How a little environmental power firm is taking on the giants of the energy sector

August 24, 2014 Financial Post

August 24, 2014

By Tony Wanless

It’s said that only the brave (or the foolish) plunge into conservative industries dominated by giants. One such industry is power generation, which features long and costly development timelines, continual requirements for proof-of-concept and competitive advantages that often go unrecognized or unheeded by very large companies.

In many ways it’s the opposite of the proverbial technology story, in which a young company expands like a rocket and within a short time is acquired by somebody bigger for a price that often seems ungodly and ridiculously high.

But a Vancouver company that has adopted an entrepreneurial approach to electrical power generation is deliberately working its way through the impediments and long timelines native to its industry.

Instream Energy Systems produces hydrokinetic (electrical energy created by moving water) power systems in underutilized waterways. This is accomplished by its scalable vertical axis hydrokinetic turbines (VAHTs) which are hung from walkways over moving water. Naturally, this is much more cost-effective, less obtrusive and environmentally damaging than the traditional power generation method – damming rivers or building nuclear power plants.

Since its inception six years ago, Instream has produced two working power generation models in a water reclamation conduit in Yakima, Wash., and the Duncan Dam near Kaslo, B.C. It is now embarking on a larger (250 kilowatt) test on the Gironde estuary in Bordeaux, France, in which turbines will be hung from an ancient stone bridge.

Note that I said Instream started six years ago. Usually by this time, most technology companies are mature, or have been acquired by someone. But the calendar turns slowly when you’re talking about the environmental engineering industry.

“It’s might be six years but we’re really only just getting to starting,” explained Instream’s president Ken Miller, a former stock broker who founded the company after he discovered the potential for the technology and “found something I was really passionate about.

“There are no benchmarks out there for this sort of thing,” he said, explaining why time seems to slow down while you find the right technology configuration. “You have to recognize that when a change is made from one way to something else, there is always an impact. So with water turbines, you have to produce power but not affect the ecosystem that you’re working within.

“ You have to take baby steps and build a solid platform before you do anything.”

Another reason it takes time to develop a working technological configuration in the industry is that even a small installation involves high costs. So each technology must be rigorously tested to ensure it fits numerous requirements while also being cost-effective.

For example, the hydrokinetics industry’s main competitors are wind farms, which have been deployed throughout Canada as a “greener” alternative to traditional dams. But when the wind isn’t blowing, turbines don’t turn as quickly and power generation falls off.

“We look for the inefficiencies,” explained Miller of his hydrokinetics system. “It’s important because of the high costs involved in energy production. For example, a wind farm might cost $2-million for each installed megawatt. Our cost may be higher, but we’re consistent. So, our [entrepreneurial] ‘secret sauce’ is reliability and consistency.”

This approach has attracted powerful partners who have helped the company reach the point where it is ready to grow more quickly. For example, early on it was helped by Powertech Labs, a subsidiary of BC Hydro that provides complex clean energy and engineering consulting. This led to a connection with BAE Systems, a world-wide defence contractor and engineering firm based in Britain, which designed Insight’s turbines. It is now building a new “best in world” turbine design for the company.

The BC Hydro alliance and the BAE connection attracted the interest of the Canadian Department of Foreign Affairs, Trade and Development, which then helped arrange the contract to build the turbine array in Bordeaux.

Now that his company is on the cusp of growth, Miller says the Bordeaux experience has made him realize the company’s future entrepreneurial success may lie in Europe.

“There are more opportunities there,” he explained. “Many countries rely on nuclear or coal-burning for electricity and want cleaner power. And they have many waterways so are perfect for what we do.”

 

Read full article at: http://business.financialpost.com/2014/08/24/how-a-little-environmental-power-firm-is-taking-on-the-giants-of-the-energy-sector/