GAS-TESS Pilot Project Update

GAS-TESS Pilot Project Update

  • – GAS-TESS up and running after scheduled shutdown to assess O&M requirements
  • – O&M a key factor in business case for wastewater treatment utilities
  • – Improvements to be fast-tracked to provide SA Water with key data for evaluating business case
  • – Proposed review of revenue settlement due to delays in export approval to NEM 

Operational status

The GAS-TESS was recently shut-down to install additional instrumentation and inspect it internally. This demonstrated that the unit was in good condition. An estimate for operation and maintenance (O&M) costs can now be prepared, these being a key factor for utilities evaluating biogas burning equipment over their lifetime. The GAS-TESS is now back online supplying electricity and heat to the wastewater treatment plant (WWTP). Our engineers will continue test runs to refine operating characteristics and anticipate working with the Glenelg WWTP operators to evaluate the benefits of the TESS integrated with the plant systems from late September.

Commercial arrangements under the settlement agreement are underway but SA Water has advised there may be a long delay to obtain approval to export electricity to the grid. The addition of solar generation at the same time as the GAS-TESS and the current, interim network restrictions have imposed operational constraints on the site and hence GAS-TESS, so the company proposes to review the settlement agreement with SA Water.

Current performance status

A wide range of tests have been conducted to characterise the actual GAS-TESS performance compared to original design calculations and predictions. Analysis of the GAS-TESS performance is most readily obtained from simultaneous operations of the burners using biogas at the same time as energy is produced by the turbine, as this provides steady state conditions for simpler comparison with mass and energy balance calculations.

Under this regime, the combustion system burning the biogas is operating at 82.7% efficiency, almost at design specification, and some modifications to operational procedures are expected to improve performance. As expected, in this first testing phase of configuration the device is delivering only 39.8% CHP efficiency because the turbine is operating at half its potential efficiency. This is due to a number of factors but primarily caused by low heat transfer through the heat store to the energy recovery system (ERS). This results in a lower ERS gas outlet temperature and energy content, ultimately resulting in a turbine inlet temperature well below optimum.

Next Steps

As planned, the Company will upgrade the storage to increase heat transfer once the overall systems are validated. The project agreement provides for two years of operational tests, and we intend to upgrade the GAS-TESS performance in several stages.

However, the business case for the GAS-TESS is not driven just by return trip efficiency because the biogas is a by-product of a WWTP operation that must be burnt on a continuous basis whereas the heat and electricity loads of a plant and electricity export value are variable. This is one reason that SA Water proposed a GAS-TESS device – to time shift the energy supply to maximise the value of the biogas, something that the engines cannot provide. The second reason is to minimise O&M costs.

Following the positive internal inspection, some enhancements will now be fast-tracked, where possible, to provide SA Water with key performance and O&M data for evaluating the performance of the TESS compared to engines. Other performance enhancements will be rescheduled for inclusion in the design of the next version of the technology.

Chairman’s letter to shareholders

Chairman’s letter to shareholders

Dear fellow shareholders 

Over the last week, your Company has received some enquiries from shareholders about the performance of its share price and current market sentiment, so I would like to ensure you are fully informed.  

There have been no substantial changes to our share register, our pilot installation programmes, preparation for sales of the biogas TESS, and we continue to progress systems to earn early revenues from operations on the National Electricity Market (NEM) as reported in the second quarterly in late July. Your directors share your frustrations and it demonstrates that we are not immune to general market conditions and sentiment. 

Status of current pilot projects 

The Company is piloting its technology across three key product areas, the GAS-TESS, the TESS-IND and the TESS-GRID at three respective sites. To do this, we are partnering with stakeholders including SA Water, Enova Community Energy, Ampcontol and BE Power to provide energy solutions for customers. 

  • TESS-IND 
    • Enova Community Energy (Enova) 
    • 1414 Degrees is advancing commercial discussions with Enova toward a joint venture to sell energy – both heat and electricity, to Enova customers including the Stone and Wood brewery.  
    • Stone & Wood
    • The 1414 Degrees team are currently onsite undertaking detailed feasibility studies for installation of a TESS-IND pilot at Stone and Wood’s Murwillumbah brewery in northern New South Wales. The current use of expensive LPG for process heating provides a better economic case for replacement by a TESS charged from grid sourced renewables. 
    • Pepe’s Ducks
    • Pepe’s Ducks is open to progressing a TESS-IND pilot, however the fall in price of renewable energy certificates (RECs) and its location are not as favourable for 1414 Degrees as other sites. 
    • Austcor/Abbe Corrugated
    • Abbe Corrugated is open to progressing a TESS-IND pilot, however the fall in price of RECs and availability of network gas are not as favourable as other sites offered to 1414 Degrees. 
  • GAS-TESS
    • SA Water
    • A progress report on the GAS-TESS at the Glenelg Wastewater Treatment Plant is expected to be released later this week. The Company is continuing to augment the product for sale to water utilities as a commercial alternative to biogas engines. 
  • TESS-GRID
    • AmpControl, BE Power
    • The team are analysing data supplied by Nectar Farms to prepare funding submissions to grants bodies for the scale up of silicon based storage. 

Revenue from NEM trading 

NEM price volatility is expected to continue to increase into the future as your Company integrates its TESS with renewable electricity supplied over the grid and enters into power supply agreements with customers. Your Company is therefore preparing to participate in the NEM and trade energy for supply to its customers and TESS. 

Regulators are moving to support storage and firming generation 

Yesterday we reported economic opportunities for our technology in the context of negative electricity pricing events and proposed changes to reward firming generation that would benefit the TESS technology. I am pleased to see AEMO has requested rule changes that would see energy storage systems integrated into the NEM. If implemented, this would provide further support for our TESS business model. 

I encourage you to stay fully informed with all announcements on our website and, I look forward to keeping you informed with our ongoing communication. 

In closing, we continue to progress our commercial development and pilot demonstrations as outlined in the prospectus and your Company maintains a strong cash position. I thank you for your ongoing support and assure you that the Company continues its steadfast focus and commitment to delivering clean energy storage at scale. 

Yours sincerely, 

Dr Kevin Moriarty 

Executive Chairman 

Negative electricity prices and storage

Negative electricity prices and storage

    • – Intermittent negative electricity prices will not make energy storage economic

      – Energy Security Board looking at market redesign to favour firming generation as supplied by TESS

  •  
  • After periods of negative electricity pricing in recent days some shareholders have asked why 1414 Degrees’ thermal energy storage systems (TESSs) are not making money from these events like batteries are reputed to be doing. The Company will, in time, have that capability but, as explained below, proposed market changes would reduce these undesirable price swings by rewarding firming base load generation like that supplied by the TESS.

    While the 1414 Degrees TESSs will take advantage of periods of negative electricity pricing, these events alone are insufficient to form an economic basis for investment in energy storage, including batteries and pumped hydro. These events are intermittent and disruptive so the market operators are openly looking at market changes to promote reliable firming supply.

    The Energy Security Board called for submissions on market redesign on 2nd September. As mentioned in the Weekend Australian ‘Rejig power prices to reward reliability’ (7 Sept 2019), Australian Energy Market Operator (AEMO) CEO Audrey Zibelman commented, “What we’re looking to do is work with the Energy Security Board, which includes all the market bodies to say ‘let’s talk about how we get this done as efficiently as possible’.”

    This acknowledges that batteries and renewable generators do not deliver the firming power supply that is provided by the spinning generators of fossil fuel power stations. Profiting from these destabilising price swings would be opportunistic and should therefore form only a marginal part of any business model for storage in the National Electricity Market (NEM).

    A TESS provides the spinning inertia for electricity supply, just as the big power stations do, but with the added benefit of firming renewable sourced energy. While pumped hydro also provides firming electricity, the TESS can be built as small or large units distributed through all levels of the grid, delivering reliability irrespective of interconnector or transmission problems. Furthermore, the TESS can do this because it is designed to provide heat to industries as the base load for their stored energy, so the TESS has surplus electricity for the grid.

    In summary, TESS has a much broader revenue base and can provide long-term reliable baseload electricity supply in the manner of the retiring fossil fuel stations. 1414 Degrees is currently rolling out its pilot installations to prove this in operating commercial sites.

    The economic case for firming storage requires that the NEM be changed to reward the provision of firming baseload electricity supply. Instead of ensuring longer-term operation of fossil fuel power stations, the introduction of TESS would enable the transition to low or zero cost renewable supply and, remarkably, replace much of the fossil fuel used for heating, a market twice the size of electricity. Pumped hydro and batteries are useful for long term and short term supply, respectively, but are expensive and less versatile compared to TESS and cannot displace gas emissions used in the larger heat market.

1414 Degrees scoping a new sustainable power deal with Stone & Wood

1414 Degrees scoping a new sustainable power deal with Stone & Wood

  • – TESS-IND integration study for Stone & Wood brewery in northern New South Wales 
  • – TESS-IND units would successively replace four LPG boilers 
  • – Opportunity introduced under 1414 Degrees MoU with Enova Community Energy 

 

1414 Degrees Ltd (ASX:14D) and Stone & Wood Brewing Company Pty Ltd (Stone & Wood) yesterday agreed to undertake a feasibility study for the integration of 1414 Degrees electrically charged Thermal Energy Storage System (TESS-IND) into the Company’s Murwillumbah brewery in northern New South Wales. 

Stone & Wood is actively scoping innovative and more sustainable energy solutions, and 1414 Degrees TESS-IND can provide reliable heat sourced from renewables on the grid. The brewery has a daily heat demand from processing its beer and is expecting to expand production. Feasibility would identify the potential to sequentially replace or supplement existing gas boilers currently used to generate heat with a TESS-IND 

Stone & Wood is recognised as the most successful brewing start-up in Australia. Its strong commitment to sustainability makes this is an ideal commercial location for our technology to assist in the brewery’s emissions reduction using renewable energy,said Dr Kevin Moriarty, Executive Chairman of 1414 Degrees. 

“The Stone & Wood brewery is a financially attractive site for the 10MWh TESS-IND commercial pilot, particularly when compared to our other proposed customer plants, because the displaced LPG is more valuable, and the carbon-free heat from the TESS-IND solution would significantly reduce emissions.” 

The parties have agreed to collaborate on research and development of the project, including the technology and capabilities of a pilot TESS-IND on site. 1414 Degrees will now undertake a detailed feasibility study for the integration of its energy storage technology, expected to be completed by the end of the year.  

“We are constantly looking for ways to reduce our impact on the environment, including ways to continue our shift towards renewables. We are excited and optimistic about the potential of the new technology that 1414 Degrees can bring, and look forward to some positive findings from the feasibility study,” said Ben Summons, Managing Director of Stone & Wood. 

Enova Community Energy Ltd (Enova) introduced Stone & Wood to 1414 Degrees as an industrial heat customer under the memorandum of understanding (MoU) between the parties to investigate jointly providing energy solutions to Enova and its industrial heat customers. 

“The opportunity to work with Stone & Wood and 1414 Degrees on the feasibility study for the TESS-IND is in keeping with Enova Community Energy’s commitment and vision to innovating in the energy sector. We’re delighted to be involved in this R&D project with 1414 Degrees and Stone & Wood, two organisations that are also expanding the parameters of what sustainability can and will look like, said Felicity Stening, CEO, Enova Energy. 

The joint venture with Enova would include firming renewable electricity supplied under long term power purchase agreements, using 1414 Degrees’ TESS to ensure reliable electricity and heat solutions for sale to consumers. 

“1414 Degrees is excited about its partnership with Enova, which has shown great vision to work with us on developing this opportunity by identifying an ideal industrial customer, said Dr Moriarty. 

We look forward to working closely with Enova across the coming weeks to model the financials and structure a business plan for the joint venture. 

Enova is a community-owned energy retailer operating in regional New South Wales, with plans to shortly expand to metropolitan areas within the state and other states and territories. Enova offers a range of renewable energy plans for households as well as businesses. 

1414 Degrees to progress grid scale tech for SmartFarms

1414 Degrees to progress grid scale tech for SmartFarms

 

  • – MoU signed with Nectar Farms Management Limited 
  • – MoU signed with Ampcontrol SWG Pty Ltd 
  • – MoU signed with BE Power Solutions Pty Ltd 

 

1414 Degrees Limited (ASX:14D), has partnered with heavyweight technical, agribusiness and finance partners to identify and develop SmartFarm projects using its Thermal Energy Storage Solution (TESS).  

Working in collaboration with integrated electrical and electronic technology provider, Ampcontrol SWG Pty Ltd, and renewable energy project developer, BE Power Solutions, 1414 Degrees is examining a range of joint project opportunities across Australia, including at a greenfield site in the Northern Adelaide Plains. That project would see the company integrating its grid scale energy storage solution, TESS-GRID, into a protected cropping farm development by east coast horticulture company, Nectar Farms Management Limited (Nectar Farms) 

“Nectar Farms is in the process of establishing an $80 million advanced protected cropping SmartFarm facility in Victoria, involving 10 hectares of glasshouses and a large nursery. The business is now working with 1414 Degrees on a similar development,” said Dr Kevin Moriarty, Executive Chairman of 1414 Degrees.  

“We see enormous synergy between Nectar Farms – which has a stated aim to protect the environment through clean energy, resource conservation and clever planning – and the entrepreneurial model of 1414 Degrees 

“The integration of our technologies would result in the first SmartFarm development of its kind globally, delivering another opportunity for our state to lead innovation, address energy costs and stability, and support job creation.

On May 1, 2019, 1414 Degrees Limited signed an MoU with Ampcontrol SWG Pty Ltd and BE Power Solutions Pty Ltd to collaborate to undertake feasibility and potential developments of projects including protected cropping renewable powered glasshouse (SmartFarm) developments. 

1414 Degrees Limited signed a Memorandum of Understanding (MoU) with Nectar Farms on July 27, 2019, to undertake feasibility for a protected cropping farm, SmartFarm, using TESS technology. The joint activities to be undertaken include (but are not limited to) obtaining a greater understanding of each business strategies; jointly approaching funding agencies and financial institutions; and engaging in product development activity, including feasibility, development and construction. 

The SmartFarm project follows from the ARUP study that concluded 1414 Degrees’ thermal energy storage system (TESS) would be more economical than concentrated solar power (CSP) as a replacement for fossil fuelled advanced greenhouse farms. 

BE Power is currently developing more than 300MW of renewable energy projects across grid connected solar PV, utility scale batteries, pumped hydro and biogas power disciplines. The company has extensive experience developing, financing and operating renewable energy projects. 

Ampcontrol, which approached 1414 Degrees to assess the TESS technology for inclusion in the Nectar Farms project, is a global business delivering electrical, electronic and control solutions to improve safety and efficiency in mining, renewable, infrastructure and industrial applications. 

Dr Moriarty said early feasibility stages of the northern Adelaide site were expected to progress during the current quarter. The site sits adjacent to a distribution substation at an SA Water site housing a generator embedded on the National Electricity Market (NEM), and the plan is to use the substation for electricity supply and generation from the TESS-GRID while providing heat to Nectar Farms. 

“The Nectar Farms project presents a terrific opportunity for the potential of our technology to revolutionise the approach of Australian and international industry to energy storage and heat generation. Several other development sites in SA and Victoria will be assessed” said Dr Moriarty. 

“We have been modelling the revenues to be expected from operating the TESS-GRID and our smaller TESS-IND technology on the NEM. Scenarios for energy trading range from those based on contracts for supply from an aggregator to direct exposure to wholesale pricing – and combinations of both.” 

Second Quarter 2019 Update

Second Quarter 2019 Update

HIGHLIGHTS:

  • – GAS-TESS commissioned, generating electricity and heat to site 
  • – Enova Energy signs MoU for joint venture on renewable heat and electricity sales 
  • – Nectar Farms signs MoU to collaborate on advanced greenhouse developments  
  • – NSW brewing plant proposed by Enova Energy as TESS-IND pilot site 
  • – TESS-IND commercial model to draw on multiple revenue streams 
  • – TESS-GRID site selection progressing 
  • – Strong cash position $9.7m, outgoings decrease after GAS-TESS completion 

 

1414 Degrees Limited (ASX:14D) is pleased to provide its June 2019 quarterly update. 

The second quarter saw the Company deliver on key objectives in its path to commercialisation while maintaining focus on its core technology development. 

The Company’s cash balance remains strong because monthly outgoings have decreased following the commissioning of the GAS-TESS. The $9.7 million cash balance at the end of the quarter is expected to be boosted by an estimated $2.5 million R&D rebate later in the year. 

 

GAS-TESS Operations  

The first GAS-TESS was successfully commissioned at our first commercial site, with all systems becoming operational surprisingly quickly considering this is completely new technology with no prototype. Commissioning occurred so swiftly that the GAS-TESS was able to export hot water and electricity to the site well before the wastewater treatment site’s integration systems were fully operational. Late in the quarter, the device received interim approval as an embedded generator on the National Electricity Market (NEM). We have now commenced a series of characterisation tests to determine the performance of the technology as installed. It is expected these tests will be followed by modifications to increase performance and improvements to the next model. 

Although the semi-commercial arrangements with SA Water will generate some revenues, the intent is to demonstrate the versatility of the GAS-TESS as a low cost alternative to purchasing gas burning engines. Utility service charges are determined from their asset base, so asset augmentation is their preferred model. Following this test phase, we will design production models for sale to wastewater utilities as an alternative to gas engines whose high maintenance costs reduce net revenues, and do not allow time shifting of electricity and heat output to minimise energy costs. 

 

Technology focus 

1414 Degrees is a technology focused company, working closely with technology partners and suppliers to deliver more compact and robust silicon storage. 

TESS-GRID: our team is designing and testing grid scale storage technologies, the first stage being an electrically charging 40MWh module, followed by 200MWh and 1GWh devices. 

GAS-TESS: our engineers have been testing the functionality of the technology to achieve maximum efficiency within the operating environment at SA Water’s Wastewater Treatment Plant. The maximum operating temperature of the GAS-TESS heat store has now been measured at 1350°C, so the silicon phase change material (PCM) is being configured to melt at less than 1300°C and achieve similar latent energy storage to pure silicon. In addition, the combustion products from burning biogas must be isolated from the silicon PCM. The GAS-TESS is operating well utilising the sensible heat of silicon bricks and a trial quantity of lower melting point silicon PCM. On completion of the characterisation tests, our engineers will be able to assess storage and other design and operating parameters to achieve optimal performance. 

TESS-IND: an important aspect of the GAS-TESS pilot is that silicon storage technology for its challenging environment is expected to benefit future builds of the electrically charged TESS-IND. The TESS-IND team is working to achieve higher electrical efficiency and more compact layout for the next model, due for commissioning in the next quarter. 

 

Grid scale progress 

We are continuing to advance the storage technology and financial modelling for our grid scale storage solution, the TESS-GRID. We intend to use the smaller TESS-IND to test and refine the systems for energy trading and technical control of the larger devices because these systems will scale up. Connection to the National Electricity Market (NEM) will allow us to test the revenue model in the electricity market, buying low and selling high and effectively helping to stabilise electricity supply.  

There is a risk that the TESS-IND will be completed well before it is approved to supply electricity to the NEM. The approval processes by distributors and regulators on the NEM can be very slow, even for smaller synchronous spinning generators like the TESS-IND that provide increasingly important native frequency control and stability services as large coal and gas fired turbines are decommissioned and more solar or wind farms are connected. The current plan is to initially connect the TESS-IND to the NEM at our Southlink facility and to then increase the revenue base using heat sales to the brewery or one of our previously disclosed pilot sites. 

The first 40MWh TESS-GRID module must be built next to a site with substantial heat consumption. Ideally, it will be an existing operational site with visionary management (like SA Water provided for the GAS-TESS development) to ensure fast integration of the TESS heat output. We have assessed several suitable sites within Australia and overseas, the most favourable being next to a refinery and transmission substation. A site visit with technical support from the owner and our team resulted in a positive scoping study, however as was the case with our partnership with SA Waterprogressing the integration of new technology will require high level corporate commitment. 

 

Commercial path for electrically charged TESS 

Our path to revenues from the electrically charged TESS has become clearer during the quarter, driven by changes in renewable energy financing terms. The Renewable Energy Certificate (REC) scheme and favourable finance terms from the Clean Energy Finance Corporation, which have underwritten the expansion of renewable generation for several years, are no longer attractive to industries that require fast payback on capital investment, as the price of RECs have fallen dramatically across the past year 

Businesses want reliable energy supply at a lower cost but they are understandably reluctant to lock up capital for the long term when it could be better deployed to increase production and profits in the near term. However, the fall in price of certificates has been paralleled by massive growth in large-scale solar and wind generation, causing a dramatic fall in the price of Power Purchase Agreements (PPAs) to the point where it can be more economical to draw on a PPA over the network 

Notwithstanding, renewable PPAs are not a preferred solution for industry because the supply is intermittent and variable. Reliable energy supply is essential for maintaining productivity and mitigating risk. 1414 Degrees TESS provides the means to firm renewable electricity generation and concurrently replace fossil fuel sourced heat. Industries and consumers generally prefer to purchase a supply contract not a technology solution, so your Company is working with partners to package energy solutions.  

There are a number of advantages in this approach: it enables multiple revenue streams from electricity and heat sales, trading, and grid stability service fees; it builds a recurrent revenue base; it means your Company retains ownership to protect intellectual property in the TESS technology; it provides time to prove the technology for performance guarantees to drive future sales.  

 

Energy solutions joint venture 

This energy solutions strategy is now a core target.  In the last quarter, we reported an approach from retailer Enova Community Energy Ltd (Enova), a community-owned energy retailer operating in regional New South Wales, with plans to shortly expand to metropolitan areas within the state and other states and territories. Enova offers a range of renewable energy plans for households as well as businesses. We have now agreed a memorandum of understanding (MoU) with Enova to investigate jointly providing energy solutions to Enova and its industrial heat customers. 

The joint venture (JV) would include firming renewable electricity supplied under long term PPAs, using 1414 Degrees TESS to ensure reliable electricity and heat solutions for sale to consumers. Enova has introduced a brewery seeking solutions to reduce their reliance on LPG for process heat. The brewery has a daily heat demand and feasibility has commenced into sequentially replacing their gas boilers with TESS. The site is a financially attractive site for the 10MWh TESS-IND commercial pilot, particularly when compared to our other proposed customer plants because the displaced LPG is more valuable, and the TESS solution would significantly reduce emissions. 

We will be working closely with Enova across the coming weeks to model the financials and structure a business plan for the JV. The model could be extended to other energy networks to deliver lower cost heat and electricity solutions that leverage the benefits from combining electrified heat for industry and household electricity supply. 

 

Agribusiness ventures 

Your Company has been progressing a greenhouse development arising from the SmartFarm study by ARUP. During the quarter, electrical contractor Ampcontrol SWG Pty Ltd and financier BE Power Solutions Pty Ltd executed an MoU with 1414 Degrees to investigate integrating TESS into the energy supply and finance solutions for SmartFarms. 

The project partnership has resulted in an additional MoU with Nectar Farms Management Limited (Nectar Farms) to undertake feasibility for a protected cropping farm on the Northern Adelaide Plains. Nectar Farms is currently developing an $80 million SmartFarm near Stawell in Western Victoria with product offtake to Costa Group. Its protected cropping farms will use a controlled atmosphere and grow lamps to achieve higher production and low water usage. The first site proposed for the study with 1414 Degrees is located in the Northern Adelaide Plains on a high voltage network and adjacent to an SA Water embedded generator on the NEM. The feasibility study would look at a similar development to the Stawell project, with the addition of heat from a 40MWh TESS module as the first stage to a grid scale TESS-GRID. 

 

Recurrent revenue modelling 

Our business development team has been modelling the revenues to be expected from operating the TESS-IND and TESS-GRID on the NEM in conjunction with heat offtake to the SmartFarm or other industries, including the brewery, packaging plant or poultry processor as previously proposed. Scenarios for energy trading range from those based on contracts for supply from an aggregator to direct exposure to wholesale pricing, and combinations of both. We are being assisted by specialist energy trading and renewable energy aggregator companies. Other revenue sources, such as those from Frequency Control Ancillary Services (FCAS) on the NEM may not be significant at the 10MWh scale but would apply to larger devices. We expect to be able to report the results of this financial modelling within the current quarter. 

 

To market 

The business development team attended the Australian Energy Storage conference in Sydney in June, where Chief Operating Officer Dr Jordan Parham presented on our technology. The team was engaged by a range of potential clients and investors across the two days of the conference. Concurrently, senior executives had a full schedule of briefings with investors and potential strategic partners at an investor conference in Hong Kong. There was strong interest in co-investing in our energy solutions strategy. 

 

I look forward to reporting further progress on our path to revenues in the coming months. 

 

Dr Kevin Moriarty 

Executive Chairman