19 October 2021 AFC Energy* AFC LN Renewable Energy Attractive ahead of COP26 The forthcoming UN Climate Change Conference (known as COP26) should result in an acceleration of governments’ actions to reduce CO2 emissions. This will result in an acceleration of customer end-user adoption rates which would be positive for AFC Energy which is developing zero-emission solutions for the EV-charging, construction, data centre and marine markets.
- COP26 - in Glasgow from 31 October to 12 November 2021 – has a primary goal to “Secure global net zero by mid-century and keep 1.5 degrees within reach”. This will require countries…“to come forward with ambitious 2030 emissions reductions targets that align with reaching net zero by the middle of the century” and to “speed up the switch to electric vehicles”. While most governments have such measures in place, they are expected to improve these plans over time - the so-called “ratchet mechanisms” – so COP26 could deliver concrete news rather than just fine words.
- Transport arrangements. While most people attending the conference will stay in Glasgow, heads of state will stay 46 miles away in the Gleneagles Hotel in Perthshire, presumably for security reasons. Transport to Glasgow – and for delegates in the city - will be provided by Jaguar Land Rover with a fleet of 240 I-PACE BEVs.
- Diesel generators. Social media talk that the Scottish government had spent £2m on a fleet of 20 Tesla cars has been debunked by Reuters but it confirmed that, due to lack of charging infrastructure at Gleneagles (just two charge points) it would use diesel generators there to charge the electric vehicles. While these will be fuelled by recycled vegetable oil – and so reduce carbon emissions – the story highlights the inadequacy of EV charging infrastructure in the UK.
- AFC Energy is developing a high capacity EV charging product with ABB which will be ideal for grid constrained environments such as Gleneagles Hotel. It delivered a fuel cell system to ABB in August for operational integration with ABB's high power EV charging system for…“final validation in advance of marketing an integrated system to customers”.
- Development of next generation ‘S-series’ fuel cell. Reduced complexity and ability to scale up mass-production should give significantly better economics for S-series fuel cells – utilising AFC Energy’s proprietary AlkaMem solid membrane – than those projected for the L-series; it should transform sales and profit prospects. A demonstration unit should be ready by the end of the 2021 calendar year and the first commercial stacks by end-2022.
- Our note on 13 September (A Solid future) highlighted the enormous potential for the group’s products in Data Centres and Maritime markets but our 188p per share valuation is currently based on projected sales for high power EV charging in a handful of major markets and Distributed Power for customers such as the construction industry. The potential could be greatly enhanced by the improved economics of the S-series product.
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