Waste Gas Company Shifts to a Licensing Fee Business Model

Ener-Core Inc. has signed a commercial and manufacturing license agreement (CMLA) with the Dresser-Rand business, granting it the exclusive right to manufacture Ener-Core’s power oxidizer gas turbines within the 1 to 4 MW power capacity range and to sell the power oxidizers directly to industrial customers.

Ener-Core designs and manufactures a technology that converts waste gases from a wide range of industries directly into clean power. Its technology, for example, can be used to convert low-btu landfill gas into onsite power. The company received a conditional purchase order in May worth $3.29 million to build, deliver and install four of its EC-250 EcoStations at the Toyon Canyon Landfill site within Los Angeles’ Griffith Park.

​“Power oxidation is an alternative to combustion and enables traditional systems (gas turbines, boilers, dryers, etc.) to produce heat and power from low-quality waste gases that are not suitable for combustion processes,” says Castro. “Typically, when gases are considered not suitable, it’s because they have a low calorific value (or low BTU) or because the gases have too many contaminants that would cause damage to a combustion chamber."

Gases that fall into these categories usually get destroyed rather than used, Castro adds. Power oxidation can typically overcome both of these attributes of waste gases and enable the industries that produce those waste gases to use them to meet their own on-site energy needs.

It is a lower-temperature, slower, controlled reaction process compared to combustion. It has a longer reaction time (one second for power oxidation as compared to a few milliseconds for combustion) allowing the release of heat energy from gas. It has no flame and generates almost zero pollutants due to the complete oxidation of the gas. Furthermore, because ignition is never reached, no nitrogen oxides are formed, according to Castro.

“On the cost or expense side of the business, the (CMLA) 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 its groundbreaking technology,” says Alain Castro, CEO of Irving, Calif.-based Ener-Core.

Ener-Core also will benefit from the global sales teams of Dresser-Rand and Siemens, which will be commercializing the fully integrated system (i.e. gas turbine integrated with Ener-Core’s power oxidizer) to their legacy customers as well as new industrial customers. For each unit that the Dresser-Rand and Siemens sales teams sell, Ener-Core will collect a license fee payment.

“Ener-Core expects that payments from the Dresser-Rand business, combined with Ener-Core’s reduced operating expenses, will enable Ener-Core to be cash flow positive within 12 to 18 months,” says Castro. “The agreement allows Ener-Core to continue its transformation to a low-cost, high-margin license fee business for its technology. The company believes that by leveraging the economies of scale and supply chain efficiencies of large multinational companies like Siemens and the Dresser-Rand business, it can accelerate the adoption of its technology and shorten its pathway to profitability.”

For the last 18 months, Ener-Core and the Dresser-Rand business have had a commercial license agreement (CLA). Under this CLA, the Dresser-Rand and Siemens sales teams have been able to build a relatively large and mature commercial pipeline of opportunities for this solution. Ener-Core’s engineering team has been working closely with Dresser-Rand’s engineering team, to scale up the size of Ener-Core’s power oxidizer and also integrate the power oxidizer with Dresser-Rand’s KG2 turbine.

“This new agreement … allows the Dresser-Rand business to not only sell these systems, but also manufacture the Ener-Core Power Oxidizers.  The agreement is rather timely, as it’s been signed at a time when both companies are in the final phase of testing of the fully constructed and operational system and with a fairly mature commercial pipeline of sales opportunities,” says Castro.

The Dresser-Rand business, part of Siemens Power and Gas (PG), is a supplier of high-speed rotating equipment solutions to the worldwide oil, gas, petrochemical and process industries.

“This agreement marks a new phase of cooperation between our two companies. Our engineering teams have been working closely with the Ener-Core team over the last 18 months, while our commercial teams have been actively developing a strong commercial pipeline of opportunities for this breakthrough technology,” Paulo Ruiz, vice president of commercialization for the Dresser-Rand business, said in a statement. 

The CMLA will be effective upon the successful completion of the full-scale acceptance test of the 2 MW system, which is expected to reach completion this month.