Ceres signs 'milestone' £2.7m fuel cell deal

Ceres Power, the fuel cell company, yesterday announced it had a deal with British Gas that could save hundreds of pounds annually for householders who replace their boilers with its "combined heat and power" product.

The fuel cell CHP unit is, in effect, a "micro" power station for households, which will generate their own electricity. It is the sort of product that is expected to gain from measures to be announced in the Budget tomorrow, as well as the Government's "Microgeneration Strategy", which is due to be released in the next few weeks.

Analysts said that the Budget and the Microgeneration Strategy would provide financial support for households that opt to produce some or all of their own power, which is much more efficient than taking electricity from a centralised system - which in turn means that far less carbon dioxide is produced.

Grants are expected to be made available for households that install micropower equipment, possibly in conjunction with further fiscal incentives. Already CHP units benefit from 5 per cent VAT, rather than the usual 17.5 per cent. Other microgeneration devices include wind turbines.

The £2.7m Ceres deal with British Gas is part-funded by the Department of Trade and Industry. The programme will put fuel cell CHP units into trial households. It is not clear when it will become a mass market product, available to most British Gas customers. Peter Bance, the chief executive of Ceres, said: "Most UK households will have their own power station [one day]. It will be massively cheaper than buying electricity from the grid."

According to Mr Bance, the Ceres CHP unit will not cost much more than a conventional boiler. It runs on regular natural gas, which is converted into energy in the fuel cell. Mr Bance said that households may consume around the same amount of gas but all their electricity would be generated for free, as a by-product.

"It's a no-brainer," said Mr Bance. "For a very modest price premium to a boiler, households will save £400 or £500 a year."

British Gas has estimated that around 15 million of the UK's 25 million households are suitable for a device such as that made by Ceres. Most fuel cell designs work on hydrogen, which is difficult to supply, so a major attraction of the Ceres product is that it is powered by natural gas.

Households with micropower products have the potential to supply over one-third of Britain's total electricity needs, according to some estimates. They could sell any excess electricity to the national grid.

Dominic Shorrocks, the director of new business growth at British Gas, said: "This milestone brings us a step closer to delivering a technological revolution for consumers, which confirms our commitment to empowering British Gas customers to use energy efficiently, with the potential to dramatically reduce household energy bills and cut carbon dioxide emissions."