The green investment offering returns

Jan 28, 2016

By Daniel Gleeson, Mining Journal

With emission pledges at COP 21 still fresh in the memory and US coal bankruptcies showing no signs of abating, a silver bullet to solve the coal-fired power industry’s fast-approaching environmental restrictions is needed now more than ever.

1187434-1-eng-GB_simec-uskmouth

*SIMEC’s Uskmouth power plant in Wales will play a key role in Veridyne’s SOFC technology demonstration

 A small private company, based in Vancouver, Canada, thinks it has just that.

Veridyne Power has come up with a plan to build a 150kW solid oxide fuel cell (SOFC) technology to cut emissions from existing power plants, helping them comply with incoming emissions legislation in Europe and the US.

The target market is obvious. There are 230 small-to-mid sized plants (100-300MW capacity) in the US up for decommissioning by 2020 should they not cut their carbon dioxide emissions and wipe out nitrous and sulphur dioxide discharges. In Europe, Veridyne estimates there are a similar number facing extinction.

The wider market is also abundant. Despite many already calling the death of coal, there is 1,401GW of proposed coal-fired capacity planned worldwide, according to Veridyne, only just shy of the 1,600GW already in place. If regulators get their way, all of this will be green.

Veridyne is not the first – and probably not the last – to talk up a technological solution to make all of this power generation compliant.

Since greenhouse gas emissions made their way onto the agenda, a whole host of companies have come out of the woodwork with remedies.

Most have focused on carbon capture and sequestration (CCS). Initially billed as the sector’s saviour, CCS has come with high upfront capital costs, no financial returns and lacklustre operating results.

Elsewhere, solar and wind power adoption have been held back by generation capacity and nuclear, post-Fukushima, has struggled to gain a global hold.

Veridyne thinks it has the edge with its fuel cell-based solution.

“This is essentially the first fuel cell aimed at a) coal as a fuel source and b) grid-connected coal-fired power generators,” Veridyne CEO Peter Hogendoorn told Mining Journal.

Why is this?

Fuel cells for electro-chemical power generation have been around for more than 165 years, but have so far failed to gain traction in the coal-fired power market.

 “You have to provide a solution that is going to come in around US$1,000 per kilowatt [of power generated], roughly the equivalent of the replacement cost of a coal-fired power plant,” Hogendoorn said.

The best the industry has achieved is a system costing US$8,000/kW, according to Hogendoorn. The company to achieve this, Bloom Energy, has won several contracts with high profile clients in need of clean distributed power, but has struggled with operational consistency, he said.

Veridyne is touting that it will be able to provide a reliable fuel cell solution for power plants that will produce at least 50% less CO2 and eradicate nitrous and sulphur dioxides for a cost of US$1,000-$1,500/kW.

The company thinks it can bring down manufacturing costs associated with tubular-based fuel cell design and solve the problems associated with ‘current collection’, both of which represent the primary technical hurdles normally encountered in such designs.

“This is essentially the first fuel cell aimed at a) coal as a fuel source and b) grid-connected coal fired power generators”

Uniquely for the sector, Veridyne is offering existing plants a return on investment. The reduction in CO2comes from a 50% drop in fuel requirements for the same power output.

It is this saving which plays into Veridyne’s business model. Instead of focusing on capital equipment sales and marketing, it plans to participate as a joint venture developer with revenue based on a percentage of the power plant’s fuel savings.

At a US$50 per tonne coal price, the company estimates earnings of US$28,800 per day from an average US coal-fired power plant. Healthy revenues of US$1 million/day could be achieved with 20 customers or less.

How is a company valued at C$14 million able to pull this off when others have failed?

Veridyne’s ‘extended enterprise model’ and intellectual property around current collection – which includes nano-ceramic chemistry for the tube composition developed by the University of Queensland – is the answer.

Instead of designing, developing and manufacturing its solution in-house, the company has assembled an engineering and manufacturing team with 40 years of industrial experience and around US$75 million in combined enterprise value, according to Hogendoorn.

This team consists of a NASA-awarded company focused on high-precision ceramic moulding and machinery, a leading expert in ceramic/metal joinery and coating applications, a provider of grid synchronisation generators and a specialty metal fabricator.

Hogendoorn reckons Veridyne only needs a ‘balance of plant’ supplier to complete the line-up.

The Veridyne chief’s previous deal making attracted some of these parties, but the presentation of a new business plan for fuel cell power generation convinced them.

He is not getting carried away though, realising the company is on the clock when it comes to proving the design.

“The 2020 deadline [for the US and Europe to reduce emissions] creates the urgency,” he said.

Veridyne plans to have a 150kW fuel cell built within 18-24 months. It would then test this in a real-world grid environment with syn-gas – at SIMEC’s 360MW Uskmouth power plant in Wales, with which Veridyne has an agreement in place – to gear up to a 1.3MW application.

Once the 1.3MW configuration is finalised, it can build a complete SOFC, which when combined with cycle power supply from one of SIMEC’s 120MW connections, would result in the largest fuel cell grid development project in the world, according to Hogendoorn.

This timeline comes close to the 2020 deadline, but he is confident support from one or two ownership groups in the US or Europe will lead to regulators allowing plants more time for retrofitting.

“Some time in 2016-2017 we need to say ‘okay, we’re ready to have discussions’ and then they can go to congress [in the US] and say ‘give us some time to implement this’,” Hogendoorn said.

For now, the company is looking at raising C$7 million to see it through for the next few years. “That would be the equivalent of another company raising C$100 million, as we already have the infrastructure in place,” he said, adding every dollar goes into design, testing and development.

Asked what the positive read through for the coal mining industry was, Hogendoorn was prepared: “You’re keeping hundreds of existing facilities on the grid indefinitely, with improved emissions far exceeding the [US’] Clean Air Act.”

These will require 50% less fuel to produce the same amount of power, but will be emission-compliant, meaning hundreds of coal-fired plants previously written off stay online, feeding their plants with coal.

It is often the most pragmatic solution that wins the day. In this space, Veridyne might have just found that.

By Daniel Gleeson, Mining Journal

Share this Post