Podcast #47: The Power of Micro Co-Generation

Hi, this is Ed Maguire, Insights Partner at Momenta, with a Digital Disruptor interview. Today we have with us Dan Nadav who is the CEO of EnviroPower, and we’re going to dive into what they’re doing, I think you’ll find it pretty exciting. This is really a combination of some existing technologies that have been innovated in new ways, but with profound implications for the energy industry and the grid. I think when you hear about it, you’ll be just as intrigued as I was. Dan thank you so much for joining us.

Thanks so much for having me Ed, thanks so much and good morning. Good morning to you, and good morning to everyone.

First could you provide a quick look at your background, and what brought you to start EnviroPower?

 technologies, geo-thermal, heat recovery, wind, and the last few years I’ve been fascinated by this concept called micro co-generation, or Micro-CHP, and that’s where I dedicate my career. To EnviroPower I came from that industry understanding, or I would say with a deep understanding that this is such a unique technology, such a revolutionary design that it can really change everything, bringing two major worlds, the world of heating, and the world of electricity, the two major worlds of energy that we have today, together in an very-very efficient and effective way.

Could you talk about the business problem that you’re addressing, what’s the backdrop in the industry that’s brought you to start this company?

I think that what we’ve seen in the last decade or two is amajortransition in the energy world, so big that there are few who would call it or compare it to the revolution of the internet itself. It’s a change shift from centralized generation, into distributed generation. It’s a used change that actually brings a lot of benefit, or this potentially can bring huge benefits to us, the society. We can save billions of dollars with this change of infrastructure. We can empower consumers to change their own source of electricity, and probably the most important element, we will come with this change from generation into distributed greener and cleaner in the way we use the energy sources that are available for us.

But as any other large transition, this transition also comes with challenges. Right now, one of the challenges of this transition is unprecedented price increase in the price of retail electricity. And on the other hand, basically, somewhat related to this transition, is a spike, a continuous spike in the number of outages that this country experience, electric outages. That leaves consumers with the need to look into more affordable, more reliable sources of electricity, sources of energy. In today’s market if you look at that, the choices are quite poor; you have bigger generators that the consumer can buy, or home-based batteries, but both solutions are quite expensive and most of the time comes with I would say miserable economics.

Now, there is another solution which I obviously already mentioned, it’s called micro co-generation, it’s the novel idea of integrating into one home-based device. Basically, the capacity to generate electricity and produce heat very-very efficiently, and when you do that you can potentially empower millions of consumers to generate their own inexpensive electricity. You can empower millions of consumers to enjoy bigger power at their own homes and businesses, and you can also help the grid operator to absorb more renewable electricity into the grid. So, this is the industry we’re in, this is what inspires us, it’s micro co-generation, the very elegant solution to basically bring the cost of electricity down and allow affordable and reliable electricity for pretty much 50 million homes just here in the US.

So, let’s talk about your technology, what have you developed and how does it work?

So, before I go deeper into the unique design of the EnviroPower SmartWatt Boiler, that’s the name of our product, I’ll take a step back and talk about the fascinating positioning of the product itself. What’s so unique about the product beyond just the technology, is its unique position in the market. Think about that, there are millions of consumers who can enjoy Micro-CHB in order to lower their utility bills, in order to have bigger power in their homes. Those millions of consumers are naturally replacing their older heating systems at the rate of four to five million heating systems per year. That’s what makes us so unique because, as opposed to any other Micro-CHB solution in the market we are truly designed as a drop-in replacement to regular heating systems.

Well, probably any other Micro-CGB solution in the market comes as an addition to heating systems, we design, that’s our mantra, that’s this is our core design philosophy, whatever we design with our Micro-CHB technology is designed to completely replace regular heating systems, to directly compete with regular heating systems, so the consumer will now have a choice to either replace their older system with a regular heating system, or with the system as we call it that comes with a powerplant inside. We compete with this unique design against regular heating systems on price, on functionality, and on maintenance, so basically its literally a drop for heating systems. The way it works, and that’s where most of our patents are, pretty much any boiler, start with the filtering where you mix air and fuel together, that goes into a burner. And so far, I’m just describing a boiler.

Then you have a coil of hot water wrapped around the burner, to absorb the heat from the burner, and again I keep describing a regular boiler, traditional boiler.

Now, it’s the unique element, and we call it the dual combustion chamber, is that between the burner and the hot water coil we introduce another coil, that’s our main patent. This coil, this inner coil closer to the burner is where we actually produce steam on demand, another pending patent that we have. So, we are capable to take a little of the heat from that burner and generate steam on demand, but then expand into a very small inexpensive radial spin micro turbine, this turbine obviously is connected to a generator and that’s how we generate heat. We need then obviously to condense back this steam into liquid water, and we do that in another heat exchanger where the steam is condensed back to liquid water, by meeting the return water from your home coming and streaming into the boiler, colder than when they left the boiler, absorbing the heat from the steam condensing it back, and then go back to the boiler.

That’s how we achieve 95 percent overall efficiency, one of the highest efficiencies that you will see in this type of product category.

Can this technology be used as a primary source of electricity, or I guess, as you’ve described as co-generation source; how does it work within an existing grid, or an existing set-up with a utility?

It would work very similarly, if not identical, to solar PV.  Basically, we hook the electricity through an inverter into the home or the gird, and you either use the electrons that we generate at your home, to completely displace the electricity that you otherwise buy from the grid. Or, basically if you have low range you can come, or do it on the wholesale prices, you can actually deliver the electricity to the grid. But all-in-all, the product we currently have in the market, and other products that we are considering, the idea is to actually replace electricity coming from the grid, and feed your home, directly making the home almost independent, as long as you use the heat.

So, through models that we have, we can show that during the winter months you can take your electric bills down to zero, because everything that you would need, all your electric load will be served by the unit whilst heating your home, or heating your building.

Let’s talk about the return on investment, and the economics of your approach. How would this apply… I mean if you could compare and contrast the return say for people that are based in the Northeast US, where in the winters of course things get pretty cold, but there’s certainly some opportunities to multipurpose an existing boiler, and how would this be applied in California for instance, where you don’t necessarily have cold weather, but the cost of electricity can be very high.

A great question. So, when you actually position to replace other regular boilers as a micro-CGB, as a unit that has basically a capacity generator whilst producing heat, if you do replace regular boilers it had deeper economic meaning, and I’ll return this as a question to you; what is the return on investment of your boiler? You can’t.

Yeah, exactly.

We do not buy boilers as an investment; we buy boilers or heating systems as a necessity. For example, if you buy solar panels, or if you buy Tesla Powerwall, you will count every penny against the savings that you are making, but not with boilers, boilers are basically a necessity not an investment, which means that if you ever consider any return it would be on the premium, and in our case it’s a very small premium.

Now, regarding how to make money, how to actually steal payback that premium. There are two ways basically of functionalities for heating systems, either domestic hot water, or space heating. When it comes to domestic hot water, geography does not have any meaning. Why? Because I call domestic hot water the mother of base load; washing machines, dish washers, even showers that we take are completely agnostic to the temperature outside, the washing machine will operate the same way whether its 100^o out there in July, or minus 10^oin January, therefore it’s a continuous usage through the day.

Now, in places where there is high demand for hot water, which I would say the bigger market is the market of multifamily residential buildings, which is the product that we build, or the market for which we built our first product. Then whether it's in California, Alaska, or New York, those machines will work continuously, day in – day out. Just to give an idea about the savings, every hour the SmartWatt boiler operates in New York, it will save the landlord or the home owner around 1.2 dollars per hour. If it’s a large building, say 50 families, 100 families, those units probably almost never shut down, so we are talking about massive amounts of hours every year, $5,000, $6,000, and savings that are approaching $10,000 a year.

The other solution is space heating, and therefore you are right, obviously a place like Alaska where winter last for 8 months, the savings from the machine operating longer hours will be more significant than if you’re just aiming on space heating and compare it for example to California.

How would you compare this for instance on the utility side, the ability to have micro co-generation as an alternative to demand response? What are the benefits of this approach, versus having say connected thermostats that might turn up the temperature on an air-conditioning setting, for instance?

There are many approaches to demand response which is great concept, and I don’t think there is any specific technology that, you know, could actually lead by itself, it’s always a network of various technologies, and there are many viable solutions in the market

What makes us very unique is that we are very active, or if you can say, pro-active device. It’s not about just shutting down the device, making some discomfort to the home or the home owner, or the owner of a hotel, whatever it is. It is actually a very proactive approach, and I’ll give you an example; I’ll use California for that matter, I think at the time of using California shifting from midday to evening time actually could play a major role in the integration of a micro switch in the SmartWatt boiler as part of the main response of that specific state, but I think this trend we’re probably going to see in other states as well.

So, now the shift of time used, the time where people are paying much more for electricity, in California it can go as high as 45c per kilowatt hour, and shift it from 12pm – 3pm, into more like 5pm - 7pm. So, what happens in 5pm – 7pm in the evening almost every day? People are coming back home, showers are being taken, washing machines, dishwashers are being operated. That’s the natural occurring of operating a micro switch. When you do that, the natural result is to have basically a reduction, a significant reduction in the load on the grid itself, savings for the consumers because consumers are now generating their own electricity when they need hot water, which is exactly the time where the grid is actually peaking and becomes very expensive in generating its extra kilowatts.

Could you talk about where you are with the company, how far along are you guys right now? In terms of what customers you’re initially looking at, where are you guys in the process of launching?

The customers we have right now, or at least customers who are waiting to receive their unit, are basically divided into three tiers, which is also the three tiers that we are about to serve as our core go-to market strategy. The first one is the traditional heating system value chain, because we are first and foremost a fully functional boiler with a similar price to other boilers, we can play very-very well in the existing value chain of heating systems. So, we have distributors of feeding systems, we have large H-Vac and Esco companies that are buying our products.

Then the other two tiers, I call them our Blue Ocean strategy, those are channels into market that are very unique to us, very unique to the micro-CHB SmartWatt boiler technology because of the generation of electricity elements. One is the power utilities that are very interested, some of them are buyers waiting to receive our products, so power utilities are highly interested in that, we’ve mentioned a few of the reasons, demand side management, virtual powerplant, but there’s probably another deeper reason which is related to their position in the market, their competitive position. Many realize that the next big game is distributed generation and having such a product at your disposal allows them to either increase market share or defend market share.

The last one, which is actually a model we’ve already to start experiencing with our data unit is, the model where we actually do not sell the equipment, but sell the kilowatt hour, the electricity that is generated which is a very compelling model to the end-user. It goes like this, ‘Mr End-user, please take for free the highly efficient brand-new boiler. You don’t even need to pay for the maintenance because we will do so. We just ask you for one thing, sign with us a 15-year power purchase agreement, a 10 percent discount against what you pay for the utility’. Very compelling.

That’s a great overview Dan. I guess with that are there any other final thoughts or key points that we haven’t covered so far in our conversation?

I would say that obviously we’re still a young company, we’re looking to basically increase our operation in the next 24 months. we are still basically in the start-up stage and that means that we’re always looking for investments, investors. We have now completed a raise that allows us to literally bring a fully functional unit into the field in the real world environment, and we are now starting to raise our Series A, which is a $4 million raise, to complete the design for manufacturing of the product, putting an additional 20 units in the field as a data program. In other words, bring us to the point where we can start scaling-up.

Dan, that’s terrific. Again, this is Ed Maguire at Insights Partner at Momenta speaking with Dan Nadav, CEO of EnviroPower. Dan, thanks so much for sharing the story, it’s pretty exciting.

Ed, thanks so much for your time, and thanks to the listeners. Have a great day.

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