Whitefish, MT / July 29, 2014 / American DG Energy Inc. (NYSE AMEX: ADGE) and its 70.7%-owned subsidiary focused on the EU market, EuroSite Power (OTCQB: EUSP), provide tailored, On-Site Utility™ Combined Heat and Power (CHP, or cogeneration) solutions that can help a wide variety of businesses not only slash utility costs by as much as 20%, but greatly reduce carbon pollution. Built around proven low-emission V-8 natural gas engines, the company's CHP systems are ideal for hotels and multi-unit residential sites, as well as for health clubs, hospitals and nursing homes, or anywhere else that can make use of the abundant thermal heat that is captured in the process of generating electricity for space heating or hot water.
Unprecedented Carbon Pollution Standards in U.S. Set Stage for Global Initiative
With the Obama administration's move in early June to implement historically unprecedented carbon pollution rules via the EPA's new Clean Power Plan, aimed at cutting carbon output from power plants 30% from 2005 levels within the next 16 years, the race is now on for real solutions to avoiding the inevitably rising costs of carbon-intensive electricity production. This is the first time in history any U.S. President has moved to explicitly regulate carbon from power plants and the new regulations set the stage for a rapidly emerging global carbon pollution initiative, particularly among the world's largest emitters. The primary focus of the Clean Power Plan will be enforceable goals/targets administrated at the state level targeting carbon pollution per megawatt hour of electricity produced, thus creating huge incentive for growth in the clean energy generation industry. The EPA's plan should be finalized by mid-2015, instituting a national framework that would give states the flexibility they need in order to tailor their own solutions to meet the new targets within a year thereafter. This is a signal to the CHP space and to markets that is unmistakable.
While the environmental benefits of on-site CHP are tremendous, the real selling point to American DG Energy and EuroSite Power customers has typically been the ability to tailor a uniquely optimized, site-specific solution, combined with hardware operating efficiencies that approach 90% (compared to only 35% on average for grid electricity and a seasonally-adjusted 65% for conventional boilers). American DG Energy and EuroSite Power handle everything needed to implement their CHP solutions, from site evaluation and system selection to all the costs for installation, operation and maintenance, giving customers an easily approachable no-capital upgrade choice. Both companies offer to install and run the system at their own expense, taking full advantage of the improved efficiency and carbon avoidance benefits to generate revenue, while providing the business owners with a more stabilized cost structure that is free of worries over fluctuations in fuel price or periodic maintenance outlays. By charging customers a lower cost for the electricity and heat they use via an immediate, guaranteed discounted rate which produces bottom-line savings from day one, such CHP upgrades are as attractive to businesses as they are to carbon-focused environmental regulators.
CHP Taps Carbon Avoidance Market Beautifully
The CM-75 (75 kW) and InVerde 100 (100 kW) microgrid-compatible CHP units, designed and manufactured by Tecogen, Inc. (NASDAQ: TGEN), which is American DG Energy's biggest supplier, are also available with ultra-low emissions control packages, making them perfect for the prevailing carbon pollution standards that are now taking shape in the U.S. These CHP systems already open up some locations for U.S. Green Building Council, Leadership in Energy and Environmental Design (LEED®) credits due to carbon reductions and offer customers a direct route for preemptively sidestepping emerging carbon taxes in the U.S., which will be similar to those already found throughout Europe.
Taxes on energy in Europe designed to cut carbon pollution, like the Climate Change Levy imposed on non-domestic users in the U.K., can be avoided by using CHP that passes muster with the CHPQA (Quality Assurance for Combined Heat and Power). CHP also allows U.K. organizations participating in the CRC Energy Efficiency Scheme to reduce their carbon footprint and carbon taxes. CHP fits the bill for the global carbon pollution initiative sparked by the recent EPA decision, and the global framework guidance already exists to support the technology's roll out via the UN's Intergovernmental Panel on Climate Change (IPCC). The IPCC WGIII Fifth Assessment Report on mitigation of climate change from April of 2014 and the subsequent Summary for Policymakers (PDF) clearly indicate how green house gas emissions from power plants can be sharply reduced through upgrading to highly efficient combined heat and power that is fueled by natural gas.
In a wider view, American DG Energy has secured an agreement with Tecogen to be their exclusive CHP distributor for China, Hong Kong and Japan, where the On-Site Utility model shows great promise, as environmental regulations and rising energy price dynamics, like those in Europe and the U.S., continue to become more and more prominent. The growing global market for CHP is a rising tide lifting all boats with companies like Capstone Turbine Corp. (NASDAQ: CPST), many of whose microturbines (gas turbine plus high speed generator) end up in CHP applications, already seeing the benefits.
ECB Doubles Down On Real Economy with NIRP, Targeted LTROs, ABS Buying
EuroSite Power's existing ability to monetize carbon reductions in Europe, generating revenues off the carbon avoidance boom, will be strengthened considerably by the ECB's historically unprecedented move on June 5th to take banks into Negative Interest Rate Policy (NIRP) territory, with a cut to minus 0.10 percent on the deposit facility rate (essentially charging lenders to sit on money). A simultaneous cut to the main interest rate of 10 basis points (now 0.15 percent) and a 35 basis point cut to the marginal lending facility rate (now 0.4 percent), in addition to new targeted Longer-Term Refinancing Operations (LTROs), moves to set up an outright Asset-Backed Securities (ABS) buying program and put an end to sterilization of Securities Markets Program-injected liquidity.
Germany is currently Europe's biggest CHP market with around 36% of the industrial and utility market share. Not satisfied with being number one in Europe when it comes to CHP, Germany has plans to double its cogeneration footprint by as soon as 2020, having set a target for cogeneration of 25% of all electrical production within the country. This striking indicator from the biggest CHP market in Europe about the future of the space really throws a spotlight on operators like American DG Energy and EuroSite, as well as on the ECB decisions, which are characterized by forward guidance that suggests more will be done if necessary.
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The growing momentum for CHP upgrading across Europe, as well as in the U.S. and abroad, spells big things for sector manufacturers and installation/operation specialists who can help bridge the carbon gap. Innovators in heat capture and recovery technologies, like ForceField Energy, Inc. (NASDAQ: FNRG), 51%-owner of Organic Rankine Cycle technology developer TransPacific Energy, continue to break new ground in waste heat to electricity engineering and provide a sense that there is indeed a bright future in clean, renewable power generation from a broad spectrum of continually evolving heat capture technologies. It seems obvious that pressure to reduce carbon pollution, in the form of rising energy prices for carbon-intensive production methods, will only increase from this point forward. Incentives and allowances by regulators across the planet for low-carbon, clean energy technologies like CHP will continue to be a strong industry driver for the foreseeable future.
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