Refining Strategies to Deliver Energy Efficiency and Green Technology Innovation


Encore Clean Energy Inc., SunPower Corporation, Distributed Energy Systems Corporation, Alchemy Enterprises Ltd. and Honda Motor Co. Ltd. Provide Insight on the Future Energy Path

By Jennifer Lee
April 2006

While concerns are increasing over how long global oil supplies will match consumer needs, the pathway is widening for companies offering technological and environmental solutions. With increasing support from a Federal level and individual States increasing their incentives for energy saving products, companies already establishing themselves in this sector are also in a position to expand their product lines and reach into new areas being promoted at a government level. SunPower Corporation (NASDAQ: SPWR), Alchemy Enterprises Ltd. (OTCBB: ACHM), Encore Clean Energy Inc. (OTCBB: ECLNE) and Honda Motor Co. Ltd. (NYSE: HMC) discuss their vision on technology, innovation and market drivers in the changing energy sector.

On a recent visit to the National Renewable Energy Laboratory, President Bush spoke about the country’s potential to become less dependent on non-renewable sources. During his presentation he clarified: “What I’m talking about is a comprehensive strategy. In other words, we’re not relying upon one aspect of renewable energy to help this country become less dependent. We’re talking about a variety of fronts.” As we see states moving to increase their energy saving incentives, offering rebates to consumers who opt to purchase energy wise products, the reach of these state policies can be felt across many sectors.

Larry Shultz, CEO of Encore Clean Energy Inc. (OTCBB: ECLNE), a company that produces a product in this market called the Magnetic Piston Generator, describes the company’s innovation as a, “heat recovery technology which converts waste heat into electricity. This technology, looking forward, is really the key to our thrust into the clean energy marketplace because what most people don’t know is that for every mega watt of electricity generated in the United States, more than a mega watt of heat goes up in smoke- either up a smoke stack or through a cooling tower.”

When explaining where the company positions its technology in the current marketplace, Shultz explains that, ”American industry is very inefficient where all of that heat is wasted. So what the MPG technology does is it converts that wasted heat into electricity whereby we can continue to harness up to 20% of that wasted energy.”

Speaking about the company’s current shift in focus Shultz reports that, “Encore is not really focused on 4 product lines anymore, we’ve really trimmed our product lines to focus on the lowest hanging fruit, which is waste heat recovery and no one is really focused on this in the U.S.

Following where he sees the market headed over the near term, Shultz reports, “I view the market for renewable energy products in the US as a high growth industry. The worst thing that we can continue to do is to export our money to buy energy from sources when we have this huge amount of untapped heat resources available to us here today. I believe there is a coming energy crisis to the country. We believe the market for renewable energy products is vast and the trickling effect of the Energy Policy Act of 2005, at this time, doesn’t really help us- it’s not really helping any innovations on our side at this time. However I totally agree that the market for power is going to be centered around the end user and distributed power, which is why our waste heat recovery tech is so perfect, because it is centered around the end users existing equipment and infrastructure.”

According to the U.S. Department of Energy, Secretary Samuel W. Bodman made the announcement on April 3rd that, “$140.3 million in weatherization program grants (will be designated) to 31 states and the Navajo Nation to make energy efficiency improvements in homes of low-income families.” The Department conferred that, “weatherization can reduce an average home’s energy costs by $358 annually.”

Such bold steps for policy makers, lead to a market reaction which can be felt on many levels. Julie Blunden, Vice President of External Affairs for SunPower Corporation (NASDAQ: SPWR) draws an example of how current shifts in public policy are influencing the market in important ways. Ms. Blunden states, “We think that SunPower’s growth is a good example of how public policy is helping to drive capital investment as well as technology advances. Our investors and suppliers see that the solar power market is growing rapidly in the U.S. and around the world and have supported our growth to meet that demand. Within the next decade, solar will be at a price parity with retail electricity rates in much of the developed world, offering SunPower access to the trillion dollar global electric market.”

Further to this, Blunden said that, “at both the Federal and state level, we have seen a real increase in appetite for policy which encourages renewable energy and solar power. Some of the main drivers behind this shift are increasing fuel prices and volatility, environmental concerns including climate change, and a renewed focus on energy security risks.” Noticing the shift in how the market views problems with energy supplies, Blunden offered that, “it’s not just political risk that is at issue with energy supply today, but weather risk as well.”

Walter Schroeder, President and Director of Distributed Energy Systems Corporation (NASDAQ: DESC), which focuses on giving commercial and industrial users more control over the cost and reliability of their energy, says, “innovators of energy sustainability fall into three distinct categories: manufacturers, developers or integrators.” He reports that some of the top companies currently participating in this sector on the manufacturing side include: “Evergreen Solar, General Electric ( for wind), Energy Conversion Devices ( for solar) and Sun Power Corporation.” In terms of developers he listed, “Cape Wind, Sun Edison, AES Corporation and Solar Integrated Technologies and for integrators, Northern Power Systems,” came up at the top of this list.

In terms of states who are making good headway in their energy sustainability policies, Schroeder commented that, ”the states that are doing the most are California (way out ahead), New York and New Jersey. Connecticut and Massachusetts get honorable mention.”

Jonathan Read, President and CEO of Alchemy Enterprises Ltd. (OTCBB: ACHM), an alternative energy based company currently “developing a new electric power cell technology that it believes will generate and manage electricity to power a broad range of applications, from every day vehicles such as buses, trucks, trains and cars to alternative power supply stations to power homes,” offers comment on the market. Read points to the fact that there are some states which have taken on a more aggressive strategy than others, with respect to encouraging renewable energy strategies. He says that, “as we are the producers of a power source, we’re reliant on our customer to work with the states on end-user tax credits. We are actively working to position ourselves for Federal tax credits and or grants as it relates to alternative energy.”

In speaking further on the line of state-specific incentives for the energy wise consumer, Read said, “there are two tiers of state and Federal tax incentives. The first is for the producer of alternative energy technologies and the second tier involves provisions and tax incentives for end users (ie. motorists) which we would partner with once our technology is fully fleshed out and proven.” In terms of when the company is planning on having their technology incorporated into a vehicle for use, he furthered, “we hope to have a fully functional bench model by end of this year, towards the first quarter of next year. We are anticipating a major test within the next month.”

Alchemy has been currently working with New Zealand based company Designline for approximately six months. Designline prides itself in creating, “innovative designs, working in partnership with customers to provide superior build quality and transport that is sustainable.” Read says, “our initial strategy is to joint venture with Designline to get our first bus up and running and seek other end users for other joint ventures or sale of this technology and licensing.”

With respect to the long held challenge of global oil supplies, Hillard Huntington recently addressed the Senate Foreign Relations Committee on March 30th. As Executive Director of the Energy Modeling Forum at Stanford University, he informed the Senate that some of the factors contributing to ‘tight oil markets’ over recent months include: “anti-government attempts to disrupt congressional elections in Venezuela culminating in an explosion at an oil pipeline connected to that country’s largest oil refinery and devastating hurricanes Katrina and Rita in the United States in August and September.”

Such a future for world supplies of oil present hybrid and fuel cell manufacturing companies with an entry point into the market. As these opportunities continue to present themselves, the changing shape of transportation design and delivery should follow a pattern of competition among global leaders already entering into this realm.

Innovation and Expansion
Jamie Wimberly, CEO of Distributed Energy Financial Group, a company that specializes in consulting and financial services, focusing on innovative energy technologies and solutions, says that when looking at some of the top companies functioning in the renewables sector, “picking winners is difficult when all the puzzle pieces of integrated systems and business models are coming together at the same time. I will therefore let the numbers do the talking. The top five companies in the DESI based on Q1 performance include: Metretek Technologies (MEK, + 67.0% in Q1 2006), Ballard Power Systems (BLDP, + 62.0%), Medis Technologies (MDTL, + 58.6%), Sat Con Technologies (SATC, + 53.3%), and Itron (ITRI, + 49.5%).”

As the market grows, we are seeing companies such as Honda Motor Co. Ltd. (NYSE: HMC) expanding their range of services, with the launch of a compact household cogeneration unit, which combines “the world’s smallest natural gas engine-with an efficiency configured, compact, lightweight power generation system employing Honda’s unique sine-wave inverter technology to create a compact unit suitable for residential use, boasting an energy efficiency of 85%.” According to the company, the use of this unit in combination with a heating system which uses “recovered exhaust heat is expected to result in approximately 30% reduction in CO2 emissions.”

Honda supplies these units to Climate Energy LLC, headquartered in Boston Massachusetts. According to a release issued by the Climate Energy, the Micro-CHP System is, “conveniently configured to replace existing space heating furnaces and boilers in new and existing homes. The concept is simple: electric power is produced as a by-product of the normal supply of heat to the home. The result can be dramatic; lower electric bills will be experienced by homeowners, while ultimately lowering the nation’s overall energy use and pollutant emissions.”

When asked whether he thought companies taking a leap in this market would create a trend over the next one to two years, Wimberly commented, “Yes, absolutely. DEFG strongly believes that the full functionality and value proposition for many so-called energy technologies have yet to be discovered. For example, advanced meters are communications platforms which can serve as a conduit to the home or office, and do so much more than simply be the cash register for the utility. Power electronics, energy storage devices, and other enabling technologies with cross over potential into other markets are what make this sector so exciting to follow.”

World Oil Supplies
Taking a look at the future of fuel supplies available to meet global demand is a pressing topic for investors and consumers alike. The U.S. Department of Energy (DOE) recently released a report in February entitled, “Peaking of World Oil Production: Impacts, Mitigation & Risk Management,” authored by Robert L. Hirsch, Roger Bezdek and Robert Wendling. Under a section dealing with the topic of current oil resources, it states that “because oil prices have been relatively high for the past decade, oil companies have conducted extensive exploration over that period, but their results have been disappointing. If recent trends hold, there is little reason to expect that exploration success will dramatically improve in the future.”

The solution to the current oil dilemma presents a challenge for enterprise, in such a respect that fuel efficient vehicles must be made affordable and practical for end users. Speaking at a scheduled talk entitled, “National Security: High Mileage Vehicles and Alternative Fuels” at a renewable energy and fuels convention in Las Vegas April 11th this year, Roger Duncan of Austin Energy, spoke about the state’s Plug-in Partners National Campaign. The initiative involves the use of plug-in hybrid vehicles (PHEVs) which are, “outfitted with a battery pack sufficient to power the vehicle from 20 to 60 miles on battery charge alone. Considering that half the cars on America’s roads are driven 25 miles a day or less, a plug-in with a 25-mile range battery could eliminate gasoline use in the daily commute of millions of Americans.” DaimlerChrysler is already making a Sprinter Van prototype which has an ‘all-electric’ range of 20 miles.

Panelists at this talk tended to agree that bigger batteries needed to be allocated to hybrid vehicles in order to make them more efficient and useful in the fight against oil dependency. Speaking on the energy front overall, a report issued by Pricewaterhouse Coopers entitled, “The Big Leap: Utilities Global Survey 2006,”

Amory Lovins of the Rocky Mountain Institute spoke. He outlined the current oil problem, stating that, “the Department of Defense is increasingly handicapped by half-century old patterns of using and getting energy, designed for massive steel forces, ‘floating to victory on a sea of oil.’ Today’s war fighting needs just the opposite.”

Gradually, the solutions for today’s current energy dilemmas are being introduced on a scalable level. Making renewable energy affordable, convenient and accessible continue to be the challenges associated with opening the way forward in this market. Since the introduction of the Energy Policy Act of 2005, the impact is gradually being felt, but the emphasis could continue to be left with the end users, who are suggested to be the primary market drivers for this sector.

Three factors which continue to affect levels of investment in this sector are regulatory uncertainty, oil shortages and the growing demand to boost US security and lessen the dependence on foreign oil reserves. As regulations change per state on a continual basis, the market will evolve to meet the demands of government, but end users must be able and informed about the options they can afford. As US security becomes a heightened issue however, this industry may get the added boost and incentive it needs to bridge the gap between capital investment, product manufacture and end user purchasing.

Disclaimer

Jennifer Lee
Jennifer Lee has a degree in English Literature from the University of British Columbia. She holds a publishing certificate from Simon Fraser University and has worked at both Vancouver and Western Living magazines, where she began her career as an editorial intern. She has worked as an editor in countries such as Zimbabwe and South Africa, producing books, newsletters and editing various quarterly magazines on a variety of international development related topics. In South Africa, she worked to help produce a bi-weekly newsletter for the Institute for Security Studies on crime and corruption headlines which appeared in all national and provincial papers. Prior to working in southern Africa, she wrote articles for DMR Consulting Group, on mergers and acquisitions taking place in the market during 2001. She now produces a quarterly publication at the University of British Columbia.

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