Raser Technologies' financial history is not terribly flattering.
Last December, Motley Fool was singling the company out as a poster child for debt-ridden businesses with no discernible free cash flow, based on the firm's $80 million in long-term debt and its paltry $284,000 in reported revenue.
The company had struggled unsuccessfully for years to profit from its Symetron AC motor technology, which it had been marketing as an improvement over both existing AC electric motor designs (in terms of torque) and high-torque, permanent-magnet electric motors (in terms of price).
Raser's pitch included eco-conscious overtures to hybrid electric vehicle manufacturers, which may be the only logical explanation for its curious new expansion — into geothermal energy.
What's even more curious is that it seems to be working.
Raser made Fast Company's list of the "50 Most Innovative Companies" last month for its ability to "generate zero-emissions electricity using water that's scarcely hotter than a cup of coffee." The listing followed Raser initial completion of its first 10.5 megawatt commercial power plant.
With considerable backing from Merrill Lynch, Raser has begun an ambitious plan to construct 155 MW worth of geothermal plants on its vast real estate acquisitions across the western United States. It has plans to do the same overseas through a partnership announced in September with Indonesia Power.
Successfully completing those plants would appear to be the only major economic expense for Raser's geothermal project.
"If you think about it: There's no fuel cost, there is a little bit of operating/maintenance cost," says Richard Putnam, the company's investor relations manager. "The only other cost is just capital cost [for construction]."
The operating cost is low because the plants are automated remotely from Raser's offices in Provo, Utah and the Connecticut headquarters of UTC, the company providing Raser with low-temperature power generators.
At the moment, Raser's first commercial facility is supplying 3.5 MW of sustained power to the local utility and is in the process of ramping up to its 10-11 MW net capacity, most of which is being sold to the city of Anaheim, Calif. There is a small bit of irony in the idea of Raser doing business with a city whose claim to fame is a hockey team named after a rag-tag group of down-on-their-luck misfits. Like the Mighty Ducks, Raser seems to beating the odds.
Raser has been reticent to reveal the actual cost of its power production, but it is offering electricity at $13–17/MW-hr less than the going rate for geothermal. That suggests that Raser's method of geothermal power generation may be a considerable leap in efficiency.
Refrigeration In Reverse
No small part of what makes Raser's approach to geothermal power promising is its partnership with UTC, United Technologies Co., whose PureCycle 225 modules are capable of deriving energy from previously useless low-temperature geothermal sites. Raser's Thermo facility in Utah is composed of 50 such modules, each capable of operating independently on one of their four geothermal wells. This allows for continuous electrical production despite routine maintenance, or the inevitable bum unit.
Each PureCycle module is what would be classified as a miniature "binary-cycle" geothermal power plant, which is differentiated from "dry steam" or "flash steam" plants by its use of a second fluid (a refrigerant with a low-boiling point). Water injected into the geothermal well returns to the module and exchanges heat with the refrigerant, which then evaporates into a high pressure gas, pushing a turbine, generating electricity and returning to liquid form in the process.
Of course, binary-cycle geothermal plants aren't new. They're the method of choice for most geothermal areas which contain only moderate-temperature water below 400°F. What makes UTC's involvement interesting is that the company has figured out a cheap and easy method for turning its vapor compression products (think industrial-scale air conditioning and refrigeration systems) into binary-cycle power generators.
"The turbine is nearly identical to a standard centrifugal vapor compressor used in water-cooled chillers," according to UTC sales manager Halley K. Dickey. With minor and simple substitutions, the company has been able to convert entire production lines to the development of mini binary-cycle generators with applicability not just for geothermal, but anywhere waste heat in the 165–300°F range is produced. This includes, coal-fired power plants, bulk commodity chemical plants and — for fans of deep historical irony — exhausted oil and gas wells now capable of a second life as geothermal wells.
So, does this give Raser an edge on its geothermal competition?
Well, while the technology it is leasing from UTC appears strong (as does its geothermal real estate holdings), there is no logical expectation for Raser to remain the primary consumer of UTC's PureCycle units. This leaves the company open to potential competitors who may be able to pair UTC's technology with more geothermal expertise, a better balance sheet, or both.
Raser's success would appear contingent then on its skills in commercial geothermal plant design.
During a conference with investors last Friday, the company recorded significant losses for the last quarter of 2008, attributed primarily to $13.6 million in impairment charges that the company incurred on three of its geothermal wells. Raser's CFO, Marty Petersen, stated that this included a functional well at the company's undeveloped Truckee, Nevada, site; a well at its Thermo site, which was scrapped after becoming "encumbered with hardware down the hole," and a second Thermo well that was not sufficiently useful.
However, the company also has three fully functioning wells operating at Thermo with a fourth well drilled, tested and waiting to be tied into the system—and they've done it all in what industry insiders universally acknowledge as record time.