In September, I attended these three conferences. They were all different, but also had a great deal in common. This writeup attempts to capture major themes and to provide highlights of some of the more interesting developments that came to light. Please don’t hesitate to let me know if you’d like further details on anything discussed below (or anything you see on the agendas that I didn’t mention).
EESAT Electric Energy Storage Applications and Technologies Conf.
Sept 18-20, 2000, Orlando, FL
Distributed Power Strategies and Business Opportunities
Sept 25-27,2000, Washington, DC
Clean Energy Roundtable
Sept 27-29, 2000, Aspen, CO
One major common theme–
“Attack of the Killer Investment B’s”
Many investment banking firms are cranking up bigtime to get a piece of the action in high9s-clean-distributed energy technology. They’re starting to “get it” and don’t want to miss out, though there’s a lot they don’t know about it (and their in-house utility analysts aren’t much help). They’re attending these events in ever increasing force, and also putting on their own!
BofA Securities, CIBC World Markets, Robertson Stephens, First Albany, Deutsche Banc Alex Brown, Morgan Stanley, Goldman Sachs, Lehman … They’re issuing research reports, initiating coverage, and investing in and pushing services to companies in this industry. Not only are they coming to energy conferences, they’re putting on their own, usually invitation-only for clients and other investors.
– Goldman Sachs will be handling Powercell’s (zinc-bromine flow battery) next financing, following a recent $30 Million infusion from a variety of investors.
– Credit Suisse First Boston is acquiring DLJ, which is doing a private placement for ZBB (the other zinc-bromine flow battery).
– Bear Stearns, famous for their very popular 250 page research report, “Distributed Energy Services” back in April, is coming out with one on microturbines in the next couple of weeks, with more to follow.
– Beacon Group, recently acquired by Chase H&Q, has been actively doing energy technology investments alongside their extensive array of more traditional energy sector plays.
– Price Waterhouse Cooper is helping STM (stirling motor) to raise $4M each coming from a coalition of DTE, Delco Remy, Ricardo (engine consultants) and a group from Singapore, to be followed in the near future with a probable private offering.
The main drivers behind all this excitement include deregulation/competition, demand for premium power, environmental concerns (new regs, Kyoto, etc.), and technology advances (renewables, distributed resources, and the internet). Add to that the general supply crunch here and abroad. While there are some aspects of the investment “flavor of the month”, these trends are seen as real, irreversible, and significant.
Traditionally, development stage companies are financed by venture capital or corporate money. Now, however, companies are going public earlier and earlier (“pre-earnings” and even “pre-revenue”). This means that retail investors are engaging in “public venture capital” as it has been called, taking on the higher risk of early stage companies.
Speaking plainly, there’s a bubble in the pre-ipo and public company stocks that is similar to what’s been happening in the dot-com world and elsewhere. The players are piling on, and both good and bad can come of it. While this industry enjoys all the attention and increased capital (and valuations), there will be a continual shaking out, with big winners and losers–as we’ve seen very recently. One just hopes the losers won’t put a drag on the whole sector.
Clean Energy Roundtable http://www.montreuxenergy.com
This is one in a series of invitation-only conferences, many in Europe, targeting senior executives. The “Aspen Clean Energy Roundtable” meeting was the 7th annual such event, with many repeat attendees. A number of major energy companies, bankers, and NGO’s were represented, plus a sizable contingent from the DOE National Labs, but just a few utility people. Speakers are strongly discouraged from doing sales pitches, but rather to shed light on big trends and issues.
The biggest trend and issue — a widely held view that is an absolute necessity to come up with a “low/no carbon” energy future, in light of global climate risks and population growth and economic development. Furthermore, hydrogen is the key, as the main energy carrier of the future. There were a few visionaries who began talking about the potential of a “hydrogen economy” in the mid 70’s (during the first oil crisis). Maybe their day is coming.
Another prominent theme was the evolving role of government, from “Nanny” to enabler. Bruce Stram of Enron Energy Services spoke about this historic role of government, intervening heavily to cope with market imperfections, as less necessary as telecommunications and information flow improve. Instead, government should avoid “command and control” and instead punish social externalities with penalties, and support a vigorous R&D program.
Swiss Re reviewed their outlook that global climate issues represent huge risks to the insurance industry, noting losses from hurricanes and other weather-related damages. They’ve been very active promoting Kyoto, emissions trading, and clean development mechanisms.
Shell Hydrogen is a new independent business within the Shell group. CEO Don Huberts explained the parent company’s commitment to sustainable development (disposed of coal assets, and set up Shell Renewables and Shell Hydrogen). He described a 250 kW SOFC installation in Norway integrated with fish farming, use of an SOFC with injection of CO2 into depleted wells and deep aquifers, commercial and residential CHP with SOFC or PEM, and a proprietary natural gas processor to make hydrogen for residential fuel cells.
Valuing Renewables — Shimon Awerbuch of ICF Consulting reviewed his work on using a portfolio approach to valuing renewables. Traditional engineering-based approaches are completely inadequate–they ignore financial risk; they didn’t work in manufacturing (completely missed computers, robotics, and CAD); and they don’t work for high capital, low operating cost projects. Portfolio concepts are routinely applied in securities investment, where adding even a higher cost (lower return) investment to a portfolio can reduce the total risk, for an overall better result. See his articles Public Utilities Fortnightly, Feb 15, 2000, and Energy Policy (to be published) email@example.com
Other presentations included:
CMS Energy is pursuing environmentally friendly technology solutions, including microturbines for gas field pumping operations, a methanol plant installed in Africa to eliminate a massive gas flare, and their own “virtual power plant” program they’re calling Elan (electric local area network).
Honeywell’s microturbine group sees their devices fitting into a seamless array of energy management systems, controlled over the internet in real time.
Stirling Energy Systems, in Phoenix, is gearing up to develop huge solar power farms using dish concentrators with the Swedish-made Kockums stirling engine.
H-Power is aggressively pursuing rural markets for their existing commercial small scale PEM fuel cell systems.
Electric Energy Storage Applications and Technologies Conf.
The message is similar to the June ESA meeting [See UFTO Note, 25 April, 2000]
–storage is coming into its own, as part of the boom in new energy technology, along with DG, renewables, premium power, etc. The complete proceedings will be published in hardcopy and on a CD, by early December.
Keynoter Bill Parks, the lead for DOE’s new Distributed Power effort, [UFTO Note May 31] noted the convergence of many issues, including growth (economic, population and energy demand), price spikes, high oil imports, power quality needs, air and water quality, and climate change. New companies are entering, and everyone proclaims to be green. On top of that, average energy efficiency in the US hasn’t improved, capacity margins are below 10%, and power infrastructure is aging. DOE’s expanded efforts will go beyond the core technology R&D emphasis, to deal with systems, and to address institutional barriers. For example, the IRS is reviewing depreciation schedules for CHP and DG.
Value of Storage – Tom Jenkin, Brattle Group, described an LP model they’ve developed to analyze in detail the arbitrage possibilities for a storage system. The model calculates the maximum net revenue over a one week period by optimizing the use of a generic storage device, hour by hour. At any given time, the device can do one of four things: charge (i.e. buy energy), sell energy, sell reserve capacity, or do nothing. Using price data for the California ISO, initial results suggest a capital cost of $250-$750/kW can be supported in this kind of application. firstname.lastname@example.org, 617-864-1576.
At EA Technology (UK), they’ve developed a model to calculate net present value cost-benefit of various storage technologies in various applications. Alan Collinson, email@example.com
Regenesys, the National Power spin off, has announced their first commercial scale project (120 MWH, 15 MW) at a power plant in the UK. This is one of the prominent “flow” battery technologies discussed several times before in UFTO Notes. Notably, they have qualified it to provide blackstart, in addition to energy management, arbitrage, and frequency and voltage regulation. They also have an initial agreement with TVA to the first N American installation.
Tokyo Electric is getting good results with their advanced sealed Sodium-Sulfur battery. A key to safety is an innovative self-shut down mechanism where an inner tube expands if heated (by the reactions that would result from a leak) and blocks the ceramic electrolyte. A 6 MW, 48 MWH system has been operating since mid 1999, for load leveling and ancillary services.
AutoCap reported on the advantages of charging battery cells individually, greatly extending the expected life of batteries in large systems. When an entire string of cells are charged in series, due to variations some cells are overcharged and some undercharged. They’ve developed a system with an isolated charger, and a cell selector device that monitors and charges one cell at a time. This applies only to the maintenance charging, not the heavy recharging cycle after a discharge.
New Supercapacitor — there are countless stories around about ultracaps or supercaps. Many use low voltage aqueous electrolyte concepts, with extremely high surface area electrodes made of very porous materials, and utilizing the double layer effect. Though they can deliver unheard of capacitance in small packages (farads instead of microfarads), these cells have problems with high impedance and self-discharge. To reach any useful working voltage, cells must be put in series, and run into additional issues to do with voltage balance. According to tests of an 11,000 Farad unit at EPRI PEAC, a Russian company has a breakthrough concept involves an asymmetrical design, which solves these problems, and can deliver very high discharge rates over a wide temperature range, with high specific energy.
From the website: http://www.esma-cap.com
“JSC ESMA electrochemical capacitors utilize a polar cell and aqueous electrolyte. The negative electrode is made of an activated carbon material having high surface area, where electric energy is accumulated at the electric double layer. The positive electrode is made of nickel hydroxide and designed for high charge/discharge rate. This combination of electrodes provides a 4-5 times increase in specific energy over capacitors designed with both electrodes made of a carbon material. The maximum operating voltage of the cells ranges from 1.3 to 1.6 V depending on the capacitor type and its operating mode. The capacitor is prismatic in shape, with a case made of plastic. It has a resealable safety valve in its cover to release gas during improper use when a certain value of excess pressure is reached. JSC ESMA capacitors have been designed to remain in service even if the operating voltage level is exceeded. Capacitor operating characteristics do not degrade if the capacitor is operated under an excessive voltage level over a short time. The capacitors can withstand a short circuit current caused by improper handling.”
Emitter Turn-Off Thyristor (ETO) is a new solid state switch developed at Virginia Tech that promises great improvement over GTOs and IGBTs. It is a hybrid based on the GTO and MOSFET. It is much smaller and simpler, it uses less drive power, and it is 10 times faster — it can turn off 3000 amps in 2-3 microseconds, vs. 30 for present devices. This speed will enable switches that can react to faults in time to safely turn off rather than relying on fusing. Virginia Tech is actively looking for licensees to commercialize the ETO. (I have pdf copies of the full paper and the patent application.)
Zinc Bromine Flow Batteries (ZBB & Powercell) Powercell’s standard unit is the PowerBlock, 100kW/100kWh, in one self contained package complete with power electronics, is in production. (http://www.powercell.com) ZBB Technologies Inc. in Wisconsin is developing a larger utility scale version, with DOE funding. Two 400 kWh demonstration units are being installed on Detroit Edison’s system this Fall. Though based on the same original work at Exxon years ago, the two programs have important design differences.
Active Power, following on their very successful IPO, has a deal with Caterpillar, who is selling systems under the name CAT 250. This is a 250 KVA, 12 sec system. A price of $250-325/KVA was mentioned. Active Power has also recently built active harmonic filtering into the package. Duke Power reported on a demo installation at one of their customer sites.
Magnet-Motor (Germany) reported on their use of 2KWH/150 KW flywheels on public buses, ever since 1988. Company website: http://www.magnet-motor.de/homeengl.htm
Several programs are working on flywheels using superconducting magnetic bearings: the Shikoku Research Institute, Chubu Electric with Mitsubishi, and Boeing Phantom Works. This last one appears to have some resemblance to the earlier work at Argonne that was supported in part by ComEd. It is funded under the DOE Superconductivity Initiative.
Distributed Power Strategies and Business Opportunities
Sept 25-27,2000, Washington, DC
One of dozens of conferences on distributed power, this one had some big names and a high level of international participation, but no big announcements or new insights. As usual, the networking opportunities were at least if not more valuable than the sessions.
Ake Almgren, CEO of Capstone, was co-chair, with Mark Fallek of DTE Energy. In his opening remarks he noted that DG and central station plants are both needed, it’s not an either-or situation. DG can be thought of as another way to “distribute” power, not to “generate” it. Central station plants have a very long lead time, and difficult siting requirements. Also, T&D costs contribute as much as $4-500/KW to the price of power, which DG can avoid. Fallek cited some future global market estimates for DG of $38 billion/year. Premium power, now a $50 billion market, is growing at 30%/yr, suggesting $500 billion in 15 years.
Bob Shaw, who single-handedly invented venture capital in new energy technology, and who helped start many of the notable companies now making headlines, gave a perspective that was extremely bullish on DG and renewables, but a bit alarmed about the “bubble” situation. He is convinced that DG really will take over from central station power, sooner rather than later. DG is a perfect case of a “disruptive technology”. The engines built by US automakers every year are equivalent to the capacity of the entire US generating system. So, an industry 1/10 the size of Detroit could replace that system in a mere 10 years. The fact that VCs and Wall Street see energy technology as the “next big thing” is making capital available to this sector as never before, but it is also leading to unsustainable valuations that could become problematic. The paper is available online: http://www.arete-microgen.com. I also have a copy of the powerpoint presentation, which provides some additional material.
“First, Second, or Third Coming??”
Is DG just a replay of one or two previous episodes, or very different this time? Shaw clearly espoused the latter view, but others were less convinced. In the 60’s, a midwestern gas company pushed a “total energy” concept based on reciprocating engines; maintenance problems and the poor suitability of recips to baseload operation proved the undoing. In the 80’s, the PURPA QF provisions led to a swarm of packaged cogen installations; QF contracts have all but faded from the scene. Shaw maintains that today’s convergence of developments is really different. Robert Swanekamp, editor of Power Magazine, took an extreme contrarian position that DG is a non-event, and that 1/2 of the large CCGT’s on order will be cancelled as a power glut emerges. He said he had no knowledge of the disruptive technology argument, but that didn’t stop him from dismissing it. (He was probably the only person present who hadn’t heard about Clayton Christensen’s ideas and their relevance to DG. See UFTO Note 19 April 1999; or http://www.disruptivetechnologies.com/)
Technologies — there were a dozen or more presentations by companies: makers of fuel cells, stirling engines, and microturbines; power electronics, internet-based controls and energy management; and O&M.
Barriers — reports on the EEI and IEEE interconnection efforts; an excellent overview of competitive, institutional, regulatory and financial obstacles by Nat Treadway, (for a similar presentation, see http://www.leeric.lsu.edu/deri/info/may2000/treadway.pdf)