Fuel-cells can be used to provide household electricity and heat more efficiently than the current technology. However, if their use became widespread, there would be important ramifications for electricity distribution and the Renewables Obligation.
Centrica [CNA.L] has teamed up with Ceres Power to build the UK's first fuel-cell boiler. The basic principle is to put natural gas and water vapor into a reformer, which converts these inputs into hydrogen and carbon dioxide in the presence of a catalyst. The hydrogen is then fed into the fuel-cell itself, where a chemical reaction with oxygen across a membrane produces electricity. Heat is a by-product of the reaction and can be used to heat the house.
The problem faced by designers is that a household's need for heat and electricity varies considerably over the day and with the seasons, and it is difficult for the combined heat and power (CHP) unit to match its output to this varying demand. Ceres Power intends to do just that; failure to do so means that it would still be necessary to use gas and electricity in the conventional way to meet peaks in demand. Conversely, the household may also have excess electricity to sell back onto the grid when its own demand is low.
Whichever micro-CHP technology becomes most popular, there are some important implications to consider. The first is that there would be a large switch from domestic electricity consumption to gas consumption. Instead of utilities generating electricity from gas and then selling it on to consumers, consumers would be doing it for themselves. This could result in a large drop in the amount of electricity consumption covered by the Renewables Obligation.
Furthermore, because less electricity would be purchased from the grid, the fixed costs of running a network would have to be recouped through a smaller number of units, increasing the cost of a unit of electricity sold via the network. The third implication centers on the issue of excess electricity that would be sold back to the grid. This would require an upgrade of metering technology and balancing systems, again at a cost that would find its way back to the end user.