Ceres Power Holdings PLC’s (LON:CWR) technology can act as a bridge towards a society entirely powered by hydrogen, supported by its fuel-flexible and hydrogen-based power systems.
The company has poured 16 years of research in what scientists call a solid oxide fuel cell (SOFC), powered by several kinds of fuels, and the combined heat and power (CHP) hydrogen version unveiled earlier this month.
The latter is simpler than the existing technology, as it delivers an equivalent performance with fewer components and up to a 40% cost reduction, and it can be used in homes and businesses.
Industry experts expect the cost of hydrogen fuel cells to be as low as US$425 per kilowatt by 2030, while combined cycle gas turbines are currently priced at US$1,000/kW.
In initial testing, the hydrogen CHP system achieved over 50% electrical efficiency with potential to reach 90%.
While this technology still has to be finalised, the fuel-flexible SOFC is on the market and can be applied to industrial processes.
Ceres is not a manufacturer but licences the technology to other companies, therefore operating a high-margin, asset-light business model.
The fuel cell market is expected to record an annual growth rate of 24% over the next five years, although analysts forecast Ceres’ profits to make a significant leap later rather than sooner if the technology is established successfully in the market.
It works in partnership with big manufacturers like Chinese engines giant Weichai Power, German engineering firm Bosch, US engine maker Cummins and Japanese carmakers Nissan and Honda.
Key markets are Japan and South Korea, where Ceres has partnerships with boiler group Miura and fuel cell specialist Doosan, having targeted 800,000 and 850,000 fuel cell vehicles by 2030 respectively, with the associated filling stations expected to multiply too.
Ceres’ SOFCs can be powered with gas and hydrogen, or a blend of both, providing flexibility according to what is available on the market.
They can be adapted to different sectors – for instance, providing energy security to renewables – thanks to their scalability.
It compares to systems like alkaline fuel cells or PEM (polymer electrolyte membrane), which are sensitive to carbon dioxide poisoning.
Moreover, in PEMs costs are driven up when the system needs additional equipment to reduce CO2 if the hydrogen is derived from a hydrocarbon fuel, which is another disadvantage of using natural gas alongside emissions.
In contrast, SOFCs are cheaper to produce than clean hydrogen from biomass, electrolysers or water filters.
Analysts argue that fuel cells may be more suitable than batteries for heavy-duty vehicles and emission-heavy industries.
For Berenberg, competition will be the main challenge, in case a peer comes up with a somewhat better product, although Ceres has the upside of being first.
“Ceres’s proprietary technology is viewed by original equipment manufacturers and industry experts as offering the best solid oxide fuel cell technology at the lowest cost,” analysts at Berenberg said in a note.
“Its scalability is Ceres’s key competitive advantage.”
Shares are currently trading at 215p, having steadily climbed over the past couple of years.