Energy costs are soaring across the globe, exacerbated by post-coronavirus (COVID-19) demand and Russia’s war on Ukraine, which has threatened supplies.
The crisis has given fresh impetus to green energy suppliers as businesses and consumers look for alternate sources of power.
Alkaline Fuel Cell Power Corp. (NEO:PWWR.AQN) (AFCP) says it is well-positioned to help drive the energy transition for customers and investors, globally. The company is developing an innovative hydrogen-powered Generation 3.0 fuel cell system that will operate without generating greenhouse gas (GHG) emissions.
At the same time, the company's April 2022 acquisition of AI group’s combined heat and power (CHP) generation business - rebranded as PWWR Flow Streams - provides AFCP with immediate recurring, long-term gross operating income from a current active account.
AFCP CEO Frank Carnevale said the company is literally handing “PWWR to the People”.
Proactive asked Carnevale what sets AFCP apart from other green energy companies.
Proactive: What's different about AFCP's Gen 3.0 hydrogen fuel cell technology?
Frank Carnevale: From a fuel cell perspective, there are a lot of different technologies around fuel cells and the more common ones we find are PEM (proton exchange membrane) PM (proton motor) or even solid oxide. The alkaline fuel cell is the most cost-effective when it gets to the smaller applications that we are going after, when you have hydrogen as your fuel, when it's flowing to the pipe or flowing to your home.
Globally, that's clearly where the markets are moving, from a natural gas conversion to hydrogen, and all the components we're looking at will make it a very cost-effective, very affordable technology for the average person.
The industry refers to the energy transition and transformation. What is that and how does AFCP play in it?
The alkaline fuel cell that we’re developing is a significant component of achieving net zero by 2040 and beyond. However, there's no silver bullet on how to fight climate change; of how you get to zero carbon. But there are many tools along the way in this energy transition and transformation over to the net-zero carbon economy.
Even though the initial introduction and initial investment was in alkaline fuel cell technology, which is great for a market that has hydrogen, this energy transition and transformation is really about all the different components that get you there. There's a massive change that will occur in the industry from what technologies are delivering electrical energy. Are they behind the meter in a home, are they in the grid? So, there's no straight line to what achieves that zero carbon. But all these technologies will assist in getting there.
From a transition perspective, one of the key components other than trying to achieve net-zero is making sure that people are empowered along the way so that they have better options, better choice, better competency on the energy solutions and choices they're making going forward. That is a critical piece in this energy transition.
You recently acquired AI group's CHP generation business, and you just announced the branding of it as PWWR Flow Streams. What is the plan for the CHP business line and how does this help AFCP?
There are a few benefits. The main one is about getting more immediate revenue into the business, which ultimately, in this market, helps us to achieve the end goals of the new technologies we're investing in until they get to market. So, the immediate revenues that come with having an operational CHP asset in the Toronto area is tremendous. Another one has already signed and more are on the way. Having that immediate revenue stream is critical for the business and the earnings that come with it. It also allows us to grow the asset base. So, it's not just revenue that's here and gone, but it comes with a long-term contract with this alternative asset class. It’s critical for us and underpins how we want to grow the business. That's critical from a revenue and earnings perspective.
The second benefit is more about diversifying the revenue stream, diversifying the risk in our business so an investor looking at our business understands there's this great hockey stick opportunity and potential on the technology side and all the intellectual property we're investing in. But until that happens, the revenue ensures that their investment is de-risked and there is something they can hang their hat on.
The third piece is what we referenced earlier. In this transition to that eventual market where hydrogen is flowing to homes and businesses and you're able to turn on your equipment, it's not a straight line. So, what do we do? We take these CHP assets that are now using natural gas and there's this ability to continue to morph what that technology looks like. We're looking to incorporate fuel cells, other types of solid oxide fuel cells, within our CHP systems. So, we're on the path of an eventual transition to hydrogen, certainly the most efficient natural gas, flowing to those customers that we have these long-term contracts with.
Do you expect the acquisition of AI’s CHP assets to also make you more visible in the North American market so that investors sit up and take notice?
Absolutely. North America has a great opportunity with the cost of electricity where it is, and costs continue to rise for every customer across the spectrum in North America. It’s a tremendous opportunity to grow the CHP business and various components of that business, possibly even back in Europe and beyond. But for now, the focus is on growing the Canadian and North American footprint.
Do you expect significant customer demand for your CHP and micro-CHP solutions?
What should really drive the demand is whether we are economic. If we are the better price option for customers, then that's a great model. The way that energy costs are increasing across the board, certainly in North America, for electricity and the delivery of power to homes and businesses, we're securely in the money and it's really just a question of ensuring we have a great path to market, with the right distribution vehicles, and the right service companies to be sure we can deliver and deliver quality.
AFCP seems to be combining investments in clean technology and energy assets. Why is this good for investors?
Certainly, in this marketplace, investors don't mind taking some risk. Investors who like clean tech understand the potential of that technology taking hold and the significant return potential. In this market there's a bit more of an effort, we believe, to really ensure that it's de-risked on the bottom end so that there is a real functioning business that generates revenues and generates earnings that you can hang your hat on. This diversification is what ensures that your investment isn’t at risk and that it has a solid footing. The upside of the investments in new technologies is where there's that hockey stick. So that combination we think really is a great solution for investors and what they're looking for today.
The economics are there. It's really, at the end of the day, about providing affordable, renewable, and reliable energy for customers. It's also about taking advantage of that in scaling our business. So, the new revenue stream will really help us bring a pretty competitive solution to the market.
Is that revenue stream immediate?
One project is already installed and operational and a second one is already contracted and it's just a question of closing on the financing, which could be imminent. And then there are several that have already had proposals in and are waiting to close, so we will update with additional revenue projections and earnings projections. But certainly, the goal is to take that $50 million pipeline of projects and have them secured for the next 24 months. That's all right away. The revenue comes from those being installed and operational.
Contact the author at stephen.gunnion@proactiveinvestors.com