Ener-Core announced last week that it has signed a license agreement for its Power Oxidizer equipment with Dresser-Rand, part of Siemens Power and Gas Division.

The agreement gives Dresser Rand and Siemens the exclusive right to manufacture the Californian firm’s Power Oxidizers within the 1 to 4 MW power capacity range and to sell the Power Oxidizers (integrated with the 2 MW KG2 turbine manufactured by the Dresser-Rand business) directly to industrial customers.
Alain Castro of Ener-Core
Ener-Core is the world’s only provider of Power Oxidation technology and equipment that generates clean power from waste and low-quality gases from a wide variety of industries. Decentralized Energy caught up with CEO Alain Castro to talk about the latest leap forward for the company.

“I believe this is a technology that can really advance the decentralized energy industry and how we deal with pollution control,” says Castro. “Using contaminated waste gases as energy is a novel concept; hopefully it won’t be so novel as more of these systems are deployed into the market over the next few years.  It’s exciting to have Siemens and the Dresser-Rand business involved in the manufacturing and commercialization, as their global organizations are able to get this technology deployed light years faster than we could as a small company.” 

With the German engineering giant on board through a Commercial and Manufacturing License Agreement (CMLA) the company’s product is set to be thrust towards a much wider audience at a much faster rate than previously possible.

“We have limits on how much we can manufacture in-house. They do not and when you take into account the lower cost that they can make our systems, the sheer number of manufacturing sites around the world where they could eventually make these systems and the size of their global salesforce, this is a limitless commercial and manufacturing strategy. We feel fortunate to be engaged with a company that has such resources and can get this technology out so much faster and at a lower cost than we ever could.”

The agreement also enables Ener-Core to reduce its manufacturing infrastructure and lower its operating costs, thereby allowing the company to focus on its core business of developing and deploying additional applications for the technology.

Just a couple of months ago the company completed development of its 2 MW oxidizer, a notable landmark in its bid to appeal to companies with a high carbon output, through providing technology that enables the conversion of the poorest quality waste gases into useful heat and power.

Reducing that manufacturing overhead frees up Ener-Core to put more into the development of additional product applications of its underlying technology. That ability to use low quality gases (or unused fuel, as Castro refers to it) for power, while emitting virtually no pollution, offers attributes that are very useful to companies who face increasing operating costs associated with legislative and financial pressure to keep emissions down.

“There are other applications for this. We can engage with a steam boiler company, replace their combustion chamber with our Power Oxidiser and enable their boilers to make on-site steam from un-used waste gases.   Similarly, we can engage with massive industrial dryer companies, enable their dryers to run on waste gases and release virtually no pollution – it takes bandwidth and focus to select our partners and develop our other applications for this and get it out to market.”

“While Siemens and Dresser-Rand will be manufacturing and successfully ramping up sales of their KG2 gas turbine paired with Ener-Core’s Power Oxidisers, we will be providing them with engineering support as well as sales support. We also expect to be rolling out new applications of our technology with additional partners. We want to focus on what we are good at, which is developing additional products around this technology;  at the same time, our business strategy enables our license partners do what they are good at, which is to ramp up the sales, reduce the cost of manufacturing and deploy these systems in high volumes.”

Castro says the fact that the product is being taken on by such a high profile multinational is of huge significance for Ener-Core, as it should prove to be a significant factor in terms of prospective clients’ purchasing decisions.

“I have been directly involved in in financing many power plants and have had oversight over the purchasing of a lot of equipment over the years. In the large scale power industry, most professionals in that line of work are more comfortable purchasing from global first-tier engineering and power equipment supply companies when we are going to purchase a utility-scale system to generate power for 15-25 years.”

“Having Siemens take this to market under the Dresser Rand business and with their global sales force means a lot, and it will provide comfort to hopefully offset the traditionally conservative perspectives of purchasing professionals in the energy infrastructure sector.”

Castro hopes to see greater recognition for the product once it is evident how it can reduce operating costs and emissions in the novel way it does, ‘once it is validated with more real installations.’

“We also have the opportunity to climb up into larger turbines.  Currently, we are working with Siemens and the Dresser-Rand business in the 2-4 MW power capacity range; in the future, we could feasibly engage with the maker of a 5 or 6 or 10 MW turbine.”

Ener-Core had previously collected a $1.6m license fee, in relation to its previous license agreement with Siemens and the Dresser-Rand business; that previous license agreement was limited to sales. With this new agreement (which includes manufacturing within the scope of the license), Ener-Core will collect a license fee payment for each unit that the Dresser-Rand business sells, with the precise fee payable based on a percentage of the total value of each system sold. The company expects to collect license fees between $370,000 and $600,000 per unit.

The Dresser-Rand business has additionally agreed to minimum sales thresholds, beginning in 2017, to sustain the terms of exclusivity. Ener-Core expects that these minimum payments, combined with Ener-Core’s reduced operating expenses, will enable Ener-Core to be cash flow positive within 12 to 18 months.