The technologies change, but the economic opportunities remain the same, and so does the narrative of yet another Australia technology export and the myopia of Australian governments and its energy industry. Ceramic Fuel Cells has all but abandoned hopes of a rapid deployment of its ground breaking technology in Australia, and has instead shaved down its workforce, ended local production, cut commercial ties and will focus all its efforts on Europe instead.
The new strategy was confirmed at the company’s annual general meeting on Monday night, when the company gave details of new incentive payments in the German state of North Rhine-Westphalia, which it said would “take away the sticker shock” of the estimated €30,000 cost ($A37,400) of its ground breaking Blue-gen units, and pave the way for high volume production and cost reductions.
Ceramic Fuel Cells had already prepared for such an outcome when it agreed to establish its commercial manufacturing operations in Germany several years ago, and – like solar PV and solar thermal technology developers before it – has finally given up on any similar encouragement in its home country
It has been pushing for its technology to be included in various state and federal incentives for renewables in Australia, and although the Victorian government’s pricing regulator recommended fuel cells be included in a feed in tariff, the rate is not expected to be attractive and recognise the benefits of distributed generation. And CEO Brendan Dow also took a swipe at Australia’s utilities, suggesting they had virtually shut up shop in embracing new technologies, and were more intent on protecting their age old business models and retaining customers.
In Germany, however, which has provided the most sustained incentives for renewable energy sources such as solar and wind, the focus of new tariffs is now being switched to other sources of technology, particularly those that can help customers reduce their dependence on the grid, and to provide balance for renewables.
The most exciting of these incentives are being introduced in North Rhine Westphalia, the largest and most populous state. Indications are that this could help reduce the upfront capital cost of the fuel cells by a third. With this and other rebates and tariffs, this could offer a payback for the fuel cells of around 7 years, as this table shows.
North Rhine Westphalia is investing €250 million over the next few years to kick-start new technologies as it seeks to source 25 per cent of its energy from combined heat and power, of which fuel cells could be a key component. This transformation could happen as quickly as 10 years, which is when the nuclear fleet is due to be taken completely offline, and this budget is aimed specifically at systems of 50kW and below.
The result of this, and new feed in tariffs introduced in the UK, means that Ceramic Fuel Cells’ commercial focus is now almost entirely based in Europe. The company which developed its technology in Australia and listed on the ASX in 2004, now employs 30 people at its plant in NRW, but it has cut 56 jobs in Australia in the last four months. More may follow. The manufacture of components at its Noble Park facility in Victoria will cease in the new year, and its HR, commercial, legal and manufacturing operations have all been moved overseas. A distribution agreement with Harvey Norman has also ended. Dow says that the roles of the CEO and the CFO may also follow overseas.
In effect, the company is following in the footsteps of the solar PV and solar thermal technologies that were similarly frustrated in Australia, and formed the basis of what is now Suntech, the world’s largest solar module manufacturer, and Areva Solar, the solar thermal technology.
Dow said the German incentives in particular will drive sales volumes, which in turn would give scale and then help reduce manufacturing costs. Dow said in an interview with RenewEconomy earlier this year that the next few years in Germany would likely be the game changer for the technology, but it will also likely be make or break.
Today, he told RenewEconomy: “This is a pretty tasty deal for us. We’re feeling pretty positive about life.”
Dow said the proposed feed in tariff in Victoria, which would pay little more than a wholesale price for energy, did not reflect the benefits of distributed power. “Tariffs should have regard for people for putting power back into grid and recognise the benefits of distributed generation.
“This is a lost opportunity for Australia. In all honesty, we’ve just found the utilities here have been unwilling to engage with us, and to think about different ways of engaging with customers. It’s disappointing on so many levels.
“The big three (utilities) are shutting up shop. They are not really embracing solar, and are more worried about their loss of market share and their ability to acquire customers. But we’ve seen in Germany what happens when utilities don’t embrace change. The big four generators there are not making money, but they are now desperately trying to change the business model in the german market, which is undergoing a huge transition.
“It will happen here as well. New business models will emerge, it will just take a bit longer. That’s why we are leaving Australia. The governments overseas want this to happen, and they have introduced short lived market introduction programs. We can circle back (in Australia) when profitability permits.”