The announcement of a new strategic partnership between French groups Areva and Schneider in the sector of energy storage raises many questions. To me, the primary ones are:
- Who is contributing what to the partnership?
- What is the venture aiming for?
- Is it likely to be successful?
My summary guesses:
- Areva is contributing the technology (fuel cell, control harness, and management front end), while Schneider is providing distribution and marketing.
- If the venture has a clearly defined market (which I am not sure is true), it is probably off-grid Africa #1, islands of the South Pacific #2, less developed parts of Asia #3.
- This is a top-driven venture with a low likelihood of success.
My analysis follows.
Areva is mostly state-owned, and largely focused on the construction and operation of nuclear power plants. Schneider Electric is a multi-entity industrial group, covering a large number of fields related to electric power equipment, competing with Siemens and Rockwell in many areas.
Both companies have been on a downward trend in the past few years. Areva has been hard hit by the Fukushima disaster (resulting in a shutdown of nuclear power construction, at a time when a rebirth seemed likely). Its latest construction efforts, focusing on a new generation of nuclear reactors (3rd generation EPR), have been plagued with enormous delays (7 years+) and huge overcosts (90%+). Schneider group has shown little intrinsic growth, and grown mostly through acquisitions that have significantly diluted its core strengths. It appears to have lost significant competitively on the marketplace in all international markets.
Both companies are looking for newer, greener fields where they can recover some momentum. They both have a renewable energy unit (or group of units).
The partnership announcement indicates that Areva is providing its “Greenenergy Box” technology, while Schneider is providing nothing. The technology in question is a electrolysis-based hydrogen fuel cell that can be coupled to a photovoltaic power plant, and has had a pilot installation in Corsica for 3 years (coupled with a 560kW solar plant).
Since Areva does not have commercial distribution capability, Schneider is expected to provide this part of the venture. For Schneider, it will be a significant effort for their sales teams, but the original cash outlay is low. This means the decision to go into the venture was an easy enough one for Schneider that they may not have properly assessed how much work will have to be contributed downstream for the venture to be successful.
The Electrolysis + Fuel Cell combination has been a very popular one in the past 20 years when looking at initiatives. But its commercial success so far is limited. As a storage technology, it has poor AC to AC efficiency. Of course, its efficiency is not the primary argument of sale, it’s the energy capacity that is important to the application. Mostly, its usability and reliability have been questioned, because of the difficulty in separating hydrogen, and the dangers of its manipulation. While there are several examples of electrolysis in grid-scale applications, I don’t know of any successful commercial-scale applications combining electrolysis and H2 fuel cells.
Is it possible that Areva, a company focused on building GW nuclear units, can understand the constraints of designing a MW-sized fuel cell that must be sold, installed and operated to/by customers it has never dealt with? It seems more likely to me that, within Areva, the initiative starting the business was top-down driven by a large administrative company, attracted, like many others in the past 20 years, by a seductive technology idea. They might have been more successful than companies such as Toyota, which have been working on a similar technology for many years – but this seems unlikely to me.
So, in my eyes, the likelihood that we have a runaway success technology here is quite low.
The partnership announcement specifically mentions its focus on isolated locations. There is not much market in Europe for isolated locations with no access to the grid which would need to rely on solar PV and stored energy from solar PV for their power. On the other hand, Schneider has good penetration in much of Africa (where Areva also has mining and refining operations), along with some parts of South East Asia (Vietnam and Laos), and, of course, the large number of islands controlled by the French in the South Pacific – the latter being an ideal but small market for the technology. These markets likely represent the primary goal for the venture, in the order of #1 Africa (size), #2 Pacific islands (easy reach), #3 SE Asia.
As the specified market is for isolated locations, this means that the price point is too high to make sense for other uses in grid-connected areas, and we can rule these out.
Given Areva’s lack of access to customers potentially served by the technology, it is probable that the technology development resulted from top-down design, with little input from eventual customers.
The technology itself (electrolysis and hydrogen fuel cells) has been extensively studied but has not shown successful commercial deployment so far.
Because of its hydrogen handling, there is operational danger in the technology. The past ten years have shown that the handling of explosive or flammable gases is difficult to manage in developing countries: there are many biomass plants built for $10M to $50M in the 2000s now mothballed in China, because their operation ended up being too dangerous (due to the presence of CH4) without tight operations management skills on location. I expect similar problems with H2 management.
These factors, together, point at a low likelihood of success for this partnership- low, but not zero.
It’s too bad, really. There is great power density in hydrogen fuel cells, and great attraction in the concept of using shed power from solar or wind to store energy into hydrogen fuel cells. So I really hope that I am wrong in my conclusions. I would love to see the scheme successful.