• AFC Energy has granted to Linc Energy worldwide exclusive rights to utilise and operate AFC Energy Fuel Cells in conjunction with any UCG application for a period of 24 months (with an option to extend this agreement to 3 years if required).

• Linc Energy will purchase the first Alpha Fuel Cell System for £200,000, payable in instalments based on delivery milestones, with delivery to Linc Energy’s demonstration facility in Chinchilla, Australia anticipated by late March 2010 but no later than five months from the date of the agreement.

• Linc Energy will have the option to extend the exclusivity period in perpetuity. To exercise this option Linc Energy must invest £2.3 million into AFC Energy stock at a price determined in reference to the market price at the time of exercise. Linc Energy will own the AFC Energy stock and have the right to freely trade the stock as appropriate.

• 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 two percent of the net profits generated from the use of AFC Energy fuel cells.

Testing of the Alpha Fuel Cell System will involve Linc Energy using a simple membrane gas separation process upon the UCG gas to ensure a satisfactory hydrogen mix feed gas is available for the Alpha System Fuel Cell. Linc Energy anticipates commencing testing of the system at Chinchilla by mid April 2010.

Alkaline fuel cells are characterized by low operating temperatures (below 80°C) and high efficiencies (50-70%) relative to other types of fuel cells. The electrolyte is potassium hydroxide (KOH); the gas used at the anode is hydrogen and the gas used at the cathode is air containing oxygen. A downside of AFCs has been CO₂ contamination of the electrolyte, reducing efficiency. Unlike the poisoning of a PEM fuel cell by CO, the CO₂ contamination can be addressed by replacing the electrolyte, AFC says.

AFC has run thousands of hours of system and electrode tests, and in some instances has run comparison tests to ascertain the severity of the problem of CO₂ contamination in KOH. The company says that it has not found there to be any very significant influence of CO₂ until well beyond 3,000 hours when a small reduction (typically in the region of 8-10% can be detected) in a system running without CO₂ scrubber protection. New electrolyte immediately restores the performance of the system.

The Alpha System Fuel Cell is being developed as a low-cost, easy to maintain, mass manufactured unit that can be installed in modular blocks. At the larger commercial end, this will involve container-sized housings (approximately the size of a 12m shipping container). The current design intention is that several of these Fuel Cell containers will provide 400MW to 500MW of power generation.

UCG is in fact one of the cheapest ways to produce hydrogen, according to Linc, both as a primary product or as a secondary by-product source (depending on the coal and geology at the UCG site). At Linc Energy’s site in Orroroo, South Australia and at many of Linc Energy’s Wyoming (USA) sites, the nature of the coal is such that Linc Energy will be producing hydrogen rich-UCG gas. Subsequently, it makes business sense to divert that surplus hydrogen into direct profit generation businesses like the AFC Fuel Cell power station, the company says.

The picture of success is that you have a UCG field producing cheap and efficient UCG gas, with this UCG gas piped aboveground a short distance on the same gas field, adjacent to the fuel cell installation. There the gas is cleaned and put through a membrane to enhance the hydrogen percentage that is fed into a smart and compact Fuel Cell power generation facility that produces virtually no CO₂ emissions. In fact the by-product that this power generation plant does produce is in high demand, and that is clean demineralized water.

—Peter Bond, Linc Energy CEO

Once the 3.5 kW Alpha Fuel Cell System has been proven to operate successfully upon hydrogen produced from UCG, the next step towards commercialization is that AFC Energy will supply an (approx) 50 kW Fuel Cell unit to Linc Energy to allow the completion of commercial scalability testing.

The partners anticipate that this 50 kW test fuel cell could be available from late 2010, with delivery to Linc Energy in the first half of 2011. Once successful testing has been completed upon the 50 kW units, it is anticipated the first commercial fuel cell power station will be ready for delivery in late 2012.

AFC Energy established B9 Coal Limited to formulate, integrate and obtain exclusive rights for technologies involved in generating, highly efficient low carbon electricity from Underground Coal Gasification opportunities and carbon capture and storage (CCS) technologies.