TIDMAFC
RNS Number : 3099S
AFC Energy Plc
02 October 2017
AFC Energy Quarterly Newsletter - September 2017
Dear Shareholder,
I am pleased to provide an overview of the Company's activities
for the quarter ended 30 September 2017.
As we proceed into the final quarter of 2017, we are also
commencing the final stage of AFC Energy's three-year accelerated
path to a commercial fuel cell technology platform.
I am pleased to confirm we remain on track!
Throughout the course of Q4 2017, I will be providing you with
updates on progress made, further demonstrating the game changing
nature of our technology within the international power market.
Within the scope of this quarterly newsletter however, I wish to
highlight the following key developments that are now coming
together in support of this outcome:
-- Longevity of fuel cell electrodes, a key driver of cost
reduction, on an extrapolated basis, continues to materially
improve with 2017 targets well within sight and likely to be
exceeded;
-- These same electrodes developed with Industrie De Nora ("De
Nora") under our Joint Development Agreement ("JDA") are now
engineered and fully integrated into the AFC Energy fuel cell stack
with excellent results from industrial-scale sized electrodes
validated in Surrey;
-- Introduction of AFC Energy's newly designed fuel cell stack
without solid nickel substrate frames, now demonstrated both at
laboratory scale and industrial scale with improvement in stack
performance - while reducing stack costs by up to 30%;
-- Balance of plant design optimisation now completed and
implemented at Stade, capable of accepting new full-scale fuel cell
stacks for longevity validation during Q4 2017;
-- Clarity over roadmap to a power generation cost from the AFC
Energy fuel cell stack of less than US$0.10 / kWh;
-- Completion of engineering scoping study at Covestro's
Brunsbuttel industrial park incorporating design of AFC Energy's
first 1MWe fuel cell system;
-- Visit by De Nora CEO to AFC Energy's Surrey head office to
inspect progress made in the first twelve months of the JDA, and
progressing negotiations towards an electrode supply agreement;
-- Invitation from De Nora to present at their October 2017
"invitation only" conference in the United States to existing and
prospective clients across the global chlor alkali industry where
De Nora are the leading provider of electrodes to over 50% of the
industry.
Importantly, over the past few months, several new initiatives
have commenced within the team that have the potential to provide
new and exciting opportunities for AFC Energy as it commences
commercial technology deployment. These initiatives could again
materially revolutionise the scale of opportunity within the
hydrogen economy in which we are investing today whilst building on
our core technology platform. But more on that later.
I trust you can sense the important progress made by the Company
and its partners over the past quarter as we continue to
consolidate efforts towards a commercial fuel cell stack by the end
of the calendar year. I hope this newsletter provides an overview
of these developments and their importance to the success of our
commercialisation programme.
Fuel Cell Development
As I highlighted in the June 2017 Quarterly Newsletter, the
collaboration with De Nora is of specific importance to the
achievement of our accelerated commercialisation roadmap outlined
almost three years ago. We are now well and truly focussed on scale
up of results achieved by our two companies "in the lab" into an
industrial scale fuel cell system.
Importantly, in fully integrating the new JDA electrode into the
AFC Energy fuel cell stack, certain design changes were instigated
including removal of the solid nickel substrate and replacing this
with a plastic frame with the electrode adhered within the frame.
This change has now been fully tested with immense success
resulting not only in an improvement in fuel cell performance, but
also a material reduction in stack cost of up to 30%.
These electrodes and new stack design are currently in operation
at AFC Energy's facility in Surrey.
Accordingly, we remain focused on delivering the following
outcomes by the end of this year;
-- Achieve full integration of commercial fuel cell electrodes
into the AFC Energy stack design and delivering operational results
from this stack at our facility in Stade, Germany.
-- With successful electrode integration complete, finalise our
design for a commercial fuel cell electrode architecture and stack
design that is capable of mass production with warranted
performance metrics. As you will have noted from previous
newsletters, we have already achieved three out of the five
commercialisation metrics. Our scoping study at Covestro is
demonstrating that the cost targets are achievable, and the joint
work with De Nora is surpassing the expectations of both parties
regarding longevity forecasts.
-- Develop dialogue with De Nora for the terms related to a mass
electrode manufacturing agreement.
I am very excited by the progress we continue to make, as we
move steadily through the plans I communicated in the June
Quarterly Newsletter. Further details on this progress are provided
below.
Finalisation of Balance of Plant (BoP) Changes at Stade
In the June Quarterly Newsletter, I mentioned that we had
completed the design changes that were needed to upgrade the BoP.
The construction of these changes has now been completed - whilst
not extensive they were difficult to design and construct within
the limited space envelope available. 'Dry' commissioning of the
changes has been completed and the facility is ready to accept the
upgraded stack and cartridge during Q4 2017.
But why make changes to a facility that had previously worked?
In summary, our intention is to achieve the key driver to enable
deployment of power projects globally ... commercial viability. The
changes made not only enable the acceptance of the newly designed
fuel cell stacks referred to above, but also enhance the system for
longer term commercial operation in a way that maximises the
chances of a successful commercial and affordable fuel cell
operation.
The initial fuel cell deployed at Stade provided AFC Energy with
a tremendous reference site for a static fuel cell power generation
plant, but at the time of commissioning, did not fully address all
the metrics of commercialisation. We are now addressing these
issues which will play into the demonstration of a commercial fuel
cell platform during Q4 2017.
We are also in the process of closing out project Power-Up. We
will imminently be submitting our final report to the EU Fuel Cell
and Hydrogen Joint Undertaking. Doing so will facilitate the
release of funds due to AFC Energy, and its partners, under project
Power-Up.
Commercialisation Metrics - P.L.A.C.E.
I spoke about these commercialisation metrics at the AGM earlier
this year and as a reminder of their meaning, the P.L.A.C.E.
metrics are as follows;
P - Performance - achieve > 10 kW / cartridge (achieved)
L - Longevity - achieve electrode longevity of > 1-year
operation (key cost driver)
A - Availability - up to 98% in a normal operating year
(achieved)
C - Cost - lifetime cost of electricity target <US$ 0.10 /
kWh (on track)
E - Efficiency - electrochemical conversion efficiency for
hydrogen > 60% (achieved)
Following the commissioning of the initial plant at Stade and
then in what you may recall was referred to as the Gen. 2.0 work,
we were able to deliver three out of five of the metrics. This was
a great place to be at the end of 2016, but we needed to progress
further. To be able to generate competitive clean baseload power we
needed to take steps to achieve the Longevity and Cost targets.
De Nora JDA Agreement - Update
We entered into our JDA agreement with De Nora so that we could
look at electrode development work in a collaborative manner. De
Nora, in their normal business sector, are the leader in electrode
supply to the Chlor Alkali industry where they offer
industry-leading warranties to the performance of their electrodes.
We are seeking to mirror these characteristics to AFC Energy's fuel
cell system and to our customers and partners.
The benefit of the JDA is not only do we seek to deliver this
year an initial one-year operational life of our electrodes, but
through collaboration, we are now starting to look towards two-year
operational lives with a line of sight to a four-year economic
operational electrode life.
The ability to deliver this extended operational lifetime in our
electrodes is the critical factor in reducing the levelized cost of
power to less than US$ 0.10 / kWh. This would be an incredible
outcome not only for AFC Energy, but for the fuel cell industry and
the wider hydrogen economy, and will put our technology on a
comparable footing with other low carbon, baseload power generation
technologies.
Working with De Nora, we are confident this is a credible
outcome that is now within reach, and to the extent AFC Energy can
offer a warranted electrode life of up to four years, not only will
we see the financeability of the technology enhanced for commercial
project deployment, but we should also see an enhancement to
margins and financial return to shareholders in the medium
term.
Completion of Covestro 1 MWe Design Basis Engineering Study
After Stade, we wanted to design a fuel cell plant that could
provide clean baseload power at 1MWe output, as a repeated design
basis that could meet the increasing scaled size of our partner's
and prospective partner's commercial projects.
Following the recent engineering and scoping study, conducted at
Covestro's Brunsbuttel industrial park in Germany, we have now
completed the design basis for a 1MWe power project. Not only does
this design basis incorporate the learnings form Stade, it also
contributes to our ability to improve the cost metric through the
benefit of economies of scale. Specifically, the results of the
study are that we now not only have a view of cost of power
production at < US$ 0.10 / kWh but are in line of sight of the
CAPEX levels equivalent to those norms for established thermal
generation. Both of these outcomes are a landmark achievement for
AFC Energy.
Having completed the engineering and scoping study, we will
shortly commence dialogue with Covestro with regards the next steps
towards project delivery.
Home and Away
Closer to home, at Dunsfold, we continue to make progress -
using the outcomes from the Covestro scoping study - on the
Front-End Engineering and Design study for the 1MWe micro-grid
scheme. The difference with this scenario, compared to a typical
chlor alkali opportunity, is that the hydrogen will need to be
generated via steam methane reforming of bio-methane. This poses
additional challenges which we are in the process of addressing.
Both Covestro and Dunsfold project opportunities are being
developed in conjunction with discussions ongoing in Korea, the
Middle East and in the North West of England at Peel
Environmental's Protos site.
We have also been undertaking initial study work to assess how
we can provide clean back-up power generation via fuel cell
utilisation. Normally this type of back-up power is met through the
application of diesel generators - however, the AFC Energy option
study has addressed this issue by looking at a modularised 80 - 160
KW solution with the hydrogen fuel source being derived from
cracked ammonia. This work is being finalised and is targeting a
market segment that, globally, is worth more than US$20billion.
In addition to these prospects we have also been busy, as usual,
with our ongoing research efforts and have recently published our
first scientific paper, "In-operando optical observations of
alkaline fuel cell electrode surfaces during harsh cycling tests".
I bring this to your attention as it underlines the nature and
expanse of the type of ongoing test work needed to bring our
product to market.
Further afield we have been invited to speak at the De Nora
Chlorine / Chlorate Seminar in Cleveland, USA. This seminar is a
bi-annual event organised by De Nora for their customers in the
chlor alkali sector. The global chlor alkali market has long been a
key target of AFC Energy and this represents a fantastic
opportunity for us to present the solution our product offers to
the leading players in that sector helping them to take greater
control of their energy needs. The invitation not only underlines
the close relationship we have with De Nora but also validates our
working arrangement with the market leader for electrode supply to
the chlor alkali sector.
In conclusion, I trust you will see from the overview contained
in this Newsletter that there are many aspects of our ongoing work
that are extremely exciting in providing a market leading clean
energy generation displacement technology, providing us with an
excellent launch platform for a fuel cell that meets the commercial
standards we have set ourselves.
I wish you all a pleasant Autumn,
Yours sincerely,
Adam Bond
Chief Executive Officer
-------------------------------------
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 ('MAR). Upon the
publication of this announcement via a Regulatory Information
Service ("RIS"), this inside information is now considered to be in
the public domain.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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