March 3, 2014 Issue
The Most Powerful Name In Corporate News and Information
Generating Clean Electric Power and Heat from Low Quality Waste Gases
Ener-Core Inc. (OTCBB-ENCR)
Ener-Core designs, develops,
and manufactures products and technologies that generate clean electric
power and heat from low quality waste gases. We anticipate our Gradual
Oxidation technology will provide customers with cost competitive power
generation from previously un-utilized waste gases, while at the same time
substantially reducing air emissions from several of the world’s highest
sources of industrial air pollution.
Prior to his career in the renewable energy sector, Alain was a Partner at Ernst & Young Consulting, and held overall responsibility for the firm’s oil & gas industry consulting practice across the South America region.
In addition to his role with
Ener-Core, Alain is currently an executive advisor to one of the largest
global manufacturers of utility-scale wind turbines, as well as a member of
the advisory board of Global Energy Innovations, a leading provider of
diagnostics solutions for the utility-scale energy storage and standby power
Interview conducted by: Lynn Fosse, Senior Editor, CEOCFO Magazine, Published – March 3, 2014
CEOCFO: Mr. Castro, what is Ener-Core?
Mr. Castro: Ener-Core is a company which is deploying a game changing technology to the waste and energy industries; for the first time in history, a large percentage of the industrial waste generated from industrial activity in all continents of the globe can be converted into power in an economically attractive manner. At the same time, Ener-Core’s technology can neutralize the contaminants in those waste streams that contribute to our air pollution.
CEOCFO: Is it the best of both worlds?
Mr. Castro: It has long been sought after by both environmentalists as well as the energy industries alike. Most environmental solutions represent a way of cleaning our air or cleaning our water or neutralizing our soil or something that is of benefit to our environment, but unfortunately they represent a cost burden to industrial activity. The exciting thing is, as you just said, what Ener-Core is providing is the best of both worlds in that we can now solve or mitigate or neutralize a huge source of air pollution in a manner that is actually profitable to the industries that generate this air pollution.
CEOCFO: Would you please explain the science and technology behind what you have available?
Mr. Castro: Certainly. All of us have been raised in a world where the generation of energy from fossil fuels equates to combustion. Combustion powers our power plants, powers our cars and our airplanes. Combustion is a chemical reaction, and it is combustion that we implicitly think of when we think of power generation. Our technology is utilizing a similar, albeit slower chemical reaction called oxidation. Oxidation occurs in nature. Most of us, in layman’s terms, think of oxidation as a rusty tail pipe. However, oxidation at the basic level is the reaction of any element with oxygen. Therefore, oxidation happens in nature to most air pollution streams from industrial waste. Unfortunately, it just takes many years for all of this air pollution to react with oxygen and get neutralized, and in the process the pollution does a lot of damage to the air quality of our atmosphere. We have found a way to accelerate an oxidation reaction, so it does not take years; it actually takes one to three seconds. The thing about oxidizing gases verses combusting them is that when you oxidize a gas you can almost completely destroy all of the contaminants and undesirable compounds in that gas. We have achieved rates of 99.8% destruction of contaminants in the gas streams. The other convenient effect of an oxidation reaction is that when accelerated it puts out an immense amount of heat. Therefore, with this accelerated oxidation reaction, we are able to take an industrial waste gas, mix it with an immense amount of air from the atmosphere and induce an oxidation reaction in one to three seconds, destroying almost all of the contaminants in that waste stream, while at the same time generating heat. We then take that heat and we work with turbine manufacturing partners to integrate their standard turbines such that the turbines will receive our heat output and convert it to electricity, which can then be plugged directly into an electrical grid and power an entire town.
CEOCFO: Is it a piece of equipment that you are installing? How big and how massive?
Mr. Castro: We design and manufacture sophisticated equipment. We are manufacturing them in different sizes. We have a two hundred and fifty kilowatt size, which can power about 250 to 300 homes. We are also releasing a two megawatt size that can power up to approximately 2500 homes. Then we are going to be scaling up to 5 megawatts and 10 megawatts in the next two to three years. The sizes of our current products are effectively twenty two to twenty five feet high. The smaller unit is six feet wide. The larger units will increase to about eight feet in width.
CEOCFO: Has this process been tried in the past? What is the history and how did you come to your solution?
Mr. Castro: The development of this came out from a very innovative engineer that worked in the research division of Southern California Edison for most of his career. He had always believed that oxidation could be used to mitigate a large source of air pollution, while at the same time generating energy. When he retired from Southern California Edison, he began to really spend his time on this science. After about eight years of working on it on his own, he was able to gain some funding from the venture capital community of Southern California. After another six years of well funded research and development, he and the team that was built around it, were able to get the concept to a fully functional 100 kW unit in the year 2009. The team then deployed a 250 kW unit in the year 2011 / 2012 into a military base in Georgia. That particular project was funded by the Department of Defense. We ran it for an entire year on a real landfill. Landfills put out a lot of waste gas and we were able to prove that this technology can reliably take that waste gas 24 hours per day during an entire year and generate power from it while at the same time neutralizing the waste stream that would otherwise go to our atmosphere.
CEOCFO: Is the energy community aware? Do they know what is going on at Ener-Core?
Mr. Castro: Not just yet. We have just begun marketing this last year. We have secured our first commercial order with the largest waste management company in the Netherlands. So we are currently installing it there and planning for an inauguration of that unit around April or May of this year. That inaugural event will be one that we’ll utilize to make the energy industry aware of this breakthrough. But although this technology has taken 10 years of development prior to releasing to the market, we’re a new entrant to the market. Quite frankly, we have been in a bit of stealth mode for most of our history as we worked on getting this technology ready for market deployment. Therefore, this year 2014 is really the year that we are focusing our efforts on making the energy market aware. Now, there are technologies out there that exist today based on combustion, that can take waste gases and convert them to power. However, they require higher quality waste gases that have a certain degree of cleanliness in them already and that have a certain level of energy content or BTU per cubic foot in order to make combustion a viable option. Therefore, because of the approach we are able to utilize gases that are far more contaminated than what standard technology can handle and far more lower in energy content that what standard technology can use. Therefore, one could say that we are stretching the limits of what traditional technology can do to waste gases that clearly, just have never been feasible for power generation.
CEOCFO: You mentioned the Netherlands. Was it strategic to start in Europe? Was it opportunistic because they were willing to do it?
Mr. Castro: It was more opportunistic than strategic. We have many interested parties in California, as well as throughout the North East United States. And in general we already have a high level of interest from several companies throughout Asia and Europe. But, whenever you deploy a new technology in the energy industry, it’s always going to be a challenge to secure an order from a customer that is willing to be the first, and hence that part was opportunistic. However, the first customer just happened to be a large waste management company in the Netherlands. It could just as well have been a coal mine, an oil refinery, a wastewater treatment plant or even an ethanol plant. All of these industries, and many more, emit waste gases that we can now neutralize while converting them to power.
CEOCFO: When you demonstrate is there an aha moment? When you are showing people, where is the skepticism? Is there a typical point where they understand how it is possible and makes sense?
Mr. Castro: The first typical point will just be when we have a few of these operating in the United States, in Europe and in Asia. But, in a sense, the aha moment already happened, as people can already read about the great technical results that were generated from our one year operation within the Fort Benning military base in Georgia. However, nothing replaces an engineer’s appetite for actually seeing the unit operating. Published results from a successful one year operation are useful, but most engineers want to see things operating, and hence there will be many aha moments, as more and more engineers see that this really does work. Therefore, to us it is critically important to get some units operating in all of the major regions that we are focusing on, which is the West Coast of the United States, the East Coast of the United States, Europe and a few countries throughout Asia, so that the engineers in each of those regions can get closer to an operational unit, see it operating smoothly and have their own aha moments.
CEOCFO: What is the plan? How will you be doing it?
Mr. Castro: We are working very closely with our turbine partners. When we deploy these power stations on these particular sites with low quality gases, we are the critical element of a power station, because our technology is the part that takes the waste gas and convert it into usable heat, while at the same time destroying the contaminants. However, the power station requires a turbine to then convert the heat into electricity, and we do not make the turbine. We partner with turbine companies. Therefore, our turbine partners stand to effectively harness or deploy their turbines into an entirely new market, as the turbines alone cannot operate on these are gases that are not fit for combustion. Therefore, our plan is to deploy this commercially with our turbine partners. That is because, as I said, when we commercialize a power station, a power station includes our gradual oxidizer technology as well as a turbine. The turbine companies are getting quite excited about what this means. This means that they now have access to an entirely new market, which historically has been off limits to them technically. Now, thanks to this breakthrough from Ener-Core, they can start commercializing their turbines into this new market. And this is not just a small, insignificant new market. This is a market that we quantify at, at least $77 billion dollars in size. Therefore, it is appetizing enough even for the largest turbine makers in the world today.
CEOCFO: Commercialization and development are always expensive. Are you funded for the next steps and will you be seeking funding?
Mr. Castro: We have been historically funded by the venture capital community in the West Coast United States. We have recently gone public and began trading on OTC in July of 2013. We are currently in the process of raising private capital and are approaching towards and up-listing and initial public offering later in 2013. Therefore, the answer to your question is, we have been sufficiently funded for the entire R&D phase of the company’s life over the last six years and we are currently raising funding so that we will have the capital behind us to properly manage this commercial market deployment at a global scale over the next three to five years.
CEOCFO: Why pay attention to Ener-Core today?
Mr. Castro: The answer is fairly simple. There are very few environmental solutions out there that can exist in complete absence of legislation and subsidies. Most renewable power technologies are only competitive today, because local or regional or country incentives allow them to be or give them that extra financial support they need to be competitive with traditional power. What we have here is a technology that solves a massive environmental problem, which is air pollution, while at the same time generating profits for the companies that have these waste streams that generate this pollution. And at the same time, the companies that generate power with Ener-Core’s technology can compete with traditional power technologies in full absence of incentives or legislation. That is really the holy grail of what most investors in renewable power are looking for: clean energy technologies that will remain competitive, even if legislation were to be reduced.
CEOCFO: What might people miss or misunderstand about Ener-Core when they look? What should they realize that may be a little below the surface?
I think that companies might mistakenly see Ener-Core as just
another microcap company. We have completed a fairly intense R&D phase over
10 years. We are just starting into market deployment and we are listed OTC,
which is microcap. I think that when investors look at microcap companies
they just stereotype microcap companies as small companies which may become
medium size companies over time. There are not many companies that have a
true breakthrough technology that stands to be deployed into a new market of
this magnitude; 77 billion dollars. Therefore, what I think that people
might misinterpret is that this is a microcap company and just categorize us
as such, when in fact the likelihood of us remaining a microcap company for
longer than six to eight months is quite small. I think most people, when
they take a closer look, will realize that we are quite rapidly going to
become a significant company within the energy and waste industries, by
helping to solve a real global problem in a profitable manner.
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