The combination of synthetic hydrogen from UCG will make an ideal feed source for its fuel cell systems, AFC Energy said. Linc Energy will utilise a simple membrane gas separation process on the UCG gases to ensure that a rich hydrogen mix is available for feed-in to the fuel cell system.

Linc Energy has an operating UCG plant in Chinchilla, Australia, where it is intended to initially install AFC Energy’s Alpha fuel fell system for demonstration and then, once developed, install the larger c50KW AFC fuel cell system. All parties anticipate multiple installations of AFC Energy’s 50KW system for full scale commercialisation.

Under terms of the agreement, AFC Energy has granted to Linc Energy worldwide rights to utilise and operate AFC fuel cells in conjunction with any UCG application for a period of 24 months. Linc Energy will purchase the first Alpha fuel cell system for GBP200,000, payable in instalments, with delivery anticipated within the next five months.

Linc Energy will have the option for 24 months to extend the exclusivity period in perpetuity. To exercise this option, Linc must invest GBP2.3m in AFC Energy at a price determined in reference to the market price at the time of exercise. For Linc Energy-owned sites, Linc Energy will pay to AFC Energy an upfront payment calculated on the cost of delivery of fuel cell systems, and a royalty based on profits generated from the use of AFC Energy fuel cells.

For Linc Energy-owned sites, Linc Energy will pay to B9 Coal, as introducer and broker to the transaction, a royalty equal to 2% of the net profits generated from the use of AFC Energy fuel cells.

The operational system will permit the optimal usage of coal with minimal environmental damage. The project capital expenditure for power stations using AFC Energy’s low cost fuel cell system is forecasted to be less than that of conventional coal/IGCC power stations.

Ian Balchin, CEO of AFC, said: “Whilst our primary focus remains firmly on the chlor-alkali market, we now have access through B9 Coal to the rapidly emerging market for power generation from underground coal. This opportunity is by far the largest potential market for AFC Energy that we identified and is operational practically anywhere in the world where there are deep coal deposits.

“The implementation of this programme can create a ‘Holy Grail’ for future coal utilisation with low-cost, highly efficient conversion of coal into power and through the process of CCS it can turn the dirtiest fossil fuel into the cleanest.”