Plug Pulled on Regenesys

Utilipoint’s Issue Alert on Jan 22 did a nice job of reviewing several developments in energy storage (I highly recommend getting on the distribution list for these daily missives):

“Energy Storage Shows Promise”

There are nice plugs for Active Power and Beacon flywheels (though Pentadyne is really the one to watch, I think). Curiously, Beacon is focusing not on very short duration, but instead is going after the lead acid battery applications.

The big news was the stopping of all work on the big TVA Regenesys project, and the curtailment of the work on its sister project at Little Barford in the UK.

The Regenesys flow battery works by storing or releasing electrical energy by means of a reversible electrochemical reaction between two salt solutions—the electrolytes. The electrolytes are pumped through hundreds of individual cells, which are separated by a membrane. The electrolytes are stored in 700,000-gallon tanks; the concentrated solutions are sodium bromide and sodium polysulphide. (Many references are available on the technology.)

The history of the business is a bit complicated. Originally begun under National Power in the UK, the program was placed (in around 1999) into a subsidiary company, by the name of Innogy. Later, National Power was split up into International Power and a domestic utility business. The domestic utility portion took the name Innogy, meaning that the technology subsidiary had to be renamed Innogy Technology Ventures Limited before a further renaming as Regenesys. Recall that Regenesys was being prepared for an IPO, which was suspended when tech stocks dropped in 2001. It was the utility business, Innogy, which was subsequently acquired by the German giant, RWE in 2002. RWE was rounding out its British invasion, having previously bought Thames Water, a major water supply company, and some smaller energy services companies. The technology development subsidiary, Regenesys, was simply an incidental piece that came with the deal.

Note that Regenesys is the only flow battery technology effort that had decided to focus entirely on very large utility scale applications (“pumped hydro in a box”), e.g., at 10-20 MW. Actually, it only really makes sense at this kind of size. (The other flow battery developers have been targetting much smaller projects, in the 1 kW to 1 MW range). Prior to the RWE acquisition, Regenesys had acquired Electrosynthesis, a small electrochemical consulting company in Buffalo NY to boost its resources, and laid plans for a serious assault on the North American market. Meanwhile, work continued on the first commercial 120 Mwh demo at the Little Barford power plant in the UK.

At TVA, the $25 million facility was just about complete, but TVA needed the electrochemical modules, when RWE decided it wasn’t prepared to continue funding development, leaving the program with nowhere to go. TVA made a very quiet announcement in December, but because of other news around the holiday season it wasn’t picked up by the US press til mid January. (See for example,

TVA is exploring ways to move forward, including other possible uses of the site.

The general view is that the technology is viable but RWE estimates the technology has another 5 years of work ahead before it’s truly commercial. Because the Barford project had slipped far behind as well, RWE simply doesn’t want to continue putting cash in that long; there are other business priorities for RWE.

The future is up for grabs. Regenesys may just be put on the shelf, or be sold off. Meanwhile, a major report on flow batteries is in the works by Escovale, in the UK. “Flow Batteries: Technologies, Applications and Markets” is being prepared by a team that includes Anthony Price, who was marketing manager for the Regenesys program prior to becoming an industry consultant. I have more information on this report.

Anthony would be a good starting point to delve into the implications and opportunities represented by this latest development. 011-44-1666-840-041

Other contacts:
Mark Kuntz, Regenesys Ltd, Chicago (thru June) 630-562-1271
Joe Hoagland, TVA, 256-386-2108,

Gas-to-Liquid: Its Time Has Come

As outlined in an UFTO Note last year (17 May), Gas-to-Liquid (GTL) technology has been around for nearly a century. Known as the Fischer-Tropsch process (FT), it converts gas into a liquid fuel in the form of a refined crude or even a final product such as (clean) diesel. Until recently, conventional wisdom has been correct: use of GTL has been limited by high capital and operating costs.

[In the FT process, synthesis gas (or syngas, H+CO) is reacted in the presence of an iron or cobalt catalyst. End products are determined by the length of the hydrocarbon chain which, in turn, is determined by catalyst selectivity and reaction conditions. Possible end products include kerosene, naphtha, methanol, dimethyl ether, alcohols, waxes, synthetic diesel and gasoline, with water or carbon dioxide produced as a byproduct. Natural gas or coal can be the raw feedstock. ]

Several drivers, however, have combined to change that situation entirely:

– Dwindling world oil reserves and high exploration costs
– Impending limits worldwide on sulfur content in diesel fuel
– Vast quantities of “stranded gas” identified
– Technology advances, thanks to substantial programs by the oil majors

Very recently, these same oil companies have announced multibillion dollar GTL projects. Last October, Shell announced a $5 billion plant in Qatar, and estimated production costs at less than $4 per barrel. As the NY Times reported (Oct 16), Exxon Mobil is also building a plant in Qatar, at a cost of $10 billion, and the South African company Sasol is constructing a 34,000-barrel-a-day GTL plant in Qatar that is expected to come online in 2005. Together with ChevronTexaco, Sasol is negotiating with the government to build another 120,000-barrel-a-day GTL plant. Conocophillips announced its own $5B plant to be built in Qatar. (Seems Qatar is the place to be!) BP’s commercial pilot plant in Alaska is operational.

The petroleum industry has found more than 5,000 trillion cubic feet (tcf) of natural gas in remote locations, an energy equivalent of 500 billion barrels of crude oil. Most of this resource is abandoned in place because of the prohibitive cost of transportation infrastructure.

A new company, World GTL, Inc. was founded in 2000 by industry veterans. Their plan is to acquire ownership rights (in some cases production rights) to certain stranded gas fields at deeply discounted prices, and capitalize on opportunities that now exist to convert these “stranded” natural gas fields into synthetic petroleum products.

Why don’t the majors do this themselves? They do hold on to larger fields and may eventually develop them as LNG sources (or increasingly, with GTL), but they have no interest in smaller fields, e.g. under 3 tcf. This leaves a huge opportunity for players like World GTL. In fact, majors have already said they’d license their GTL technology and help with plant financing. (There is an analogy to the independent oil company movement over the last 20 years in the US. The majors decided that shallow water drilling in the Gulf was not going to work with their overhead costs and targeted IRRs, so they left the area to small independents who have done very well indeed.)

Turning Stranded Gas into Proven Oil Reserves

World GTL has come up with an interesting strategy. Once the development is done on a project (i.e. secure gas rights, do site plan, license technology, do preliminary engineering, arrange financing, sales agreements, etc.) previously stranded gas reserves with little to no value will essentially have been converted to “in the ground” gasoline and diesel inventories which can be easily monetized in the international oil market.

World oil companies are struggling to rebuild and expand their proven reserves which have dropped to dangerously low levels. Reserves can be borrowed against, and this critically important for these companies, not only to be able to invest in the development of those resources, but as a contribution to their balance sheet. The majors are spending an average of more than $5 per BOE (barrel of oil equivalent) just to find bookable reserves today (and that’s not even counting the “fully developed” cost to produce). Every dry hole drilled adds to the problem.

World GTL estimates that ten cents will cover development costs needed to get a BOE to “bookability”, and there is a long list of buyers who will jump at the chance to buy these BOE’s for $1. (Actually better than BOE, because it’s zero sulfur fuel.)

Thus venture returns are possible even before the plant is built. Once it is built, the fully developed cost of production is less than $5 per barrel of finished product, and refinery demand for sulfur free blending stock is already booming. New EPA regulations drastically limit sulfur content of diesel fuel beginning in 2006. Other regions are doing likewise, and refiners have very limited means to comply, especially in light of the lessening supply of lighter crude oil.

The company is currently raising $40 M to take their program to the next level and build two small commercial GTL plants. A great deal of information is available, including a collection of recent articles in the business press.


Contact: David Loring,
President, World GTL Inc., New York, NY

[Where the majors have all gone into Qatar with projects that won’t produce anything until at least 2006, World GTL has projects ready to go to relocate and retrofit existing (idle) methanol plants using a unique process with a World GTL patent application filed. This unique process can put these facilities into GTL production with positive cash flows within 12-18 months. The engineering study for the relocation and retrofitting has been completed and there are guarantees involved. Significant project finance assistance is available from certain US government agencies for these specific projects.]