Residential-scale fuel cell CHP a better match for domestic loads

There has been much discussion of the potential for micro-generation, and micro-CHP in particular, where products are sized to fit the average home. Here,Peter Bance puts the case for micro-CHP based on fuel cell technology, and reports how his company has partnered with a major UK utility in order to break into a potentially very high volume market for units.

Small-scale distributed generation represents an opportunity to meet a number of major overlapping needs ” the reduction of emissions from power generation and residential heating, lower energy costs for consumers, improved power grid robustness and greater national energy security. These needs are highly relevant to the UK’s current energy debate ” the Government has estimated that, over time, micropower products have the potential to supply 30%”40% of Britain’s electricity. But the same themes resonate in many contexts worldwide right now, too.

Various technologies are being brought to market to enable micro-generation at the level of individual residential properties. Some are renewable (e.g. solar thermal), some produce heat only (e.g. ground source heat pumps) and some generate only power (e.g. micro-wind). However, there is a growing consensus that small-scale combined heat and power ” so-called ‘micro-CHP’ ” is a strong candidate for mass market adoption and, therefore, significant impact.

This article focuses on micro-CHP, its potential across multiple market sectors and geographies, and the critical success factors to enable widespread take-up.

Micro-CHP technology

Micro-CHP will usually be used to provide heating, hot water and power to the home. It will typically take the form of a domestic appliance connected in parallel to the mains electrical grid, and coupled into the conventional services of the house (see Figure 1). Several types of core technology are being employed in micro-CHP products currently under development by various manufacturers:

  • engine-based systems, based on external combustion (Stirling engines) or conventional internal combustion cycles
  • organic Rankine cycle (ORC), effectively the same process as used in fridges, freezers and air conditioning systems, but operating in reverse
  • fuel cells, which can be considered as quiet, clean, solid state ‘electrochemical engines’ converting fuel and air into electricity and heat.

Figure 1. Micro-CHP in the home
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Fuel cells themselves can be implemented in several different ways, but the basic operation is similar. An anode (where fuel is reacted) is separated from a cathode (where air is reacted) by an electrolyte (which allows passage of certain reactive components). The Ceres Power fuel cell is a unique combination of chemistry based on cerium gadolinium oxide (CGO) deposited on a stainless steel substrate (see Figure 2). This enables products designed to be compact, robust, durable and cost-effective to manufacture.

Figure 2. Diagram of Ceres fuel cell
1. Stainless steel support; 2. Anode;
3. Electrolyte; 4. Cathode
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Ceres packages its fuel cell into a domestic appliance using a modular approach (see Figure 3). Cells are combined into stacks of the appropriate power output, and then integrated with balance-of-plant components into a flexible fuel cell module ” suitable for widely available current fuels such as natural gas and LPG, as well as fuels of the future such as biofuels and even hydrogen. The module is then combined with conventional boiler components into an integrated appliance able to generate power and all of the heating and hot water for a typical home from a single unit, with no need for a separate boiler/furnace/water heater.

Figure 3. Fuel cell micro-CHP product architecture ” from fuel cell to complete appliance
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Analysis of the ‘voice of the customer’ in residential applications indicates several important success criteria:

  • economic case (e.g. can the system pay for itself in a reasonable period of time)
  • product format (e.g. acceptable size and weight, based on where the product will be located in the building)
  • compatibility with the residential operating cycle (e.g. can the unit meet variable power/heat demands, accommodate power cycling during periods of absence and so on)
  • suitability as consumer ‘white goods’ (e.g. is the product compatible with quiet, low vibration operation, an annual maintenance interval, multi-year lifetime etc)
  • minimal changes to home or lifestyle (e.g. simple plumbing and electrical work, no requirement to schedule clothes washing simultaneously with heating etc).

    In practice, a product that can directly replace a wall-mounted boiler, has the potential to pay back in less than five years and has essentially automatic operation, could achieve mass market sales in Europe and Asia, for example.

    Key differentiators

    The technologies indicated above differ significantly, in ways that may not be obvious from first examination. One major differentiator is heat-to-power ratio; in order to better interpret the significance of this factor, an understanding of the daily and seasonal variations of heating, hot water and power in the home is necessary.

    Figure 4. Typical annual energy variation in the home (UK)
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    Figure 4 indicates the large variation in space-heating demand during the year, typical of countries in northern Europe, while hot water and power demand stay fairly constant.

    The required heat-to-power ratio of the home therefore varies substantially according to season. Homes may also vary their heating during the day according to occupancy ” heating may be turned off or turned down if the residents are out at work, for example. In practice, micro-CHP systems typically direct the heat they co-generate into a thermal store (i.e. hot water cylinder) if space-heating demand is limited, for example during summer, in smaller homes or in modern well-insulated properties.

    Heat-led systems such as internal combustion engines, Stirling engines and ORC, co-generate relatively large amounts of heat alongside power. Heat-to-power ratios of 5:1 or even 10:1 may occur, implying electrical efficiencies of 15% or lower, significantly below that of most centralized generation capacity on the mains grid. This is fine if space heating is needed while power is generated; if not, then the thermal store may quickly fill up. The micro-CHP system cannot generally dump the excess heat without severely damaging the economic case, or falling foul of appliance efficiency regulations.

    Fuel cell technology is capable of much lower heat-to-power ratios approaching 1:1. Hot water and electricity requirements can therefore be well matched, and the thermal store topped up by the micro-CHP system as a by-product of generating the majority of power needed by the home.

    Figure 5. Typical power variation during 24-hour period
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    Figure 5 indicates how power required by the home varies significantly during the day. Some of this variation is predictable, in line with the standard consumer profiles used by utilities. Some is random, based on the exact timing of kettles, showers, ovens and other appliances.

    In order to maximize the economic case, the micro-CHP system should meet the majority of this varying demand (purple area) to avoid the import of expensive electricity from the grid. If there is an attractive tariff available for exported power, the system should also be able to choose whether to make more power than is needed in the home, and sell this to the utility (blue area). The Ceres fuel cell is designed to modulate and follow a flexible operating cycle, turning down or even off/on as needed. Technologies forced to operate at a constant high power output will typically need to export more and therefore rely more upon a suitable export tariff.

    For a UK home, the majority of the power consumed is at less than 1 kW. Requirements above this level are met by importing from the grid. A larger micro-CHP system sized to meet peak demand would cost significantly more, would have lower utilization, and would therefore have poorer economics. When space heating is required, condensing boiler components are activated, enabling year-round operation.

    Fuel cell micro-CHP technology is therefore well suited to meet the needs of the home while maximizing the economic case.


    The efficiency of micro-CHP allows less fuel to be used to meet the same overall building comfort requirements. Because of the heat-to-power ratio and flexible operating characteristics of Ceres fuel cell technology, savings of around 25% of total energy costs (gas + electricity) are achievable for the home (compared to a condensing boiler in the UK). Reduction in the home’s emissions footprint of up to 2.5 tonnes of CO2 per annum is also possible(for an average UK British Gas customer replacing a non-condensing boiler).

    This represents an opportunity to make significant progress towards environmental targets, with the UK residential sector producing around a quarter of the country’s emissions. For example, replacing all current UK home boilers with micro-CHP units, such as from Ceres, could reduce total UK emissions by around 10%. Since residential boilers are typically replaced approximately every 10 years this could happen quickly; the replacement segment is the largest in the UK, representing over three-quarters of the boiler market or well over 1 million boilers per annum.

    The benefits of micro-CHP are also highly relevant to the new build sector, where building regulations are moving quickly to improve energy efficiency. In the UK, the Code for Sustainable Homes has already indicated that residential properties built from 2016 onwards should have minimal environmental impact through energy use. A basket of regulations is starting to require developers to take energy system design into account right up front in the planning process.

    Improvements in thermal performance only take energy efficiency part of the way towards such a ‘zero carbon home’. Reduction in the embedded carbon footprint of power consumed by the home is arguably the next challenge. Fuel cell micro-CHP can provide low carbon electricity via conventional natural gas or LPG infrastructures. New biofuels offer a way to dramatically reduce the carbon profile of a housing development. And this can be achieved using an appliance costing only a modest premium compared to a normal boiler, able to fit in the same way into the home, and without requiring substantial lifestyle changes.

    Route to market

    Because of their position in the value chain, utilities are important market entry partners for the micro-CHP sector. Utilities are often incentivized to promote energy efficiency. In the UK, the Energy Efficiency Commitment (EEC) and its successor the Carbon Emissions Reduction Target (CERT), channel funding into products such as insulation, home heating appliances and energy efficient consumer goods to stimulate purchase. Low carbon products and services also represent real growth market opportunities for utilities. Consumers are starting to demand them, and utilities are often well placed to provide a complete portfolio and help the consumer to choose among them.

    left to right: Laser welding of the fuel cell; a Ceres fuel cell stack; inside the Ceres production facility
    Click here to enlarge image

    Some utilities are already involved too in the ‘home services’ business, providing home heating installation, service and maintenance in parallel with provision of electricity and gas connections. Such utilities can provide a trained, quality-controlled network of staff able to help ensure that micro-generation technology is installed and maintained correctly ” a major success factor for new product introduction.

    There is likely to be an evolution over time in the business model used by utilities to deploy micro-CHP:

    • Utilities may initially wish to promote micro-CHP in a similar way to established appliances, as part of a portfolio of other new micro-generation products. For example, consumers in the UK typically purchase their boiler and therefore enjoy all of the associated savings of a more efficient model. Utilities are able to compensate for the loss of energy volumes (the consumer’s energy bill may go down) through value-added services related to supply, installation and maintenance of home appliances.
    • Utilities may then start to bundle provision of micro-CHP products with associated services. For example, consumers may be offered the option to pay for the unit via their gas bill, or they may agree to longer term gas/power contracts in exchange for a discount on the appliance.
    • Finally, utilities are likely to change their operating model in line with incentives from regulators, to ‘energy service’ models that sell outputs to customers not inputs. For example, consumers could buy agreed levels of ‘comfort’ and ‘quality-of-service’ from the utility rather than simply paying for volumes of gas.

    Under energy service models, utilities gain direct benefit from implementing greater efficiency measures, since more efficient use of resources leads to improved margins. Micro-CHP offers a range of additional benefits to utilities implementing these models, including access to reduced customer churn costs, lower transmission and distribution costs and avoided capital expenditure for new centralized generation capacity.

    As partners for micro-CHP technology companies, utilities can therefore provide volume market channels, strong consumer brand awareness and (in some cases) control over quality installation. Commercial deals are being done right now between micro-CHP technology companies and major utilities, putting in place partnerships spanning development, trials and deployment phases.

    An example is the deal announced in January 2008 between Ceres Power and Centrica (the owner of British Gas, the largest utility company and boiler installer in the UK). Under the terms of this agreement, British Gas will pay à‚£5 million (US $10 million) to Ceres to help fund the value engineering of the micro-CHP product and, together with British Gas, conduct trials with residential customers. British Gas is committing its operational resources to support the roll-out of micro-CHP products including training, installation, servicing and logistics.

    British Gas has also placed a volume forward order on Ceres for a minimum of 37,500 micro-CHP products. Both organizations have agreed to promote the Ceres micro-CHP product with the intention of achieving substantially greater levels of annual sales. Centrica has also purchased a 9.999% stake in Ceres Power, for around à‚£20 million ($40 million).

    This agreement follows the successful recent demonstration of Ceres Power’s wall-mountable fuel cell micro-CHP unit in September 2007. It provides Ceres with a clear route to market with a volume partner in the UK. For the duration of the agreement, British Gas has the exclusive right to supply and distribute Ceres micro-CHP products to the residential UK market. Ceres retains the right to supply and distribute micro-CHP products anywhere else in the world, and the right to exploit its innovative fuel cell technology in other applications globally including in the UK.


    The opportunities for mass market domestic micro-generation are enormously exciting and moving ever closer to becoming a commercial reality. Consumers, housebuilders and utility companies alike would do well to examine the technology being used among differing micro-CHP designs, as these are likely to lead to very different products with widely varying performance and market applicability.

    Peter Bance is the CEO of Ceres Power

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