Results from the central simulations were used to give the annual reduction in carbon emissions from operating a fuel cell in place of the reference system, and the annual revenue generated from a 10p/kWh feed-in tariff. The carbon reductions were estimated with the whole life-cycle carbon intensity of natural gas (197 g/kWh HHV), and a range of values for electricity. These are plotted together in Figure 8.11 for a 1kW PEMFC system operating for one year.
Figure 8.11: Relationship between the annual value of a 10p/kWh feed-in tariff and the carbon savings from a 1kW PEMFC system, when displacing electricity of different carbon intensities. Each data point represents the carbon savings
and FIT payment from a single house used in the simulation.
In each case there is a strong correlation between carbon reductions and revenue from the FIT, as both were linked to the amount of electricity generated by the fuel cell. The gradient of each data set in Figure 8.11 indicates the cost of providing this FIT per tonne of carbon displaced – which is plotted in Figure 8.12.
The carbon costs of providing a 10p/kWh FIT were calculated using four of the scenarios given in Figure 8.11; no costs were calculated for the case of 250 g/kWh displaced emissions, as the fuel cell would increase rather than decrease emissions. The average cost of a 10p/kWh FIT to the government would be £466 per tonne of CO2 for a PEMFC displacing average grid electricity. This cost scales linearly with the level of tariff offered, so for example a 2.15p/kWh FIT would be equivalent to a £100/T carbon cost in this situation.127
127 It could be argued that by offering a lower tariff, the less suitable (and thus higher-cost) households would not choose to invest in a fuel cell, lowering the average carbon cost further.
£0 £100 £200 £300 £400 £500 £600 £700 £800 £900 £1,000 -2 -1 0 1 2 3 4 5 A nn ua l F IT pa ym e nt
Annual CO₂ emissions reductions (tonnes) 250g
Grid average
(647 g/kWh) 750g 1000g 500g
Figure 8.12: The cost to government of carbon mitigation with a 10p/kWh feed-in tariff for fuel cell micro-CHP systems. The left plot shows a PEMFC system displacing electricity of different carbon intensities, while the right plot shows the
carbon costs for different technologies displacing grid average electricity.
Carbon costs are reduced if the fuel cell displaces higher carbon electricity generation – falling to an average of £177/T for a 10p/kWh FIT if coal fired plants at 1000 g/kWh were displaced. Costs however increase sharply as the carbon intensity of displaced electricity reduces towards that of the fuel cell (e.g. 410-450g/kWh for PEMFC). The higher efficiency of SOFC and PAFC systems means that they would offer lower carbon costs for a given level of FIT, as seen in the right hand plot of Figure 8.12.
As shown earlier, a 10p/kWh feed-in tariff alone would not provide sufficient revenue to make PEMFC systems economically viable with present prices, meaning that the household, industry or government would also have to contribute towards the cost of emissions reductions. When the total additional cost of the system is accounted for, carbon costs almost double to £911 per tonne as shown in Figure 8.13. This carbon cost will decrease rapidly in line with fuel cell prices, and so could be expected to halve within five years. These results show the same dependence on grid carbon intensity as in Figure 8.12, as the emissions reductions from the PEMFC were the same in both cases.
£0 £100 £200 £300 £400 £500 £600 £700 £800 Grid average 1000 g/kWh 750 g/kWh C ar bon cos t for a m ic ro -C H P f e e d in ta ri ff ( pe r tonne C O ₂)
Carbon intensity of displaced electricity
£0 £100 £200 £300 £400 £500 £600 £700 £800
PEMFC SOFC PAFC AFC
C ar bon cos t for a m ic ro -C H P f e e d in ta ri ff ( pe r tonne C O ₂)
Fuel cell technology
£466 / T £374 / T £339 / T £461 / T 500 g/kWh £0 £500 £1,000 £1,500 £2,000 £2,500 £3,000 £3,500 £4,000
Figure 8.13: The total carbon cost for PEMFC displacing grid-average electricity, considering current and near-future prices for the fuel cell system. Average values are given for each upfront price, representing the combined cost to the
household and to government.
8.4. Concluding Remarks
When the lifetime costs and savings from a fuel cell micro-CHP system are combined, they are dominated by the high upfront prices seen today. With the central assumption of a 10p/kWh feed-in tariff and current UK energy prices escalating at 2.5% per year, a 1kW PEMFC system is estimated to have a payback period of 25-45 years, compared to a working lifetime of 10-15 years.
This result is highly sensitive to reductions in upfront price, the level of support offered through a feed-in tariff, and the future development in the prices paid for energy. PEMFC systems could reach breakeven within 10 years if prices fall to the projected levels of around £6,000 per system. Similarly, the economic case for investing in fuel cells is greatly improved if historic rises in UK energy prices continue (~10% per year [330]), or if the level of FIT support offered by government is higher than expected here.
Even though fuel cells are the most expensive form of microgeneration at present, they are able to compete economically with much better established solar PV when given a level playing-field of incentives. A 20 p/kWh FIT could give financial payback within 12-19 years (possibly within the reach of current system lifetimes), reducing to 5-8 years by 2015 due to the expected decrease in capital costs. It is clear that the level of support that will be provided by the FIT, and
£0 £200 £400 £600 £800 £1,000 £1,200 £1,400 £1,600
Current prices 2015 prices 2020 prices 2025 prices
Tot al c os t of c ar bon m it ig at ion (pe r tonne C O ₂)
Upfront price of the fuel cell system
future initiatives for renewable heat production will make or break the economic case for fuel cell micro-CHP.128
Over its economic lifetime of 10-15 years, a PEMFC is estimated to cost £14,100±1,100 more than the reference heating system and save 17±4 tonnes of CO2 when displacing grid-average electricity. The estimated total carbon cost for the central case therefore lies between £750 and £950 per tonne of CO2 avoided. These costs can be halved over the next decade with the expected price reductions, or immediately if it is valid to assume that coal fired plants will be displaced by fuel cell electricity generation.
Actions with a carbon cost below £25-50 are generally considered to be ‘value for money’ methods of combating climate change.[2, 7, 331, 332] The IPCC estimate that 20-40% of global CO2 emissions could be avoided for under £50/T, which would be sufficient to stabilise the climate at 2-4°C above pre-industrial temperatures.[7] However, this would offer no guarantees against the most devastating effects of climate change, and so governments may have to accept higher costs of mitigation if they are to avoid catastrophe.[2]
Fuel cells are clearly not among the ‘low hanging fruit’ – measures such as improving building insulation and heating/cooling efficiency which could reduce CO2 emissions with low or even negative costs.129 As with renewables and other forms of microgeneration, current prices must be reduced substantially before fuel cells can become a mainstream and cost effective method of CO2 mitigation. Today’s carbon cost for PEMFC systems is in the same league as those estimated for domestic and large-scale solar PV and solar thermal installations, which range from £100- 2,000 per tonne.[330, 333]
The motivation for industry and governments to invest in fuel cell technologies today is not to offer the benefits of CO2 reduction and reduced fuel consumption in the short term, but rather to advance the technology to a point where it could be an economically attractive solution in the long term. Based on current understanding of prices and their rate of decrease, this could be expected within the next ten to twenty years with an international commitment to rapid deployment.
128 The Renewable Heat Initiative is intended to run alongside the proposed feed-in tariffs, rewarding low-carbon heating technologies such as micro-CHP by crediting heat output, much in the same way as the FIT credits electricity production.[255]
129 A negative carbon cost implies that both carbon emissions and costs (from fuel purchase) could be reduced together.