Q2Power strives to give businesses and communities the power to manage and
monetize their waste through scalable technology and networked business solutions.
We seek to eliminate costs and regulatory liabilities of waste disposal for
under-served customers by using these waste resources to generate distributed
renewable energy and other valuable reuse co-products. We call our small-scale,
customer-centric solutions “Resource Ecosystems”, and see them as
critical steps towards what we believe to be the inevitable decentralization
(reducing transportation and increasing resource utilization) of the $75 Billion
waste management industry in the United States. Our vision is to become an agent
of change and global leader in this transformational shift from “wasteful”
to “resourceful” attitudes and practices. In this way, we will work
to contribute to the long term sustainability of our customers and our planet.
The Company’s prime target market for development of our Resource Ecosystems
are small-scale Waste Water Treatment Plants (“WWTPs”) and other
sites such as farms that utilize Anaerobic Digestion – a proven process
that reduces bio-solid volume, treats pathogens, and produces methane (a useful
fuel, but also powerful greenhouse gas if not eliminated) as a by-product. Approximately
400 of these WWTPs (out of about 1200 nationwide) process under 20 million gallons
per day (“MGD”) of waste water; but only 55 of them (14%) utilize
their waste methane for power or heat, according to the U.S. Department of Energy
(“DOE”) and Environmental Protection Agency (“EPA”).
Further, most of these WWTPs send their bio-solids (i.e., sludge, the resulting
waste of the AD process) to landfills, which is a major cost item. In the Company’s
observation and research, these WWTPs are generally over-looked by established
waste management and waste-to-power companies because they are too small for
traditional, power and waste solutions.
We also focus on commercial and smaller industrial customers that produce waste
fuels in their primary manufacturing processes. To the extent that we can combust
these fuels on site while meeting EPA air quality guidelines, we can utilize
our proprietary technology to generate electric power and useful process heat
with resources that previously constituted a disposal cost item for the facility
owners. In doing so, we may be able to reduce their operating costs and power
consumption from the grid, while eliminating certain liabilities and expenses
of waste fuel transportation and disposal.
Our business model is based in large part on our proprietary technology, which
currently includes a unique reciprocating piston external heat engine (the “Q2P
Engine”). The foundation for this technology comes from our 20-year (with
two 10-year renewal periods) worldwide exclusive license agreement with Cyclone,
our former parent. Independently from Cyclone, we have developed this core technology
to a working “pilot stage” product currently in the field, and have
recevied our first commercial purchase order to be delivered in Q2 2016.
We have also developed other critical technologies to support a total combined
heat and power (“CHP”) system around the Q2P Engine, such as waste
fuel burners, controls and other subcomponents (collectively with the Q2P Engine,
referred to as a “CHP System”). The CHP System produces grid-ready
electric power and process heat from the input of waste liquid or gasseous fuels
such as methane, biogas, used motor oil, and other similar non-spec fuel resources.
Early internal testing of our combustion system shows relatively clean emissions
from these waste fuels, meaning that we believe we can meet EPA air-quality
standards for similarly-sized power systems; however this has not yet been verified
by an independent third party. Our complete CHP System package is housed in
a portable shipping container, and has modular functionality, so Q2P Engines
can be added to generate additional power, as needed.
The Q2P Engine itself runs on a steam-based Rankine cycle, similar to how large-scale
coal and nulear plants produce power; however, our technology is designed for
small-scale distributed power generation applications. This engine produces
mechanical power when the working fluid (water) is presurized and super-heated
to about 600F in a heat exchanger that is placed in the hot exhaust stream of
another work-producing piece of equipment (such as our proprietary methane/biogas
burner system). Through a specialized valving subsystem, this fluid is piped
to the Q2P Engine’s cylinders where it expands rapidly to push pistons
and turn a crank shaft. The cooling gas then goes into a condensor where it
turns back into a liquid to start the process again. In this way, the system
is “closed-loop”, not requiring any additional fluids to be added.
The Q2P Engine has been running both in our facility and in initial field pilot
programs for over one year, logging hundreds of hours of operating time.
Beyond the Q2P Engine and CHP Systems, we are reviewing other technology and
products offerings that can provide additional value to our target customers,
and expand our total addressable market. For instance, our CHP Systems can generate
electricity and process heat from methane produced by Anaerobic Digesters at
wastewater treatment plants (“WWTPs”). We currently have a pilot
project in the field which is generating power at a WWTP in central Ohio. A
large portion of a WWTP’s operating expenditures are spent removing the
residual sludge from digesters, either by combusting or landfilling this material.
Technologies that can convert sludge to other useful products, such as compost,
engineered soils or nutrients, could provide additional value for our future
customers and new revenue streams for the Company. We are pursuing synergistic
alliances with companies that have both technology and business networks for
the manufacturing and sale of such beneficial re-use products from waste like
sludge.
We currently pursue direct sales of our Q2P Engine and CHP Systems to commercial
and municipal customers. We received our first purchase order in January 2016
for a 10kW CHP System that is capable of running on waste liquid fuels. This
CHP System is expected to be delivered in Q2 2016, and we are receiving milestone-based
payments for work completed during the contract period. We believe that there
are many other similar customers in the US that could benefit from one of our
CHP Systems by reducing waste liquid fuels that typically present a cost for
the facility to dispose (as well as an EPA liability in some cases), and converting
that negative value feedstock into power and process heat.
As we grow, we intend to transition our business model to one that compensates
the Company for the value we create for our customers over time. For instance,
we may be able to market Power Purchase Agreements (PPAs) and leasing programs
directly to municipal, commercial and industrial facility owners. In this manner,
we would retain ownership of our equipment and sell electricity and heat to
our customers at a cost below their standard utility rates over a long-term
agreement (typically 10 years). These types of PPAs have been utilized for decades
in the commercial and residential solar power industry. Furthermore, we may
be able to receive fees from certain customers for the disposal of some types
of waste fuels. This revenue stream is called a “tipping fee”, and
in certain situations, waste disposal and environmental liability avoidance
can be of more value to both the customer and the Company than the production
of power and heat.
We believe that our CHP Systems may provide a strong base to allow us to expand
our product and service offerings with our customers. For instance, a WWTP that
uses our CHP System to generate power and maintain the operating temperatures
within their Anaerobic Digester, could also retain our services to remove sludge
and convert that typically landfilled waste into useful co-products like compost
and engineered soils. In doing so we could provide a total waste solution for
these customers that may reduce their operating costs, eliminate regulatory
liabilities of flaring methane and landfilling bio-solids, and allow them to
become a more sustainable “green” facility – which has important
public / political benefits for municipal facilities.
For the Company, such an expanded business model offering could build value
by potentially increasing annualized revenue from each customer (by now including
tipping fees for bio-solids), and providing the feedstock for production and
sales of revenue generating co-products. Such a strategy could also allow us
to become more involved in the sustainability of small WWTPs and other commercial
and industrial facilities; and create manufacturing economies of scale, infrastructure
and sales networks that can be applied to the growing commercial and agricultural
Anaerobic Digester markets over the following decade.
As of the current date, the Company has installed one pilot system at a WWTP
in central Ohio, which has been generating up to 10kW of power for that facility.
We do not receive revenue from this installation, and have been using it primarily
to test equipment, components and business models for future sales. We are currently
in discussions to install additional units at nearby facilities that are larger
in size and will utilize heat recapture technology to place our waste heat back
into the anaerobic digestion process. In this way, our systems can provide two
useful outputs (electricity and heat) from the host site’s waste methane,
thereby increasing value to and potential revenue from each facility.
To market our products and services, we intend on developing agreements with
distributors, value added resellers (VARs), contracted engineering companies,
and other similar parties that have access to a broad base of customers. For
instance, we currently have a Collaboration Agreement with a company called
Phoenix Power Group that develops steam generating equipment utilizing waste
motor oil furnaces, and has access to a distribution network of tens of thousands
of current users of these furnaces, such as garages, lube shops and car dealerships.
Our agreement with Phoenix Power allows them to purchase our Q2P Engines, control
systems and other components to integrate with their steam generation and waste
oil furnace system, and sell through their network this combined technology
product, which is capable of generating up to 10 kW of grid-ready electric power
and 80kW of space /water heating for a facility. The agreement also allows us
to purchase their equipment, combine it with our technology, and sell that product
to our customers provided we do not compete directly with their current market
of garages, lube shops and other similar locations in the U.S. and Canada.
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