!

How much does a punter need to understand the product?

"This is my new space age water heater that saves me money and powers my home" ...."cool!  I want one too. "

In reply to Gradders73 (post #2)

Hi Gradders,

I am a Ceres investor. A few points.

Firstly, the product will not be sold by door-to-door salesmen. It will first be sold in the UK by British Gas, who have committed to order a minimum of 37,500 units initially and have invested £30m in Ceres (for a 10% stake). Ceres also has contracts with other companies, including EDF and Calor. BG have already started marketing it, at a low level (see http://crave.cnet.co.uk/greentech/0,250000598,10000964,00.htm , for example). Once "consumer ready", I would expect TV advertising to follow.

Secondly, from the users' POV it is not complicated. It is designed to be compatible with the gas, water & electrical fittings of a convential boiler (which it replaces), making ti easy to install. It is wall mountable and designed to fit in the same wall space as a conventional boiler. It has in-built electronics that will adjust fuel consumption to match electric and water heating demand (there is an auxialliary burner built in, so if electrical demand is low but heat demand is high, that will cut in - excess electriciity can be exported to the grid, if desired, otherwise, fuel to the cell-stack is simply reduced or cut-off. ONLY Ceres fuel-cell stack can produce variable output, competitors' CHP units have to be left on the whole time.

How does it make a profit? A gross profit of £300/unit to Ceres is not implausible. Times 100,000 units per annum for the UK market, if the product takes off... then there's international sales. There won't be any substantial revenues until volume launch, which remains on-track for 2H2011, as projected last year. So far, the milestones from last year's plan have been met and "sheltered field trials" should start soon.

Of course, this is a speculative investment, because nothing is proven - except the core technology. However, I have met the Ceres team on several occasions over the last 3 years and I am impressed by their commercial acumen, not simply the technology. I like what they're doing and how they're doing it and am happy to back them with a modest amount of risk capital.

Regards,

Mark

I think the share price of ceres is now getting ahed of itself but the prospects are huge. Fuel cells share with Fusion the complaint that they have been the next big thing for last 30 years always in prospect never in relaity.

Ceres has however got the product that really can solve the UK's looming power-generation shortfall. A solution that can also roll out worldwide.

The ideal power generation solution would not be based on massive power plants belching out CO2 and waste heat or mega wind farms in some distant western sea miles from the consumer; it would be a micro-generating solution capturing waste heat and producing power at or alongside the point of consumption.

 The distribution and waste heat efficiency gains are enormous while the devolving of capital investment to the consumer solves all the NIMBY planning delay and financing problems of mega plants. You can throw in saving the planet, side tracking, dodging or satisfying  the "Greens" (depending on your point of view) for free.

Under labour we have lost ten years and completely failed to tackle the looming power famine that is inevitable as are first generation Nuclear plantsand aged coal plants  are progressively decommissioned. What is omitted in the discussion, but forseen by peak oil freaks like me, is how we are going to power the electric car that must be part of the mobility solution from 2020 onwards.

Interview with Ceres CEO Peter Bance on BBC today: http://news.bbc.co.uk/today/hi/today/newsid_8151000/8151075.stm

With thanks & acknowledgement to riskblue on ADVFN for highlighting.

A progress update has been released today: http://fool.uk-wire.com/cgi-bin/articles/200907290700054364W.html

Fuel cell mass manufacturing facility fit out completed

 

...It is anticipated that an initial manufacturing line will be commissioned during Q3 2009 and manufacturing operations will commence during Q4 2009. The facility will manufacture low volume beta units in 2009 and into 2010 for sheltered field trials under the contract with British Gas. Additional equipment will be installed in 2010 to deliver the higher volumes required for commercial field trials and in preparation for volume launch with British Gas in 2011.

We're certainly getting closer to having a real product oin the market... but whilst the volume launch date is still on schedule, it appears to me that we're around 6 months behind delivering beta proucts, based on the roadmap included in last September's analyst  presentation.

Regards,

Mark

Prelims for Y/E 30 June 2009 out this morning: http://fool.uk-wire.com/cgi-bin/articles/200909230700144908Z.html

and announcement of a partnering deal with Daalderop BV for CHP unit assembly: http://fool.uk-wire.com/cgi-bin/articles/200909230700274834Z.html 

All seems pretty much on track for volume commercial launch in 2H11, as planned last year. Cash burn is being restricted admirably, to £4.5m in the last year (against £3.9m in the previous year, before capital raised), leaving £23m. Operating expenses are being offset by milestone payments from customers. I'd expect the rate of cash burn to increase going forward as plant fit-out has to be paid for and operating costs increase as larger scale manufacturing operations begin.

From the Daalderop announcement:

Having completed the fit-out of its fuel cell mass manufacturing facility in Horsham in July 2009, Ceres Power has now installed all of the key manufacturing machinery for the initial manufacturing line and is on track to begin initial low volume manufacturing operations in Q4 2009. The boiler assembly agreement with Daalderop together with other key supply chain relationships now in place for balance of plant components allows Ceres to prepare for production of Beta units for deployment in up-coming sheltered and commercial in-home field trials.

 From the prelims:

The Beta phase of the British Gas CHP programme is now under way and includes a sequence of activities relating to the design, procurement, build and trialling of Beta CHP units. The validation of in-field product performance and reliability including consistently high quality installation, service and maintenance, is a critical element of this phase. The refinements identified for product and manufacture from the Alpha phase testing have been incorporated in the Beta design phase. The Group is in the process of procuring the necessary components for testing and incorporation into the build of the initial batch of Beta field trial units. The Beta units will be manufactured off representative volume-capable machines and processes and use components sourced from the Group's global supply chain. 

Extensive work has been conducted in conjunction with British Gas engineers to select a representative sample of homes across the country for inclusion in the Beta field trials programme. The in-home surveys and site selection have been completed and work is under way to install the necessary monitoring equipment to capture and analyse the relevant data from the trials including room temperature, heat usage, home occupancy and electricity consumption. In addition to providing valuable in-field product validation data, the trials will enable the CHP control and electronics operating systems to be optimised using real world in-home data across a range of housing market segments. The trials will also be an opportunity to establish and optimise the associated service offering including the capture of valuable consumer feedback.

 

As usual from Ceres, looks like a professional, well managed approach, which should lead to scalable mass manufacturing of a reliable and consumer-friendly product.

Regards,

Mark

Some more from Reuters:

The company plans to bring the wall-mounted product to the mass market in the second half of 2011, Chief Executive Peter Bance told Reuters. "We're giving ourselves a couple of years of getting it right," Bance said via telephone.

He said British Gas has already committed to forward orders for 37,500 units over four years from 2011, while its second customer Calor Gas had signed up for 20,000 units over five years.

"Within the four years of that initial phase with British Gas, we expect to reach profitability," said Bance, adding that some British Gas customers had already expressed an interest in signing up to the product when it launches.

He expects the UK's planned feed-in tariff to boost interest in the product further, as it means customers would receive incentives for electricity they generate within their homes.

 

I see that Ceres have refreshed their website and published their 2009 Prelims Analyst Presentation . Both well worth examining with plenty of details on technology; product status; product, site and manufacturing pictures; and independent verification of Ceres' cost and CO2 saving claims.

Good to see Ceres making progress on the commercial, as well as technical fronts:

Ceres Power ('Ceres', the 'Company', the 'Group') today announces that it has signed an agreement (the 'Agreement') with Bord Gáis Éireann ('BGE') for residential combined heat and power ('CHP') products operating on natural gas for the Irish market (including the Republic of Ireland and Northern Ireland)...

...

Under the terms of the Agreement, BGE will pay Ceres £1.6 million in milestone payments during the development and trialling of the CHP Product (the 'Initial Phase'), including an up-front payment of £1 million. In addition, BGE has agreed to place a call-off order for 16,000 CHP products in aggregate over a four-year period for the Irish market, conditional upon successful completion of the Initial Phase and agreement of standard commercial terms, including the price, for the supply of CHP products. Subject to BGE meeting minimum order volumes, Ceres has agreed to sell the CHP product to BGE for the Irish market on an exclusive basis for a four year period anticipated to begin in early 2012... 

I have today received my paper copy of Ceres' annual report. It doesn't seem to be on their web-site yet but undoubtedly will be shortly.

Regards,

Mark

From today's announcement and accompanying presentation, It seems that Ceres' Board has had some lobbying success with the government and has concluded some "feed-in tariffs" (FIT) that, IMO, will favour Ceres' units. Specific points I note are:

• The tariffs/incentives are only availabe for domestic units, defined as generating < 2kW
• The bulk of the incentive (i.e. 10p/kWh) is for generating electricity for in-home consumption. Only a further 3p/kWh is provided for exporting electricity to the grid. This incentivises only generating what you need, which is the most efficient way to run the unit. Note that Ceres is the ONLY fuel cell-based mCHP company who's units can operate this way. Competitors' units have to be left running at full output continuously (thus consuming more gas than is necessary for in-home use).
• Ceres calculate a total annual saving to the consumer of £635/yr from the combination of reduced grid supplied electricity consumption and the FIT, for a "mass market home" with 2-3 person occupancy.

OTOH, I note that these incentives are funded through a modest increase on all consumers’ electricity bills (i.e. a green tax) across Britain’s ~25 million homes. I guess there is some risk that a new government might reconsider this approach - but I would have thought that that risk is fairly low, considering the benefits of significantly improving the efficiency of the UK's electrical generation and supporting "green jobs".

Regards,

Mark

I have been in touch with Ceres to clarify the performance of the CHP unit, as there has been some confusion surrounding this issue on other BBs. I'm documenting my findings here for the record.

They have advised that when running at full electrical output the unit is ~85% efficient and that the heat:electrical output  ratio is around 1:1. They have also confirmed that in ballpark terms this means that for each 2kW of gas input, the unit will generate ~0.85kW of usable electricity and ~0.85kW of usable heat (for water heating).

The efficiency gains are stark when you compare against the figures for current-day centralised generation: for each 2kW of fuel energy content, 0.7kW of usable electricty are delivered to the home - and the heat by-product is largely lost.

Looking at this another way, if a home requires 3kWh of water heating + 0.85kWhe, that would require total fuel energy input of 5.95kWh if conventional generation and an 85% efficient A-rated boiler were used, vs 4.68kWh gas energy input using a Ceres mCHP unit.

Cheers,

Mark

In reply to marben100 (post #13)

IMO and FWIW, I don't fancy CFU's chances of competing successfully with Ceres. The fundamental problem is physics.

AIUI CFU's product is based on traditional Zirconia fuel cells. This is a technology that companies such as Rolls-Royce & Siemens have pumped huge sums into developing. The conclusion of those giants is that such cells may be suitable for (and are successfully used in) industrial applications, where they can be operated in a highly controlled and engineer-monitored environment. These  cells operate at temperatures in excess of 800C. They and units based on them are difficult & costly to build, cannot be therrmally cycled without the risk of damaging the cells, and are delicate.

While CFU may have demonstrated their units under lab conditions, IMO Ceres have a much better chance of manufacturing reliable and robust commercial units at a reasonable cost. This comes down to the fact that Ceres' unique, patented technology (based on Ceria-Gadolinium oxide) operates at a lower temperature of around 550C, with the following consequences:

• The cells and all supporting subsystems can be manufactured using cheap, readily available materials (mainly steel).
• The cells are based on a steel substrate (as opposed to pure ceramic) which makes them more robust and resistant to thermal cycling.
• Ceres' unit (unlike CFUs) can be cycled on and off repeatedly. AIUI CFU's unit has be left operating at full-power continuously, to minimise the risk of damaging the cells.
• The power output of Ceres' unit can be automatically varied to match electrical demand, by varying fuel input.

There is actually plenty of room in the marketplace for both products but IMO Ceres has a much better chance of achieving commercial success for the reasons stated above.

Regards,

Mark

In reply to marben100 (post #15)

Hi John,

You'll find formatting easier if you click the "Show Editor" link (that editor is more WYSIWYG); otherwise you may need to press "enter" twice to get a new paragraph.

Cheers,

Mark

A compherensive update of the Wiki for Ceres Power has now been completed and you can read it here: http://www.stockopedia.co.uk/wiki/view/CWR

Cheers,

Mark

A webcast of a recent interview with Ceres Power CEO Peter Bance is available here: http://intruders.tv/en-cleantech/2010/04/12/peter-bance-of-ceres-power-and-the-future-of-micro-power-generation/

It describes Ceres' history and the significance of MicroCHP as PB sees it.

Cheers,

Mark

Final results out today: http://www.investegate.co.uk/Article.aspx?id=201009290700114755T

also a comprehensive presentation: http://www.cerespower.com/store/files/200-Results%20Presentation%20V30%2029%209%2010%20for%20web%20FINAL.pdf

The presentation provides much new detail and forward planning.

Regards,

Mark

I think that Ceres Power is now a great investment; the price has steadily fallen as the technology has approached commercialisation and the government has announced a micro generation feedin tarrif. The tarrif needs to be revisited; the 10p is OK but the volume needs to be larger.

It was overvalued; it is now undervalued and nearly fully cooked. With £40m in the bank and an enterprise value variously from £10m to £20m this is cheap. The directors bought at 60p.

I invest in Ceres Power and ITM Power and am very bullist about both.

Folio