Turning Power Plant Challenges into Clean Technology Opportunities

RenewableEnergyStocks.com™ Looks at Water and Renewable Energy Technology Companies Providing Solutions to the Impacts of Fossil Fuel-Fired Plants

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Ann-Marie Fleming, RenewableEnergyStocks.com™

October 2006

In today’s world, our rising energy demands have led to an undeniable reliance on fossil fuels and a dependence on a power infrastructure that has had serious negative environmental impacts. Key issues associated with our continued utilization of fossil fuel-fired power plants surround environmental risk from greenhouse gas emissions, water contamination as well as problems of water scarcity. Working to restore balance and turn power generation challenges into opportunities are clean energy companies such as Beacon Power Corp (NASDAQ: BCON), XsunX, Inc. (OTCBB: XSNX) and NRG Energy, Inc. (NYSE: NRG), with ITT Corporation (NYSE: ITT) and Hendrx Corp (OTCBB: HDRX) providing solutions to protect our water quality and supply.

Over the past few years protecting our environment has become a major priority within the United States and abroad. Concern over the impact that our dependence on harmful fossil fuels has had on our surroundings is far from being a new theme; however it had found renewed life by the fact that it has become economically viable, reflecting money making opportunities for both investors and businesses alike.

From a stock market perspective, while the demand for alternative sources of power and energy remains very strong as fuel prices and geopolitical tensions remain volatile, many companies within the renewable energy arena have seen their stock price decline significantly over the past several months. Short term, despite current market complacency, we may see an immediate spike as a result of a rise in oil prices or a power grid failure. Long term the potential for growth is supported by the constant flow of investments into the clean tech space and the continued presence of market drivers.

Evidence of the downward pressure felt by many alternative energy companies is seen through the movement in stock value of the portfolio that comprises the Distributed Energy Stock Index (DESI), which is made up of 41 stocks whose primary focus is distributed energy and technology solutions. Despite the declines, the existing market drivers and solid demand is believed to bode well for early 2007 performance.

As Mr. Jamie Wimberly, Managing Partner and CEO of the Distributed Energy Financial Group, LLC states, “The DESI (and the sector using the DESI as a proxy) is slowly gaining ground again after a nasty second quarter (see Figure 1). Comparing where we are today with this point in 2005, you will notice a possible pattern of slow growth in Q3 and Q4. If this pattern holds there is potential for rapid expansion in Q1 2007. In regard to segments, we are still very enthusiastic about the demand response and efficiency segment. All of our market survey results and market research point to a good year for that segment in 2007.”

The Current Power Infrastructure

The nation’s reliance on its existing power grid infrastructure has been a hot topic of discussion over the past couple of years as President Bush reminds us of the risks that come with our dependence on foreign sources of oil and consumers face a daily realization of the high cost of energy. In addition, discussions continue regarding the significant environmental consequences associated with fossil fuel powered plants from water and ground contamination, to atmospheric damage. However, we are on the road to a new energy economy as viable alternatives are presenting themselves through a diverse flow of cleantech innovation.

As Tom Djokovich, CEO of XsunX, Inc. (OTCBB: XSNX), developer of advanced manufacturing systems and cell structures for solar energy describes, “We are in a global marketplace and there are different needs to be addressed. For example, in the United States, making renewable power part of our energy solution is becoming increasingly important. We have large legacy power stations where infrastructure remains, yet we can see they are bending and cracking. We have seen a keen awareness that our continued use of existing fossil-based power sources have actually paid for and supported hostile forces that have instigated national security issues, including terrorist attacks.”

There is a growing consensus that there must be a better way. As Jamie Wimberly explains, “On one hand, customer expectations and demands are rising, requiring 21st century technologies and business models to meet 21st century needs. On the other hand, the whole system is currently fraught with risk. Good risk management means portfolio management, with the portfolio containing a diversity of supply/ distribution options mixed with financial options. Finally, I think with the next Administration, Republican or Democrat, the nation is going to get a lot more serious about global warming and environmental concerns. I fully expect that some kind of national emissions trading will come into being.”

According to Gene Hunt, Director of Corporate Communications for Beacon Power Corporation (NASDAQ: BCON), a flywheel energy storage technology developer now aiming at the grid frequency regulation market, there are several key factors surrounding our existing power system which are creating opportunities for clean energy industry participants. “The market is currently being driven by a) the ongoing deregulation of the grid's operating regions, allowing third parties to provide ancillary services such as frequency regulation, b) the expected continued rising cost of fossil fuels like oil and natural gas (which form the cost basis for conventional regulation service providers), and c) the increasing demand for electricity, which in turn drives increased need for regulation.”

Hunt adds, “Last year's U.S. market for frequency regulation in the open and accessible (deregulated) markets was valued at approximately $600 million. This year's value is likely to be higher, and next year's higher still (due to the fact the Midwest ISO is opening up its markets). This ever-growing market opportunity, coupled with generally higher prices each year for regulation, and the growing use of renewables, such as wind and solar, which due to their unpredictability increase the need for frequency regulation, serve to make alternative solutions more attractive from environmental and monetary standpoints.”

Sweet spots for clean energy technology

As the risks associated with traditional power production become more evident, clean energy technology has gained considerable momentum. Renewable energy has earned a higher priority with the current government (in particular with respect to state governments) and amongst the public as viable alternatives in helping to reduce the environmental impacts of traditional energy generation/power plants, solar and wind energy and energy efficiency products have seen tremendous growth. Success within this group has led to the rising popularity of ‘green’ building, which is defined as the practice of increasing the efficiency with which buildings and their sites use and harvest energy, water, and materials, while reducing overall impacts on human health and the environment.

Distributed Energy Index’s Jamie Wimberly explains, “I believe that energy efficiency, demand response, and green building technologies are the areas with the most potential in the short-term. The technologies are proven. Utilities and customers are comfortable with how to handle them from a business perspective. And this is the area where you get the most juice for the least cost. However, I also do not see a clear winner yet in regard to a vendor/ supplier model in this area. It will be very interesting.”

As energy independence, reducing the cost of energy and protecting the environment remain key goals, methods of integrating renewable, efficient and on-site power generation technologies into existing and new infrastructure have expanded to meet the rising demand.

According to a survey conducted by McGraw-Hill Construction/National Association of Home Builders (NAHB) the residential green building market is anticipated to grow from $19 billion from 2005 to $38 billion by 2010. Building Integrated Photovolatics is an area of the growing green building industry garnering significant attention. For XsunX, the BIPV arena offers considerable opportunity as they work to provide solar cell designs that can easily be integrated into the exterior facade or skin of the building. “We are focused on the development of thin film photovoltaic designs that provide light weight, flexible structures that can be integrated into building products and become part of the surface of the building,” explains Djokovich.

XsunX develops core technologies and licenses and equips partners to manufacture those technologies into products for the global market. “We are working on the next generation of solar cells and their manufacture for the purpose of providing benefits in solar applications or use that differs substantially from inflexible solar cells in the past. The difference between the solar systems of old differ in accommodation much the same way a non-conforming chair does from a cushy recliner. Thin films mold themselves to the application,” states Mr. Djokovich

While it is believed that renewables will not necessarily replace traditional fossil fuel powered plants in the near future, it has become a key component of the necessary diversified energy portfolio that the U.S. is moving towards. Indication of this is seen in the rising number of large energy producers that have made renewable and clean energy a significant portion of their energy production package and overall growth outlook.

NRG Energy, Inc. (NYSE: NRG) owns and operates a diverse portfolio of power-generating facilities that now includes wind energy. NRG marked their entrance into the wind generation market with their recent acquisition of Padoma Wind Power LLC, a leading wind energy development company. This acquisition is in line with the Company’s overall clean energy strategy.

As Thad Hill, Executive Vice President, Corporate Business Development and Strategic Planning for NRG Energy explains, “We feel that wind is an important part of our expansion program for several reasons: 1) because it is a very environmentally friendly way to make power; 2) it is a very rapid growing source of power, and something that we had no participation in previously (give some background on acquisition) and 3) you can make money with wind. The combination of these factors within the context of our broader re-powering effort led us to our participation in wind and our acquisition of Padoma.”

NRG follows a multi-fuel, multi-region business model which has led the Company to the establishment of a truly diversified energy portfolio to help meet the growing demand for energy, and the strengthening need for protecting the environment. “We believe that the United States is going to need a lot of investments to meet its power and energy needs. In light of this we launched an infrastructure development plan to be rolled out over the next ten years to help meet the nation’s demands. We believe a broad multi-fuel based re-powering program is needed to meet the growing energy needs. As a result our plan includes gas, clean coal, wind as well as nuclear,” states Hill.

NRG Energy continues to prove its commitment to environmental responsibility through the Company’s several key advance technological initiatives that may reduce CO2 emissions from their power plants. One such example is NRG’s joint initiative with GreenFuel Technologies Corporation and the New York State Energy Research and Development Authority (NYSERDA) to study carbon dioxide recycling.

Beacon Power is focused on opportunities to provide grid-stabilizing frequency regulation services using its sustainable energy storage solutions. Indeed, the Company currently has two such demonstration systems being field-trialed in New York and California, under contract to the California Energy Commission, NYSERDA, and the U.S, Department of Energy. As Gene Hunt describes, “Our flywheel-based frequency regulation plants, once deployed on a more widespread basis, will recycle electricity to balance demand and supply and maintain stable frequencies (and thus help overall grid stability).”

Helping to achieve grid stability and creating a more efficient and environmentally healthy frequency regulation system is a key focus in dealing with today’s plants. According to Mr. Hunt, ”The current methods of frequency regulation are a) hydropower systems, which are effective but limited in capacity as well as areas of coverage; and b) conventional fossil-fuel plants, which are more widespread but which must ramp up and down inefficiently to balance supply and demand. “Beacon flywheel systems store excess energy and inject it back into the grid as needed, hundreds of times per day, and do not consume any fuel or produce emissions. Their use thus has two environmental benefits: 1) it is a clean way to provide a service that power plants now perform, but with pollution and fuel consumption, and 2) it can free up some fossil-fuel plants now used for regulation services to instead be run at full power to provide needed electricity to the grid. When run at full power, conventional plants burn fuel more cleanly, thus reducing emissions.”

Power Plants and the Current Water Crisis:
Traditional power plants and their reliance on water for cooling have contributed to escalating supply shortages, and water contamination. Despite the obvious environmental and water issues surrounding mainstream energy generation technology, many still remain in the dark about the seriousness of what has become a global water crisis.

Jamie Wimberly elaborates, “Simply put, except for areas around national dams, e.g., BPA or TVA, the vast majority of people don’t see the connection yet between water and power issues. The country needs more leadership and environmental stewardship to educate and lead people on these kind of issues. Advocates should focus on the FERC process for re-licensing dams throughout the country. Also, the environmental impact assessments should include a more thorough review of water impacts. Problem is that the impacts oftentimes cross political/ state boundaries so there are jurisdictional challenges. Look at all the state attorney generals suing other states because of negative impacts on their water supply coming from other states. Yet, this issue is far from being resolved legally. As a result, solar and water pumping should be a winning combination in the future.”

Turning the escalating water shortage and quality problems associated with fossil fuel based power generation into market opportunity, are companies creating technology that will boost water supplies and improve water treatment capabilities.

Hendrx Corp (OTCBB: HDRX), is a manufacturer and distributor of atmospheric water generation (AWG), filtration and purification devices. With current distribution to over 40 countries worldwide targeting residential, commercial, industrial, government and humanitarian markets, Hendrx has seen the rising problem of water scarcity and contamination escalate in particular within regions such as China and India that have an incredible dependency on fossil fuel energy systems.

As George Solymar, CEO of Hendrx Corp, explains, “The increasing use of water for electric power and other uses, such as agriculture and industry, puts a tremendous strain on the availability of potable drinking water for human consumption. Drinking water is becoming scarce on a global scale. This scarcity continues to get worse with the new emerging industry giants gobbling up huge quantities of water to feed their hunger for energy.”

“Hendrx’s AWG technology is eliminating the need to draw water from a stream or a well downstream from those giants. Our technology takes the water vapors right out of the air. Using our devices, a consumer is at the front of the line as far as water consumption is concerned. He does not have to compete with commercial interests. He is essentially tapping a cloud,” adds Solymar.

ITT Corporation (NYSE: ITT) is a global leader in the transport, treatment and control of water, and wastewater, providing a variety of technologies for power plants to help reduce water contamination and facilitate water efficiency. Bjorn VonEuler, Director of Corporation Communications, explains “Power Plants require cooling water circuits and there are two basic types; Recirculating systems and Once Through systems. In Recirculating systems water is lost as a result of evaporation when this water flows through or over the cooling tower. In an increasing number of instances ITT /AWT has been helping Power Plants save water by treating their site wastewater and reusing it for cooling makeup water. ITT /AWT supplies treatments systems, namely SBR (Sequencing Batch Reactors), fine bubble diffusers, filtration systems, and sometimes including disinfection (UV Ozone and chlorination) to convert this wastewater to usable water. The technologies identified above are designed to be energy efficient and in the case of fine bubble diffused aeration can save up to 50% of the energy consumed by alternatives.”

According to Mr. VonEuler, the mindset of most modern utilities is changing to that of being concerned about environmental impacts. “Be it for their own environmental consciousness or the fact that they are being driven this way by local regulations, the tide is changing. The primary concern currently for coal fired power plants in the US is the reduction of SO2 emissions to meet 2010 deadlines. To do this utilities are installing flue gas Desulfurization (FGD) systems which use a large amount of water. It is common practice for the utilities to now demand zero liquid discharge (ZLD) systems. What this means is less fresh water is used and more water treatment is required. ITT Engineered Valve provides valve solutions throughout the FGD and ZLD systems. We have recently developed a new product specifically for this these applications,” states VonEuler.

Overall, it is apparent that we are in the midst of a shift to a more environmentally conscious approach to energy production. This movement is sparked in large part by the increasing level consumer awareness, government and legislative support as well as by the fact that thinking environmentally has become good for business. Working to protect our resources and our surroundings has become a viable growth strategy for those implementing ‘green’ strategies, and for the technology providers that create solutions to the problems associated with a fossil fuel economy.

Ann-Marie Fleming
Ann-Marie Fleming completed her MBA in the United States, where she attended Webster University. She also holds an Honors B.A from the University of Toronto. She has over sixteen years of experience within the financial industry to include retail banking and brokerage, investment banking, and mortgage brokerage within the United States and Canada, with a firm background in corporate research.

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