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20 April 2022

UK Ceres Power opts for partner power as route to SOFC market

When a large company like Germany’s Bosch says that it is on the verge of adapting a solid oxide fuel cell for industrial purposes – targeting office buildings and data centers – and will build not quite a gigafactory (about a fifth of one at 200 MW) to deliver in volume in 2024, you know there is a story in there.

In this instance this is a long term 20 year story of come researchers to create a business around Solid Oxide Fuel cells, and a small public UK firm, Ceres Power (named after the largest neighboring asteroid) which has gone about things in what Rethink Energy considers is entirely the right way.

So when a Bosch release got regurgitated this week – essentially the same story that has been doing the rounds for over a year, we realized that there is now a race on for adapting reversible fuel cells for stationary and moving distributed power applications. Bosch’s factory won’t be ready for another two years, so it is eking out releases on process a step at a time.

So far Ceres has gone about it entirely the right way – raise money, partner with massive established public bodies, and find a low cost entry into China. It is only a month since the company delivered its annual results – based partially on license fees, with the rest on engineering services – applying its SOFC design for use with multiple fuels – natural gas biomethane and hydrogen – making it reversible so that it can behave like a battery – and it has jumped to revenues up 44% to £31.7 million, driven by a license to South Korea’s Doosan, its maturing relationships with Bosch and its three year old foundation agreement with China’s Weichai and another with Miura in Japan. The company also has licensing deals with Honda, Nissan and Cummins.

Gross profit was up 40% to £20.3 million, and losses rose to £16.7 million, which was as expected. The company has £250 million of cash and investments, and raised the bulk of that – £179 million – last year.

Most of this is built around the Ceres SteelCell, which is an SOFC which can be built into stacks for varying applications from heavy duty buses, to powering re-charging units for cars, to powering downtime at data centers, and expensive industrial processes which just must never stop no matter what the grid does.

Its product is essentially R&D into fuel cells, and it has jumped in a single Pandemic year from 160 staff to 489 – mostly adding scientists and engineers.

One of the most comforting comments was that Bosch is planning to invest €400 million in the product line, and that it already has 50 pilots of fuels cells running in-house and it plans to produce 200 MW of them by 2024. And although none of these are currently talking up the use of reversible SOFC’s in homes, CEO Phil Caldwell in his presentation made it clear that having these completely power a home is a definite future move.

The nice thing seems to be that SOFCs are different things to different companies – for Bosch they are a way to offer power independence for re-charge units and light industrials, for Weichai it is about powering large buses with them, using natural gas, with some CO2 output, but without all the other typical pollution that buses issue, to comply with Chinese laws on particulate matter.

Of course a reversible fuel cell which can run on pure hydrogen is both an electrolyzer – and so a way of making hydrogen for the emerging hydrogen economy – and a way of trapping that hydrogen into a pressured container and using it as a battery in a home.

While Bosch has committed to 200 MW by 2024, Doosan so far is only shooting for an initial 50 MW installation, spending £90 million to build the plant. We are betting both will build far more than that, but don’t want to walk before they can run.

The Bosch factory may well be the first such factory of its type. In Bosch’s mind it has the bandwidth to find applications where the excess heat from the reaction can become part of the commercial offering – and it talks up 60% in electricity conversion and 85% if you include the heat, planning to offer it in multiples of 10 kW of electricity and 3 kW of thermal energy.

Perhaps Bosch is right and the real market is for decentralized power right now, which it sees as worth €20 billion by 2030. It already has 250 associate companies working out how to commercialize this field, which is 150 more than a year ago. In Germany Bosch said it operates 50 SOFC pilots at its own sites in Bamberg, Homburg, Renningen, Salzgitter, Schwieberdingen, Stuttgart-Feuerbach, and Wernau as well as customer locations such as Stadtwerke Bamberg. This SOFC unit supplies power to the surrounding area and the heat is used at a nearby bakery. The heat established in the reaction is at around 200 degrees Celcius, and so is ideal for district heating applications.

Bosch will focus on buildings, industrial applications, distributed energy supply systems (microgrids) and data centers and the two have been working towards this since 2018. In January 2020, it acquired a stake of around 18 percent in the Ceres, and Weichai has done something smaller but similar.

Other European rivals include Elcogen in Estonia, which has been pushing a reversible fuel cell design for a few years now and focuses on it being used to store renewable energy and came out of an EU funded project integrated into a “Smart Energy Hub” at Turin in Italy.

Back in February last year we told you that Schlumberger New Energy, had a very similar plan working with the CEA and industrial partners to create a new company Genvia around reversible SOFC’s in Grenoble, in France. So far not a peep out of that group despite calling them several times to request a CEO interview.

Eventually you cannot keep the word giga factory out of such conversations and at the results conference the CEO Caldwell dropped it into the equation, as an obvious end point. The exceptional thing about this business is how it is built around licensing, and not manufacturing and that gives it a way to influence the entire global SOFC equation, wherever it is in the world, without it running out of money. Its aim is to employ the best people, run as fast as possible with new developments and don’t let anyone else catch up – patent everything, but don’t expect that to protect you on its own, speed of action is so much more effective.