First Quarter 2019 Update

First Quarter 2019 Update

HIGHLIGHTS  

  • – GAS-TESS commissioning underway 
  • – Early cash flow potential for TESS-IND connected to National Electricity Market 
  • – Focus on research discipline for large scale storage development 
  • – Strong cash position, $12m

 

 

1414 Degrees is pleased to provide its March 2019 quarterly update.

 

This quarter has seen solid progress with the GAS-TESS fully installed and integrated into our first commercial site and commissioning underway. Assembly of the next TESS-IND is planned for third quarter of 2019, with all long lead time items such as turbine and heat exchanger now ordered. Our business development team have been analysing energy requirements and modelling cash flows at large industrial customer sites. They have identified opportunities to generate early cash flows in a staged approach by connecting our electrically charged devices to the National Electricity Market (NEM). Cash flow discipline maintains a strong cash position of $11.97m plus down payments on equipment for the next TESS build. First operating revenues are expected with GAS-TESS commissioning. 

 

Commercialisation strategies 

There is scope for separate business models for the gas and electric charged TESS devices based on customer profiles and energy sources. The latter can both charge and discharge to the NEM to generate revenue from grid stability services and trading, whereas the GAS-TESS stores and time shifts energy generated from biogas. However, many customers are seeking lower-cost, reliable energy supply and prefer to avoid the upfront capital and management cost of owning technology. This is advantageous for the TESS technology at this commercialisation stage because its low capital cost can be financed and amortised within a supply and maintenance contract with a reliable counterparty.  

This model can be applied to previously announced smaller industrial customers (Pepes Ducks or Abbe Corrugated), but also to retailers like Enova Energy and large manufacturing or refining companies who are intensive heat users. Locating a TESS next to an industrial heat user provides 1414 Degrees with multiple potential revenue streams including long term contracts for heat and electricity supply to industry, firming renewable generation on the NEM, and providing grid stability services. 

To further this opportunity, your Company is preparing to implement the energy services and solutions model outlined in the prospectus. This involves creating special purpose vehicles (SPV) for each customer site, in partnership with finance and engineering services entities. Since many sites proposed by industrial customers require gigawatt hours (GWh) of energy storage to replace their gas or coal fuel, we are proposing to stage the first installations so that the site can progressively reduce its current heating equipment and supply contracts while 1414 Degrees scales up its technology. The 1414 Degrees TESS is relatively easy to integrate into many factories and refineries because the TESS heat output can be matched to connect into the existing infrastructure. 

Opportunities for TESS in the agriculture sector have been enhanced in a report by global engineering company, ARUP ARUP compared 1414 Degrees TESS with concentrated solar power (CSP) and concluded that the TESS would be more economical than CSP as a replacement for fossil fuelled greenhouse farms. This is good news for Smartfarm developers and other industries looking to decrease costs and increase renewable energy use. 

 

GAS-TESS business plan 

Smaller industrial sites of GAS-TESS and TESS-IND customers are also expected to prefer energy supply contracts over the purchase of technology, however larger water utilities could prefer to purchase GAS-TESS with performance and maintenance contracts.  

Given the keen interest in the GAS-TESS, your Company is very focused on commissioning and demonstrating successful operation at the Glenelg site. The demonstration period will be conducted on a semi commercial basis, whereby SA Water will sell biogas to 1414 Degrees for its value at the National Electricity Market price at the time of supply, and 1414 Degrees will provide hot water and sell electricity to SA Water at the NEM price. The GAS-TESS can time shift the biogas energy to generate and sell electricity at the most advantageous price.  This will generate revenue and input cost from the point of commissioning, however it should be understood that the revenue will be indicative of energy efficiency and time shifting value only, whereas the primary value proposition of the GAS-TESS for waste water utilities derives from increased asset utilisation with reduction of high operating costs from eliminating pre-treatment of the biogas and fully combusting toxic corrosive and abrasive compounds. 1414 Degrees revenue potential from operations and maintenance will be assessed during the operational stage. 

 

TESS-IND/ TESS-GRID business plan 

The positive revenue potential of connecting our electrically charged devices to the NEM has been internally analysed, with further modelling by CQ Partners and Flow Power, and reviewed by KPMG. Accordingly, your Company is conducting a feasibility study to connect a TESS-IND to the NEM at our Southlink workshop, where it can buy, store and discharge electricity as engineers optimise its operating parameters to maximise revenue. Following this, the device would be relocated to a NEM connected site that could also sell heat and realise its full efficiency. For example, energy retailer Enova Energy Ltd has introduced 1414 Degrees to a heat user where a TESS-IND would assist Enova Energy in providing security of supply at a competitive cost.   

All long lead time items such as a turbine and heat exchanger for the next TESS-IND have now been ordered, and assembly will start in the third quarter of 2019. The device will utilise the existing infrastructure and control systems used for the successful TESS-IND commissioning in 2018. As would be expected, our engineers have modified the design to reduce cost and increase efficiency. 

 

Large scale energy storage 

My recent participation in the Global Energy Solutions Summit for the National Governors Association in Washington DC, and meetings with a venture capital company in Los Angeles and with the British Government Department for Business, Energy and Industrial Strategy (BHEIS) in London all confirm interest in very large industrial scale energy storage. I have previously reported that Australian corporates were seeking to reduce costs and decarbonise their energy supplies, however it is clear that these objectives are not confined to Australia.  

Unfortunately, there is still low awareness of the potential benefits to the electricity market as a flow on benefit from reducing carbon-based heat supply to industry. The overwhelming focus is on the electricity market because the increasing renewable supply is creating many new problems that bias policy towards the electrical efficiency of energy storage, favouring pumped hydro and batteries. The Washington conference alerted participants to significant environmental issues with large scale adoption of batteries and pumped hydro. Few have considered the potential of technologies like to 1414 Degrees TESS to simultaneously stabilise the grid and electrify industry by reducing its dependency on gas and diesel. It is therefore clear that 1414 Degrees must demonstrate the efficacy of its technology in the NEM and be ready for demand from utilities and industries to scale up to the gigawatt hour size. 

 

Technology readiness 

There is clearly demand from industry and governments for large scale energy storage. The cost per kWh of TESS storage diminishes with scale because more silicon can be held within a smaller surface area as the vessel size increases, and your Company has already advanced the design of a device aimed at storing four fold the energy in the same space as the current models.  

In contrast with the 1414 Degrees TESS or pumped hydro storage whose cost per unit of storage can decrease with scale, the cost per unit of cellular battery storage is fixed. Lithium batteries have a limited capacity life and will introduce many environmental challenges if used in large numbers, with the result that only pumped hydro is a sustainable contender for a very large power storage, but neither batteries nor hydro power can supply the heat needed by industry. However, TESS is a contender at this scale of storage because it is compact, can be located at industrial sites and can operate at a low unit cost of energy. These factors mean it is an attractive solution for big industry needing large storage capacity in order to switch from gas to renewable heat for processing 

The size of the market for thermal energy storage is much greater than that for electricity alone, so the capability of the TESS to provide grid stability services as well as industrial heat presents a compelling commercial opportunity for the TESS technology at very large scale. 

Our engineering team proved their innovative skills by demonstrating effective heat transfer to and from silicon phase change storage.  However, it has become clear that scaling the storage technology requires a high level of research discipline to ensure the most productive use of our resources. To accomplish this your Company has recently employed two more staff with PhD research qualifications, and I am working with them to ensure focus and rigor in our innovations to service this very large market. 

 

While we maintain close focus on commercial operation of the current projects, we’re also preparing for a big future. I am grateful to our supporters, shareholders and especially our very hard-working 1414 Degrees team. I look forward to reporting continuing solid progress in my next review. 

GAS-TESS commissioning commences at Glenelg

GAS-TESS commissioning commences at Glenelg

Commissioning of the world first, biogas powered, thermal energy storage system, GAS-TESS has commenced at the Glenelg Wastewater Treatment Plant. 

Construction was completed on Wednesday 10th April and the system was energised on Thursday 11th to start functional commissioning of control and flow instrumentation.  

The commissioning is due for completion in May. 

 

ARUP report highlights benefits of TESS compared to concentrated solar power (CSP) for Smartfarms

ARUP report highlights benefits of TESS compared to concentrated solar power (CSP) for Smartfarms

  • – ARUP reports on study comparing 1414 Degrees TESS with concentrated solar power (CSP)
  • – TESS would be more economical than CSP for greenhouse farms

Global engineering firm ARUP has reported the results of a study of technologies for heating and powering greenhouse farms. The report was funded by 1414 Degrees as an important step in the development of an integrated energy solution. It concluded that 1414 Degrees’ thermal energy storage system (TESS) would be more economical than concentrated solar power (CSP) as a replacement for fossil fuelled greenhouse farms.

ARUP was engaged to study the relative efficiencies and costs of integrating a 1414 Degrees TESS charged by solar PV into an advanced greenhouse facility (Smartfarm), to be located in the northern Adelaide Plains. The study looked at both on and off-grid scenarios comparing CSP and TESS with conventional diesel/gas installations. For the on-grid case, the direct steam CSP plant provides 20% of the power and all of the heat for the Smartfarm, similar to the successful Sundrop Farms facility near Port Augusta, whereas the TESS supplies all power and heat to operate the Smartfarm by time shifting both solar and off peak grid power. The analysis showed that the TESS option had lower capital and operating costs.

1414 Degrees Executive Chairman, Dr Kevin Moriarty commented, “This is good news for Smartfarm developers and other industries looking to decrease costs and increase renewable energy use.”

Dr Moriarty added, “Although the ARUP findings were focused on supplying renewable electricity and heat to greenhouse farms, the findings also imply a positive economic case for TESS compared to CSP exporting electricity to the grid. This is timely in the context of the financing difficulties of the Aurora power generation project proposed for Port Augusta in South Australia.”

He pointed out that “1414 Degrees is on a development path aimed at building TESS installations larger than the proposed Aurora plant, however, our implementation and capital requirements will be staged – limiting technical and capital risk to increase financing opportunities.”

The 1414 Degrees TESS also has the advantage of charging from any renewable source at prevailing prices, avoiding the upfront fixed cost of CSP power. Dr Moriarty explains, “Our power source for charging the TESS can be built locally or purchased from anywhere on the grid to provide for a flexible response to an evolving electricity market.”

Dr Moriarty said that, “Like CSP plants, 1414 Degrees TESS can contribute to a more robust electricity grid by firming renewable generation with spinning inertia from turbines and time shifting energy supply. In addition, the TESS can respond with fast frequency response and reduce emissions by displacing gas usage for heating. The result is a more extensive revenue stack for the business case.”

A large scale 1414 Degrees Smartfarm would deliver low cost firmed renewable electricity, displace gas, decrease emissions, and attract industry driving job creation.

GAS-TESS commissioning in early April

GAS-TESS commissioning in early April

  • GAS-TESS mechanical installation complete 

  • GAS-TESS electrical installation due to complete next week 

  • Commissioning due to conclude in May 

1414 Degrees has completed the mechanical installation of the world first, biogas powered, thermal energy storage system. Electrical installation has been delayed by a week, once complete the GAS-TESS will be ready to take on biogas from the SA Water Glenelg Wastewater Treatment plant. This will mark the start of our first commissioning process on a commercial site. 

Following the completion of electrical installation the engineering team will begin testing, modifying and verifying aspects as part of the commissioning process. This will include release of biogas from SA Water for firing burners and connection approvals from South Australian Power Network (SAPN). 

Once systems and sub-systems, including gas input to burning and heat output, energy reclaim to the turbine, and the electrical control interface are operating at optimal capacity the turbine will be started for the final phase of commissioning, due in May.

Recent news articles have been successful in shining a spotlight on 1414 Degrees (14D)’s exciting project, including Stockhead’s feature ‘Energy: 1414 installs world’s first biogas powered thermal energy storage system’.

Wastewater Treatment: Turning waste to clean energy

Wastewater Treatment: Turning waste to clean energy

This article has been written by 1414 Degrees’ Business Development and Marketing Manager – Maretta Layton

In the past 2 years working for this incredibly exciting energy storage start-up I’ve had the opportunity to take in and understand many new concepts around energy, storage, water and so much more.  A key part of my role is to take these incredibly complex ideas, developed by very brainy people, and translate them into something a little more digestible for the lay person. 

So, for those of you without a PhD in engineering, water, bioenergy or similar here is my attempt to explain why 1414 Degrees are so excited about our commercial trial at SA Water’s Glenelg Wastewater Treatment Plant.

Wastewater treatment: Turning waste into clean energy

With the announcement of SA Water’s decision to trial 1414 Degrees’ GAS-TESS to burn and store biogas at its Glenelg Wastewater Treatment Plant, an exciting new chapter in Australia’s renewable energy story began. This is the first technology in the world to solve the issue of effectively storing biogas as thermal energy to produce heat and electricity on demand. 

As the first wastewater treatment plant to use this unique thermal energy storage system, SA Water will help to showcase the GAS-TESS’ significant environmental and financial benefits.

What is biogas – and why does it matter?

Biogas is produced when organic waste, including human waste, agriculture waste, manure, plant material or food processing waste, is broken down in an anaerobic (oxygen free) environment with the help of bacteria. The process is energy-efficient and environmentally friendly. It’s also versatile: biogas can be used instead of conventional fuels for heat and power, and even for running vehicles. 

Globally, biogas is an increasingly important source of energy. Germany is a pioneer in this area, thanks to the large number of agricultural biogas plants on farms. In Germany, more than 8,000 plants produced 7.4million TOE (tonnes of oil equivalent) of biogas in 2014. The US produced 6.3million TOE and China 7.8million TOE that same year – while in contrast, Australia produced just over 300,000 TOE[1].

This seems to be a missed opportunity for Australia. We have significant agriculture and food processing industries, producing organic waste from factories, livestock farms (particularly dairies), wineries, grain and vegetable producers and the potential to generate significant quantities of biogas. Meanwhile, natural gas is in short supply and can be subject to high spot price surges.

Biogas is a highly economical source of renewable energy, and it’s also a fantastic source of heat. Given up to 50% of EU annual energy consumption is for heating, naturally occurring biogas has the potential to reduce the demand of fossils fuels and hence reduce emissions. Even in Australia we use more energy for heat (primarily for industrial processing) than electricity.

This may come as a surprise if you’re used to thinking of energy as the poles and wires that allow you to flick a switch at home or work. In reality, around 27% of Australia’s total energy use was for electricity in 2014-15. This compares with 33.5% for heating and 39.4% for transportation – partly due to the vast distances our trucking industry handles. 

Time-shifting energy use

So, why has biogas received so little attention to date? One of the biggest issues has been storing the gas so it has to be used as it’s generated.

This is one of the challenges SA Water were facing when they approached us about using our storage to help them time-shift their energy use. 

Currently, they must use their biogas as it is produced, which is not necessarily when it is most advantageous for them to do so. Before being burnt the gas must be scrubbed to reduce wear and tear on the engines. Heat is also an integral part of the sewerage digestion process.

What wastewater treatment plants want is a stable, consistent source of heat, less maintenance and electricity when it’s needed – not simply when it’s produced – and that’s where 1414 Degrees’ GAS-TESS comes in. It burns the biogas and stores the energy – so it doesn’t need to be flared and wasted or immediately used in gas engines to generate electricity. 

Because TESS has a high level of combustion, it’s also easier to manage biogas toxins – the residue that typically creates maintenance issues with generators. SA Water won’t need to ‘scrub’ the gas, saving significant time and operational costs. 

Other energy storage technologies, such as batteries or pumped hydro, could store the electrical energy generated from the reciprocating engines, but not also produce the heat energy SA Water needs. And with the added benefits of being low cost – silicon is abundant and cheap – and compact – silicon’s high energy density allows us to pack energy in, 10MWh of storage is contained in a space roughly the size of a 40 foot shipping container.

And that’s the type of energy so many other Australian industries need as well. In 2012-13, around 70% of the energy used by Australia’s manufacturing was natural gas used to produce thermal energy[2]. From district heating to food processing, and any type of production and manufacturing, every process uses electricity or burns fossil fuels like natural gas and liquified petroleum gas (LPG) to make heat. 

With 1414 Degrees GAS-TESS, SA Water will be able to store its biogas as latent heat in molten silicon at 1414° Celsius, providing maximum energy efficiency. This heat can then pass through an energy recovery system, converting it into heat and electricity on demand. 

Wastewater treatment as a clean, efficient energy solution

SA Water is trialling our technology to time-shift the combustion of biogas to help it meet a target of zero net cost energy from 2020 – which will lead to significant cost savings. The data we produce from this project will help us better quantify the potential of biogas as a reliable and stable source of energy, and thermal energy storage’s ability to make renewables more cost-effective across many different industrial applications. 

Ultimately, it will also help us put our vast sources of biowaste to more productive and sustainable use. 

For more information on the SA Water Wastewater Treatment project, visit our article ‘World Leading Energy Storage Pilot Breaks Ground At Glenelg’

Quarterly Update: January 2019

Quarterly Update: January 2019

HIGHLIGHTS 

  •  TESS can operate as baseload power station 
  •  GAS-TESS competitive on functionality and operational costs 
  •  Power generators seeking efficiency, lower costs and emissions reduction 
  •  R&D focus on further cost reduction from increased scale 
  •  TESS unit cost of energy decreases with scale 
  •  Strong cash position 
  •  Five new team members, including COO 

 

1414 Degrees Limited (ASX:14D) is pleased to provide its quarterly update.

Our first full quarter since the IPO and ASX listing has been very productive for the company. The funds from the IPO capital raising have enabled us to fast track the GAS-TESS commercial pilot at SA Water’s Glenelg facility. This is our first installation in a working industrial plant where reliability and functionality are the key requirements. It is also our first opportunity to operate the TESS where both electricity and heat outputs can be used and measured. This is a further step up from the commissioning of the control systems for the TESS-IND and turbine that we reported recently. That was a very important step as it showed the systems could run for many hours with continuous electricity generation.

 

BASELOAD POWER

It is probably not fully appreciated that the TESS will be configured to run remotely and automatically. The TESS has the ability to store energy, then generate synchronous electricity with a turbine and heat for long periods. The GAS-TESS will burn biogas and qualifies as a baseload renewable power station while providing low cost grid scale storage.

There will be a staged process for commissioning and testing the GAS-TESS since this is the first time biogas burning in an oxygenated atmosphere has been used to charge the silicon-based heat store. It will begin with optimising the operation of the biogas burners as they charge the thermal store and power the turbine using sensible heat. Following this, the heat store will be charged in the latent heat range, making the metal molten. Both stages will provide commercial heat and power for the SA Water facility, the only difference being the density of the energy storage.

 

GAS-TESS EFFICIENCY VS FUNCTIONALITY AND OPERATIONAL COSTS

The GAS-TESS will be fully insulated and have all systems operational, including heat supply and integrated controls to the SA Water facility, so our engineers will be able to determine its effectiveness and efficiency under the site conditions. It should be noted that efficiency is not a prime requirement for the site or most of the industrial sites we have assessed. In many cases it is the functionality and low operational cost that is the primary consideration.

For example, the current alternative to the GAS-TESS is a reciprocating engine that is expensive to maintain, less efficient for the destruction of toxic components in the biogas and does not have built-in energy storage. Our expectation is that GAS-TESS will provide a unique and very competitive solution for waste management facilities including sewerage, landfill dumps and animal farming. This global market potential supports a high growth outlook for this product into the long term.

There are numerous articles that have drawn attention to this 1414 Degrees (14D) GAS-TESS project. Among them is World-leading energy storage pilot breaks ground at Glenelg from Australian Engineering OnLine.

 

PROJECTS

During the quarter our engineers assessed the Abbe plant in Victoria and presented a pre-feasibility study fort the consideration of management and we are awaiting their advice.

Pepe’s Ducks has advised that they wish to proceed with the project after the Chinese New Year peak production period.

We continue to receive approaches from large industrial users of heat and electricity both in Australia and overseas. Power generation facilities are seeking ways to run their plants more efficiently so that they can lower costs and emissions. We have been working with them on solutions involving large grid-scale TESS delivering heat as hot air or steam, and electricity. In most cases a GWh scale TESS-GRID is required to meet site specifications.

Large consumers of gas have approached us, seeking to reduce consumption and therefore cost. It is perhaps not commonly appreciated that the refining of petroleum products, including gas, involves large amounts of heat. The CEO of Santos Ltd was recently quoted saying that their refining facilities in South Australia consume the equivalent of 5% of the gas supplied to the eastern seaboard. The continuing fall in the price of renewable generation creates an opportunity for TESS teamed with renewable generation to displace this gas, thereby significantly increasing gas availability without increasing emissions, while improving profits and preserving jobs that might otherwise be lost as industry relocates production to lower cost jurisdictions.

 

GRID SCALE – COST PER KWH OF STORAGE DIMINISHES WITH SCALE

The ability to scale silicon storage to large dimensions is one of the key attributes of 1414 Degrees’ technology, making it highly competitive for network scale energy storage. The TESS’ intrinsic design features result in increasingly lower unit costs as it scales up to GWh capacity, unlike batteries whose storage unit cost remains fairly constant with scale.

Put simply, the 1414 Degrees TESS products’ cost per kWh of storage diminishes with scale.

Our plan is to build the first 40 MWh cell, charging and discharging from the electricity grid, to demonstrate its advantages while providing stability services to the National Electricity Market (‘NEM’). A contract with a power wholesaler will allow us to arbitrage on the NEM, buying electricity at a low price and selling when prices are high. The device would also earn revenue from NEM fees for grid stability because its turbine has spinning inertia like a gas or coal power plant, and it could provide fast frequency response (‘FFR’) to grid variations by near instantaneous switching of its charging connection.

 

RESEARCH AND DEVELOPMENT

As we prepare to scale up our storage we are monitoring promising developments in the efficiency of gas turbines. Up to now, engineering companies have focused efficiency gains on very large turbines used in power stations. As the demand for these is falling precipitously, they are becoming more interested in producing smaller turbines that could be used in devices such as the TESS. At the same time, we are working to develop higher temperature heat exchangers to get more from our current turbines.

Our team continues to develop the technology to deliver even lower cost solutions. Once our workshop tests are complete, we intend to trial a small TESS at the Pepes Ducks hatchery focusing on heat output only. We are also designing and testing components for the much larger 40 MWh device to realise even lower build costs.

 

FINANCE

Our cash position remains strong. The actual expenditure on research and development was significantly less than forecast, and our cash was boosted by over $2.5m in R&D tax refunds. We expect an increased spend in the next quarter to buy a new turbine and heat exchanger for the next TESS-IND and advance our key projects.

 

CORPORATE DEVELOPMENT

We have continued to strengthen the team, appointing five new staff this quarter in the areas of research, engineering and marketing. There have been some internal changes including the creation of a research group to focus the efforts of some talented engineers.

In particular, we welcome the appointment of Dr Jordan Parham as Chief Operating Officer. This is part of the strategy we announced in late 2017 to ensure a succession plan for Executive Chairman, Dr Kevin Moriarty to retire from executive management. The company now has several senior executives who are fast gaining corporate experience and becoming familiar with our innovative technology and its potential commercial applications. This strategy, to build a leadership team that understands the business, will ensure that your Company can build shareholder value from actual technological and marketing success, and decrease corporate risk.

Dr Jordan Parham (L) and Dr Kevin Moriarty (R). If you missed the video introducing Jordan, you can view it here.

 

Capital markets have been very subdued or negative during the quarter and this has affected your company along with many others. Notwithstanding, we have gained over a 1,000 new shareholders and most large original shareholdings are intact.

 

We welcome our new shareholders and also thank existing shareholders for their support during this critical time for the company, as we build and install our first devices in sites where their full potential can be measured and realised. We expect we will make significant advances in the coming year and justify the continuing support of our shareholders.