AI data centres give Ceres Power a boost
Ceres Power Holdings is scrambling to provide the power for data centres. Can the energy technology company transform its fortunes?
Ceres Power Holdings (LSE: CWR) is one of many companies to have recently got caught up in the global AI boom. Shares in the fuel-cell provider have charged higher by 240% year-to-date. Over the past 12 months, the shares have risen 850%. Despite this performance, the stock is still down around 50% from its ten-year high in February 2021.
UK-based Ceres Power is a developer of solid oxide fuel cells (essentially mini power stations) and hydrogen-power technologies. For many years, the company and its technology were relatively unloved due to high costs and low demand. That has changed over the past 12 months thanks to the massive energy demands of AI, leading to what can only be described as an arms race for power. Data-centre operators and the so-called hyperscalers – Alphabet, Microsoft, Amazon and Meta – are seeking their own power sources as capacity-constrained electricity grids are unable to meet their needs.
Electricity demand from data centres soared by 17% in 2025. The power demand from the average newbuild data centre is forecast to rise to almost 110MW by 2030, from almost 47MW in 2025, according to S&P Global. Globally, data centres could consume 1,000 terawatt-hours (1,000,000GWh) of electricity by 2023, up 100% from 2030.
Try 6 free issues of MoneyWeek today
Get unparalleled financial insight, analysis and expert opinion you can profit from.
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
In November 2024, US utility American Electric Power entered into a landmark supply agreement with Bloom Energy to procure solid-oxide fuel-cell products capable of delivering 1GW of power. Designed to plug directly into AI data centres, the fuel cells can run on natural gas, biogas or hydrogen blends and, most importantly, can be delivered and turned on in months, not years. Data-centre company EdgeCloudLink claims it can construct a data centre and have it running within nine months, partly thanks to fuel cells removing dependency on power utilities.
A turnaround for Ceres Power?
The market seems split on whether Ceres can replicate the success of its US peer. Its record of delivering is spotty to say the least – revenue hasn't grown over the past five years. It is holding out on its next-generation Endura technology, a solid-oxide stack platform that can run on both natural gas and hydrogen. A solid-oxide stack uses ceramic electrolytes to convert fuels into electricity, and Ceres claims its technology can do so more efficiently than its competitors.
At scale, manufacturing costs are expected to be one-third lower than that of its competitors, according to Ceres, and its output aligns perfectly with the electrical requirements and standards of modern data centres. Berenberg analysts describe this as a “gamechanger” that will allow the company to monetise its research and development into a scalable platform.
Peel Hunt analysts believe this is nothing more than a branding exercise, repacking the company's existing technology into a new product. But ultimately, the company's success will depend on its ability to sell licences for its products. Over the past few years, Ceres has transitioned away from a manufacturing model to a licensing model and has outlined a goal of securing at least one new manufacturing licence agreement per year. That doesn't look like a particularly high bar considering the company has identified a 22GW market opportunity for its products by 2030, driven by demand from industry and data centres, particularly in Asia and the Americas.
A single partner scaling up to 1GW of production using Ceres' new Endura technology could generate £50 million to £100 million in annual royalty revenue. Berenberg believes that would generate $1 billion in shareholder value at current sector valuation multiples. Compared to Ceres's current market capitalisation of £1.4 billion, it's easy to see why investors have raced into the stock.
Should you invest in Ceres Power?
The next few years will be key. Analysts have pencilled in revenue of around £80 million for 2028, up from £52 million in 2024 when the company started its transition to a licensing model. This isn't enough to justify the current valuation. Still, these figures were compiled before the company announced a partnership with Centrica (the owner of British Gas) and Delta Electronics (a Ceres manufacturing partner) for off-grid energy generation.
The partnership will offer customers “competitively priced, on-site power generation, significantly reducing exposure to wholesale electricity market volatility and grid capacity constraints”. The plan is to deploy a demonstration site within the next 12 months and scale up capacity over the next three to five years. Other partnerships signed in 2025 are expected to ramp up and start delivering results in 2026, including partnerships with Shell in India, Doosan in South Korea and Weichai in China.
Five years is a long time. The firm is still loss-making when measured by Ebitda and is burning through cash (Ebitda of £7.8 million is projected for December 2028). The shares are trading at 17.5 times forward sales. Still, with £83 million of cash in the bank at the end of 2025, Ceres has the resources to sustain itself for the next three years until it reaches break-even point. The company burned £20 million of cash in 2025 and costs are expected to be down by around 20% this year.
Ultimately, Ceres is a high-risk play and the company's valuation does not leave much room for error if sales fall below expectations next year. However, it's clear there's a large and growing market for the fuel-cell technology Ceres has spent years developing. With 50GW of additional electric supply needed in the UK alone to meet demand from AI data-centre projects in the pipeline, even a relatively small order could transform the company's fortunes.
This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
