“The First No-Fuel Power Plant”

By Travis Johnson, Stock Gumshoe, September 17, 2007

This one is from Chris DeHaemer at Taipan’s Red Zone profits, and it looks like it circulated pretty heavily on Friday and over the weekend.

It’s for a company that uses momentum, in Dehaemer’s description, to store electrical energy, and essentially runs a big “momentum battery” that they use to buy up electricity at low rates overnight, then sell it again back to the grid at higher rates during the middle of the day. This is in the unregulated, auction-based energy markets, of course, which are available in many states.

The idea, according to the teaser, is that this company can make a killing without ever having to generate any electricity on its own — and it makes sense on a basic level, since we all understand the “buy low, sell high” business plan. Many of us, in fact, try to follow it.

So … what is this magical company that can store power and instantly re-sell it to the grid when demand spikes?

Well, when DeHaemer talks about “momentum” it’s pretty clear that he has to be talking about flywheel technology — giant heavy wheels, often running in a vacuum, that regulate and, in some cases, store energy with, hopefully, minimal loss. This is not too different from the concept that provides some of the power to the Toyota Prius, though in that case the actual wheels are “flywheels” — when you step on the brake, it sends that kinetic energy from the wheel back to the battery to use for running the engine.

And in a flywheel power plant I imagine it must work similarly (in case you can’t tell, I’m NOT an engineer) — the plant pulls energy off the grid to get the flywheels rotating, tries to develop an environment that allows them to keep spinning without losing much energy, and then, when the power is needed again, the momentum of the flywheel is attached to a generator that can spit electrical power back to the grid.

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OK, so I’m not going to win any technical writing awards for my delightful and colorful description of the flywheel power plant, but I think I get the basic idea. Hopefully you do, too.

So, what is this flywheel power plant company, trading at $1.50 at the end of August, according to the teaser (though as far as I can tell, the teaser didn’t start circulating until Friday, September 14, when the shares were appreciably higher)?

Well, the other clues should help us to sleuth this one out:

Insiders have bought heavily this summer, since July 6, 2007.

And DeHaemer tells us that “it could produce the highest profit margins in the history of the utility industry.”

So … figured it out yet? Maybe so, but I’ll tell you anyway … loyal reader Stonecutter and I both agree that this company is …

Beacon Power Corp. (BCON)

And it has had a wild couple of weeks, during which big news came out about several things: a $10 million cash infusion, testing success for their product, and news about preparing for manufacture and the launch of the actual power plant by early next year.

And, being an occasional sucker … er, investing enthusiast … myself, I actually thought about dabbling in shares of this one with my own cabbage when the press releases were flowing from the company last week. Don’t worry, I don’t actually own any shares, but I’m always tempted by interesting technologies like this.

Unfortunately, I’m a bit of a sucker for innovative electrical power companies — one of my larger mistakes, which remains in my portfolio at a huge loss so far, is MMC Energy (MMCN), which is a more conventional electricity generation company, albeit one with it’s own special niche (unfortunately, a niche that they’ve grown much more slowly than I was hoping).

So I certainly wouldn’t consider my interest in the shares to be at all significant, except perhaps as a contrarian indicator.

As with most startup companies and projects like this, it’s very hard to get any idea of when they might become profitable … if they ever will. Of course, since they’re starting up their plant probably over the winter, and winter is a generally low rate and low usage time for electricity, this is not perhaps the time to build wealth through an eletricity rate arbitrage scheme like this … or get attention from the media due to high electricity rates.

But what about this company? Well, if you want to know more about them one thing to really focus on that newsletters almost never cover well, and certainly almost never note in their teasers, is competition — and BCON, as you’re probably aware, did not invent the flywheel. There are a few other power companies of varying focus who sell or manufacture or use flywheel products for electricity storage, they did a quick overview of a few of them over at Stockerblog a few months ago that might help you go get started.

The company is, to get down to brass tacks, a long way from being profitable. These are expensive installations, and I have no idea what their plans are for a second plant, or for expansion. While the Northeast is an appealing place for electricity companies due to the utilities’ inability to build new plants very easily thanks to NIMBY concerns, it’s not the most taxed electrical grid in the country — usually southern California gets that nod, especially in the Summer, so that’s where most of the energy traders of the last, scandal-ridden school got their chops (Enron, et al). It would be nice to see the company try this in other markets, too, which may already be in the plans for all I know.

In my mind this ends up looking risky in a few ways: It’s a bet on a technology that hasn’t yet proven itself on this scale and in this kind of real world usage; it’s a bet on continued high energy rates and a continued open auction market for electricity; and it’s a bet that these guys are better than and/or ahead of their competitors. I’m most sanguine about that last one, since this is a new product/service and, if it works, there may be plenty of room for it to grow even if several companies get into the game. The other two, I’m not so sure.

If anyone else is an expert on flywheel energy storage … or has looked at Beacon or any of the other companies in any detail, please feel free to share. I do see potential, but that doesn’t necessarily mean much … potential without earnings can only last so long.


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20 Comments on "“The First No-Fuel Power Plant”"

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Anonymous
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Anonymous
September 17, 2007 4:35 pm

“The First No-Fuel Power Plant”? I would have thought that any solar array or any hydro plant could claim the ‘no fuel’ distinction. Anyway, there IS fuel for the flywheel—it’s electricity.

One Guy
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One Guy
September 17, 2007 5:56 pm

You’re right, of course — this is “no fuel” electricity in the same way that electric cars don’t have emissions — they get someone else to burn the fossil fuels for them.

Dilly
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Dilly
September 17, 2007 6:01 pm

Potential means you ain’t done it yet. — Darrell Royal

uthr
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uthr
September 17, 2007 6:23 pm
The technique of storing electrical energy in other energy forms is not new. “Pumped storage” uses the same idea of pumping water uphill when electrical power is cheap, then recovering electricity from the water (using gravity through turbine generators) when power is needed/expensive. Not new and depends heavily on time-of-use pricing differentials. Some utilities already do this to help balance electricity use and reduce capital expenditure for the heavy load spikes. I expect if momentum flywheels are cost-effective, it wouldn’t be hard for utilities to add this technology. Low barrier to entry for existing utilities and newcomers, or in Buffett… Read more »
b.eiland
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b.eiland
September 17, 2007 8:04 pm
I’ve had quite an interest in Flywheel Energy Stowage ever since late 60’s when John Hopkins Labs first suggested their use. On a boat design forum you can view some of my postings on the subject, http://boatdesign.net/forums/showthread.php?t=9630&page=11 see items 163-206. Quoting #201, “I’m not so sure this alone hampered further development. Fuel cost in this country have been so low compared with the rest of the world there just has not been real economic reasoning for development of alternative methods, devices, technology. Maybe that will finally change with this new realization of world fuel prices. Hopefully we will see a… Read more »
sharkproof
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sharkproof
September 18, 2007 2:43 pm

The only “No Fuel Power Plant” that I’ve found is this one.

http://ausra.com/

Unfortunately they aren’t a public company but appear will be possibly someday. It appears the start up costs won’t be as prohibitively expensive as the concept seems pretty simple. Typically in my experience the simpler the more successful.

I’m new here, but love the work that I’ve read thus far. Love to hear what the Gumshoe and group have stealthed out that resulted in some bread in the bank.

Regardless, been very interesting reading thus far. Thanks Gumshoe.

Anonymous
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Anonymous
September 25, 2007 2:28 pm

I purchased 100 sh of bcon
power about 2005 for $2.00 per
share.. its gone nowhere since
and has never been in the profit
zone until i sold it about May
2007 at a minor loss.
it never had any momentum nor
visible prospects nor visible
leadership from its hide bound management…

Anonymous
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Anonymous
October 5, 2007 2:04 pm

Hey Gumshoe: Thanks! I really like your creative writing style combined with the novel idea of sniffing out recommended stocks along with the grid results.
I suspect you’ve been in the writing business for awhile, one way or another. Despite your caveats I hope your investments have been profitable.
Your cadre of respondents are insightful and skeptical, skills necessary in the investment “game”.
I previously said I’d subscribe.
Again, thanks.

Anonymous
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Anonymous
October 14, 2007 3:24 am

TFN is touting a $1.29 stock in China and a solar energy stock. A little tight on Mortgage money and would like o see if any gummers could help with the names. Thanks pillman

Anonymous
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Anonymous
November 3, 2007 10:28 pm

Active Power ACPW has a flywheel
back-up system. You might be interested in trading them for the flywheel effect!
Also, a stored energy idea, STLOF
was based on stored hydraulic power
and appeared to be a viable mileage booster on vehicles but was only full of promises.

Anonymous
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Anonymous
November 9, 2007 11:46 pm
This following is WGPMFOutstanding InvestmentsNov. 9, 2007 New “Slow Volcano” Energy Mandate Dear OI subscriber, A new California law could be creating one of the biggest energy opportunities since nuclear power came on the scene in the 50’s. The law will force California to produce 20% of its power from sources such as “slow volcano” power. Luckily we’ve known about this “slow volcano” power for sometime now. And our resident energy expert Byron King has come up with the best possible ways for you to cash in on this new power source. It’s all spelled out in the report below,… Read more »
Constance
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Constance
November 13, 2007 8:11 pm

WGPMF – no such symbol ??????

Anonymous
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Anonymous
November 13, 2007 9:19 pm

I too received a post about “slow volcano” power. However, I have yet to find any other reference to it. Have you investigated this one and if so, what are your results?

Regarding flywheel power: without exception all flywheel applications
I have studied require power. At best the more pratical ones have been an even trade due to losses. It should be noted that it requires power to create and maintain a vacuum.

Anonymous
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Anonymous
November 13, 2007 11:23 pm

It’s “WGPWF”

And, 3 of the 5 touts in the “Volcano…” are ORA (Nevada & Nicaragua), UGTH (Idaho); NTAH (Nevada), and of course, WGPWF

Anonymous
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Anonymous
November 13, 2007 11:25 pm

11-13-07 What’s this one all about???? From Agora.

After four months of research and over 36,121 miles traveled, eight high-level meetings and over 217 hours with his nose in books, this geologist and former Navy “insider” has put together all of his findings in a special report, titled The Five “China Lake Energy” Companies That Could Make You $372,340.

Anonymous
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Anonymous
November 14, 2007 8:09 am
“China Lake Energy” and “Volcano Power” teasers: (Here’s the answers) The ‘SLOW VOLCANO” and “Navy Insider…” teasers of 20071112: Candidates: Price 11-13-07 NTAH — Nevada $1.12 ORA — Ormat with Holdings in Nicaragua & Nevada $50.72 UGTH — Raft River in Idaho $3.65 WGPWF — Geysers & Western Canada $0.4565 SRAGF — Sierra Geothermal Power $0.6065 NGLPF — Nevada Geothermal Power $1.10 PGTHF — Polaris Geothermal $1.16 1) Western “Slow Volcano” Dynamo #1: Likely to be “UGTH” at $3.65 on 11-13-07 This unheard-of company controls 10.8 square miles of choice “slow volcano” land in southern Idaho. An independent firm estimates… Read more »
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