Ceramic gets tariff for fuel cells, but not a tipping point

On Monday, Victoria became the first state in Australia to provide a feed-in tariff for fuel cells, when Ted Baillieu’s Coalition government slashed the solar FiT from 25c/kWh to 8c/kWh and extended it to include all electricity generators of less than 100 kilowatts, which can produce 50 per cent or less of the emissions intensity of electricity generation in Australia.

And while the move has not been well received by the solar industry, it was welcomed yesterday by Melbourne-based distributed energy company Ceramic Fuel Cells, whose BlueGen gas to electricity generators will now be eligible for the 8c/kWh FiT in their home state.

Ceramic’s BlueGen units – developed and made in Australia and distributed here by Harvey Norman Commercial and Hills Solar – convert natural gas into electricity and heat for hot water for homes and businesses, with an electrical efficiency of up to 60 per cent, which according to Ceramic is higher than any other form of small-scale electricity generation. And when the heat from BlueGen is used to produce hot water, total efficiency increases to up to 85 per cent – that’s three to four times better than the average coal-fired grid.

But, as Ceramic’s CEO Brendon Dow told the ABC’s Catalyst program last month, at $40,000 a pop, the installation of BlueGen units would make more sense to households and businesses if they were getting feed-in tariff for the electricity they were putting back into the grid (which, for the Newcastle home featured in the above Catalyst report, was more than 7,000kW over 281 days – a carbon emissions reduction of 5 tonnes).

And now they will, albeit a very modest one. “We welcome the Victorian Government’s decision to extend the feed-in tariff to low emissions generators like our BlueGen product,” said Dow yesterday. “We hope that other states will follow Victoria’s lead so we can further develop the market in Australia for our locally developed clean energy technology. In the meantime we will continue to build sales in our key markets of Germany and the UK.”

But compared to these “key markets,” the 8c/kWh FiT that Victoria has extended to technologies like BlueGen looks a little insignificant. In Germany, for example, BlueGen customers are eligible to receive a tariff  equivalent to about 14 Australian cents per kilowatt hour (11.5 Euro cents). This adds to the €1,800 per unit subsidy from the German federal government, as well as a capital subsidy from the German state of Saarland of 30 per cent of the total cost of BlueGen units, including installation, for up to 10 BlueGen units installed.

All of this has ensured that Ceramic is doing great business in Germany, the company revealing in May that its German distribution partner Sanevo was continuing to deliver and install its first order of 100 BlueGen units, as well as building the sales pipeline for future orders. And in the UK, BlueGen units have been eligible for a total tariff of up to around 26 Australian cents per kilowatt hour (17 pence) since April 1 this year.

So will the Victoria tariff be a game changer for Ceramic in Australia? Probably not, concedes the company’s group general manager, commercial, Andrew Neilson. In an interview with RenewEconomy, Neilson said that, while the tariff is a step in the right direction, it’s not going to provide the tipping point they’ve been hoping for.

“It’s important and welcome recognition,” Neilson said. “It removes one of the barriers we’ve had in the Australian market place. …But 8c/kWh probably doesn’t create a compelling tipping point.”

And while he applauded the leadership shown by the Victorian government – in extending the FiT to fuel cells in a political climate where FiTs are “on the nose” – Neilson pointed to what has been a collective oversight of Australian federal and state governments: putting all developing clean energy technologies in the same funding and policy basket.

“I think, because solar PV costs have been falling significantly, the government is assuming that costs for all micro-power generation technology has come down, but they haven’t,” he said.

“Germany and UK recognise that fuel cells are still pretty early stage technologies,” Neilson said, adding that technologies like BlueGen need some of the funding and policy attention that solar power technology got in its early stages of development, that have helped it come down the cost curve and begin to challenge the power grid incumbents.

And while Neilson says that Ceramic doesn’t hold out any great hopes of getting government help in the form of capital subsidies any time soon, he says that they do see “great opportunity” in working with governments to install fuel cells at government buildings; in helping them to meet their greenhouse gas reduction commitments; and in the development of decentralised “virtual power plants.”

Neilson says Ceramic sees great potential in “energy transition projects” in areas like regional Victoria, where BlueGen units, perhaps combined with solar PV, could assist in the move away from more centralised coal power. Indeed, Ceramic has proposed (loosely) such a project to the Victorian government for the state’s coal hub, the La Trobe Valley.

But perhaps the biggest opportunity for companies like Ceramic, and technologies like the BlueGen fuel cell, lies in the creation of the CEFC, says Neilson. Geared, as it is, to assist in the commercialisation of products that are beyond R&D but not yet at scale, “CEFC could be a very good vehicle to get (our) products out and onto the market,” he said.