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Sustainable
Energy Technologies’ patented technology gives them very significant advantages in
terms of cost, reliability and efficiency with their advanced power electronics products
for emerging alternative and renewable energy markets
Industrial Products
Advanced Power Electronics
(STG - TSX: V)
Sustainable Energy Technologies
609 14th Street N.W. Suite 500
Calgary, AB Canada T2N 2A1
Phone: 403-508-7177
Michael A. Carten
President and CEO
Interview conducted August 2004 by:
Lynn Fosse
Senior Editor
CEOCFOinterviews.com
December 2004
BIO:
Michael Carten, LLB is the President and Chief Executive Officer of Sustainable
Energy. Prior to founding the Company in 1999, Mr. Carten amassed 30 years of experience
in the energy industry and capital markets. He has held various senior positions within
major Canadian institutions including Senior VP and Director Corporate and Government
Finance for BMO Nesbitt Burns and senior corporate and tax partner in Bennett Jones, a
Calgary based Law firm. Mr. Carten, in addition to being the largest single shareholder in
the Company, brings to Sustainable Energy a deep understanding of energy policy as well as
fiscal issues as they relate to national and regional governments. Mr. Carten is integral
to the success of the company and is directly responsible for strategic direction,
overseeing the senior management team, ensuring adequate financing for the company and
forging and maintaining strategic alliances.
Company Profile:
Sustainable Energy Technologies Ltd (TSX-V: STG) develops, manufactures and markets
advanced power electronics products for emerging alternative and renewable energy markets.
These products, known as inverters, are needed to covert the raw power generated from fuel
cells, micro-turbines, solar, wind, hydro and new battery technologies into high quality
power required by the existing grid infrastructure Advanced power electronics - in
particular power inverters - are strategic to the integration of alternative and renewable
energy systems as part of the power grid. The company’s patented inverter platform
supports multiple product applications.
Sustainable’ inverters convert the direct current (DC) generated into alternating
current (AC), which can be used to power devices or supplied directly to the transmission
grid. The company’s patented power electronics platform is software configurable for
all the leading technologies and multiple product applications - the power industry's
first "universal" inverter. Sustainable has established itself as a leading
developer of power electronics for the fuel cell sector with its first product for the
stationary fuel cell industry in North America, Europe and Japan. This same power
electronics platform developed a recently introduced series of inverters for the fast
growing, grid connected solar power market.
Products include:
SUNERGY 5 PV Inverter
Sustainable Energy's SUNERGY 5 is the culmination of over 5 years intensive development of
power inverter solutions for residential grid connected fuel cell systems and is now
available for photovoltaics. The "pulsed step" method of power inversion is a
new and patented approach for distributed generation. The SUNERGY 5 photovoltaic power
inverter is based on this same platform and embodies all of the industry leading
innovation, expertise and knowledge we have gained from fuel cells. This product is
available with a standard 10-year warranty.
PV Assisted Diesel
Sustainable Energy's 5 kW Power Inverter will form the basis of a highly efficient and
reliable Hybrid PV-Diesel System for remote power generation. These systems will enable
customers to overcome the majority of problems faced by diesel -only systems. A system
would incorporate PV panels, and a deep-cycle storage battery bank or fuel cell with a
diesel generator in a standard construction type trailer unit.
Vertical Axis Wind Turbine
The SES 250 Vertical Axis Wind Turbine is specifically designed to optimize the
competitive advantages of the Darrieus type turbine in difficult terrain, remote areas and
developing countries, and to permit local manufacture installation and operation of the
turbine. It is an uncomplicated wind turbine that can be easily transported to the site,
installed without heavy equipment and maintained by individuals with basic electrical and
mechanical skills.
CEOCFOinterviews: Mr.
Carten, what was your vision when you started sustainable energy and where are you today?
Mr. Carten: “The
vision when we started a long time ago was to build a company that would bring renewable
energy products to the market. We started with a wind turbine technology, which we
developed and received international certification for. Where we are today is that we have
a power electronics technology, which was developed back in the year 2000. It converts the
power from fuel cells, solar power and wind turbines into the kind of power that the grid
needs; high-powered alternating. Today, we think we are the leader in stationary fuel cell
systems. We are selling to IdaTech Corp. and Nuvera Fuel Cells, Inc., two of the leading
fuel cell developers in the United States. We also have a very close relationship to RWE
AG (Pink Sheets: RWEOY); which is a German utility; probably the largest player in Europe.
We are in the process of bringing out a product for the solar power market beginning with
the U.S. residential market. We also expect to have a product in the European market by
this time next year.”
CEOCFOinterviews: What
does your technology offer that is better than what is out there?
Mr. Carten: “What
they are called is inverters, and what inverters do is take direct current and convert it
into alternating current. You can buy inverters almost anywhere for your boat or for your
recreational vehicle. Those are very simple ones, which work from batteries and run the
lights in your boat. The challenge with inverters has been to take the power that is
coming from solar rays or fuel cell systems directly, and make it into alternating current
that matches the alternating current on the grid. That shape of the wave is constantly
changing on the grid so that you have to be constantly changing the shape of the wave that
comes out of the inverter. That has been a challenge for the electronic industry. There
are a number of inverters out there and some of them are good but it does continue to be a
challenge. The single biggest issue facing the industry has been the reliability of the
product. The solar power industry is based upon a very long- lived product; most solar
panels last for twenty-thirty years and they become in-effect, part of your roof.
Inverters have typically only had a two-three year warranty and have had a relatively poor
history of reliability. What our technology is, is a little bit of a different approach to
this process, which allows us to turn out a product that has a radically reduced component
count, a radically simpler electronic circuitry, all of which translates into a much more
reliable product. Many of them are having a two, three or five year warranty, which is the
industry norm, were able to come out with a ten-year product warranty. That is probably
the single biggest differentiation generally, in terms of the rest of the industry.”
CEOCFOinterviews: How do
you compare in terms of pricing?
Mr. Carten: “We
will price ourselves to match the market because we are not significant enough to be a
market leader. In terms of manufacturing cost, we have much lower manufacturing cost. It
comes partly from the lower component count and simpler architecture. It also comes from
the fact that we focus very hard in creating a universal platform; a single power
electronics platform that can be used for a variety of different technologies and
different applications. For example, the electronics that we use and have been using for
two years now in the fuel cell sector are exactly the same electronics that we are using
for the solar and would be exactly the same ones we would use in North America as we would
use in Europe. What that means, is you would end up with a platform that you can produce
in higher volume and bring the costs down. I think our cost structure is very
impressive.”
CEOCFOinterviews: How do
you go about getting a ten-year warranty for your product?
Mr. Carten: “We
need to get listed by Underwriter Laboratories and we are in the final stages of that
process right now. It is a process, which is a safety process and a checking process We
have had a lot of interest in our first product from the whole solar industry because of
the ten-year warranty and because of what is transparently a simpler more robust
product.”
CEOCFOinterviews: Are
you actually selling any products now?
Mr. Carten: “We are
selling into the fuel cell sector. We began developing the technology for the fuel cell
industry; in fact, we realized very early on that the fuel cell industry was changing its
specifications so much that we had to drag the controls out of the hardware and put it
into the software and that resulted in us having a much simpler design. We finished those
products in collaboration with RWE and we have been selling units now for about twenty-two
months. Customers are telling us that it is the best product in the marketplace. What we
have now done is taken that platform and put it into the solar one, which gives us a high
level of confidence that we are going to have a good product.”
CEOCFOinterviews: Will
you tell us about the solar market in general?
Mr. Carten: “The
solar market is exploding. The grid connected solar market, which is the one where you put
the solar panels on the roof has been growing in the past five years all around the world
at about 60% compound revenue growth rate. The conventional solar market, which is the one
that most of us are more familiar with; the country cottage solar panels, the back woods
solar, the solar that you see on construction sites, they are running their flash lights
there; that has been growing at about 15%. That is a very good growth rate, but a much
less robust growth rate; the real action is in the grid connective solar market. Right now
you will have a very hard time getting hold of solar panels in North America because the
European market is absorbing as much as it can take and in fact the distributors are
coming here looking for product. It’s a market that I would guess the annual sales
for our kind of product into that market would be around a half a billion dollars a year,
including Japan, with Japan representing about one third of the market and that rate is
growing at the rate for solar is growing.”
CEOCFOinterviews: How are you ready to meet the demand that
is out there once you get the underwriters approval?
Mr. Carten: “Our approach to manufacturing is to
outsource it. The head of our operations comes out of the telecommunications industry; he
ran the operations here in western Canada for GE Harris Railway Electronics (a joint
venture between Harris Corporation and General Electric) for a number of years and Novotel
Wireless. Outsourcing our manufacturing is a simple process and it gives us an ability to
move it around quickly; as the volume begins to pick-up we can increase the volume without
any significant capital investment. The other thing that we will be doing is looking for
partners who will license our technology, most likely in primarily Europe and get them to
manufacture and share in the profits. One of the reasons that we are able to do that is
the approach that we have to photovoltaics is patented. Most of the other products that
are on the market are public domain technology and therefore if you were to venture into a
joint venture with someone in Germany or Spain, you might find them producing a
competitive product two or three years later. We rely on a number of patents out of the
U.S. patent office and we are protected in Europe and Japan.”
CEOCFOinterviews: Is it difficult to get in front of the
people that you need to reach?
Mr. Carten: “No, not at all! Everybody is looking for a
reliable product, both big solar module manufactures such as BP Solar International LLC,
Shell Solar B.V. as well as the distributors and resellers.”
CEOCFOinterviews: Tell us about the financial condition of
Sustainable today.
Mr. Carten: “Like every company at this stage, we are
always on edge and looking for more capital. We do have enough to get ourselves into
production and then we’ll probably want to raise more capital.”
CEOCFOinterviews: Can you give us a timetable going forward
and how do you see it developing with the challenges?
Mr. Carten: “Going forward we expect to have our UL
listing by the end of September. I expect that we will start to pick up production over
the fall. I would like to exit the year with 50 to 60 units per month, which is a pretty
modest production rate, but we will ramp it up quite a bit faster next year. I think the
challenges to us are going to be capital, to expand our business quickly enough and then I
think that there is significant potential that we will be bought out by somebody. The
bigger players in the industry, Frost & Sullivan, has targeted this sector of the
industry as the fastest growing in the electrical industry. As the bigger players come in,
they may come in with a competitive product, which would be a challenge or they may choose
to buyout a company like Sustainable.”
CEOCFOinterviews: Even if they have a competitive product,
you know what you have and how it works.
Mr. Carten: “Yes and it’s also a distribution game
and one of the big challenges is to create the relationships so that we can get the
distribution and the product support going.”
CEOCFOinterviews: In closing, why should potential investors
be interested, what should they know that may not come through when doing a surface level
evaluation?
Mr. Carten: “What investors should know is that the
industry that we are in is growing at a much faster pace than you would expect from just
looking out your window. The growth in the solar industry, is really exploding. In terms
of where we are; number one, we have patented technology, which gives us some very
significant advantages in terms of cost, reliability and efficiency, because we are
probably the most efficient product on the market. We’ve proven that in the fuel cell
sector with some major players and we are now just at the cusp of going into production on
the solar product in the solar market, which will take us to profitability. There is no
more technological risk, no commercialization risk in a sense that we know what our costs
are; our component supply chains are in place. So now the only risk is market acceptance
and our ability to penetrate the markets. However, if we do that the profits are pretty
substantial.” As well, when investing in Sustainable Energy, one is being
exposed to all sectors of the growing renewable energy marketplace since our product has
applications across the board and benefits from growth in many sectors.”
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