New miniturbine takes aim at microturbine market

By Max Mayer
Energy Industry Analyst

August 17, 2001 — The microturbine industry has taken off over the past couple of years through the emergence of new competitors and applications. Capstone Turbine, by far the most publicized microturbine manufacturer has been at the forefront of engineering, design, packaging, distribution and operating success; the company reported this month in its analyst conference call that profitability may be reached by the end of 2002 if the company can meet sales goals. Capstone’s drive toward profitability has been accelerated by the scalability of its product toward higher outputs.

Improved Gross Margin Speeds Profitability

The shift to higher output microturbines as a function of market demand was evidenced by Capstone Turbine Corporation’s development of a 60 kW unit, up from the initial 30 kW unit. A significant proportion of customers were ordering multiple units and linking them together for greater output. The company touted that linking multiple units together would allow the user to maintain maximum efficiency with the flexibility to follow electric load closely. The demand for operating multiple units proved strong enough that Capstone doubled output, developing 60 kW machines. Offering larger output machines improves Capstone’s gross margin and limits the company’s exposure to supplier risk. Critical componentry such as circuit boards, which have delayed production due to shortages are required in smaller batches when producing greater output units as less componentry is required for inventory and assembly.

But economies of scale will benefit the manufacturer more than the customer. In fact, at Capstone’s second quarter conference call, the principals indicated that the per kilowatt cost for the 60 kW machine would fall to approximately $800 per kilowatt versus $900 per kilowatt for the 30 kW model. Indeed, demand for microturbines is great enough that the company may not have had to reduce cost per kilowatt at all. Until now, customers that required the low emissions of the microturbine for DG applications had no choice but to install multiple units in parallel. Citing strong demand, the company hinted that prices might actually increase in the future. This will depend largely on the availability of competing products.

Enter the DTE Energy Technologies ENT 400

Looking to capitalize on demand for high output units, DTE Energy Technologies, a subsidiary of DTE Energy will begin delivering 400 kW microturbines early in 2002 under the brand name energy|nowTM.

DTE Energy Technologies, Turbo Genset Company of London, and Pratt & Whitney Power Systems of Canada have partnered to build a 400 kW miniturbine. Unlike the vertically integrated Capstone Microturbine Corporation that built its business from the ground up, DTE Energy Technologies has taken best-of-breed components from several manufacturers and designed a 400 kW micro–or as the company calls it–a miniturbine. DTE Energy Technologies has effectively launched itself onto the microturbine scene with a new marketing approach that the company hopes will realize annual sales of 500 or more units by the year 2005.

Target Market

Several potential markets are expected to be served with the miniturbine. Among them are the typical distributed generation markets for Internet data centers and commercial buildings. The units are expected to achieve greater cost economies through the process of cogeneration where the exhaust heat of the turbine engine is used for other building processes such as hot water heating. The economics of microcogeneration applications are favorable. DTE Energy Technologies however, will focus on a new market application–the microgrid, which the company expects to account for 60 percent of sales.

Microgrid Market to Drive Sales

The microgrid is a distributed generation model envisioned by DTE Energy Technologies’ Chief Technology Officer Murray Davis. The microgrid consists of several miniturbines to provide baseload capability, supplemented perhaps by one or more combustion engines for maximum load following capability, with an optional connection to the power utility. The microgrid concept was described as a virtual utility, where a collection of different power generation technologies are brought together to serve an aggregation of loads to provide quality and reliability that is superior to that of the current utility system. A typical microgrid based on the ENT 400 is envisioned to serve a load of around 1 to 2 megawatts. Indeed the design of the ENT 400 package was driven from the outset to enable operation in parallel with other units in a microgrid.

DTE Energy Technologies described a current microgrid under development at a facility in southeast Michigan consisting of three DTE Energy Technologies ENT 400 miniturbines providing an installed capacity of 1.2 megawatts.

Distribution and Marketing

DTE Energy Technologies plans to market and sell ENT 400 units worldwide via regional and industry partners. Many of the initial installations will be supported by the engineering and utility expertise within the company’s applications engineering group, a small team that can specify, design and install a distributed generation project from inception through to commercial operation. Eventually the company sees more of that work done by their partners who will be responsible for the engineering of the projects, including microgrids, themselves.

DTE Energy Technologies has a broad range of distributed generation technologies that it plans to offer as part of a portfolio of products. This range of technologies lends itself to the microgrids, a concept company sees being applied to a wide range of customer needs, including premium power applications, light industrial, campus-like facilities and office parks.

Continual Customer Support

Encouraging end users to employ DTE Energy Technologies’ distributed generation solutions is the company’s System Operations Center (SOC) value proposition. The system will remotely monitor the condition of each miniturbine via 150 signals of transmitted performance data. By accessing weather forecasts, local distribution system demand, and real time gas and electricity prices, the SOC can schedule and dispatch generating units, optimizing plant operation and economics. Any distributed generation unit or microgrid operator will be able to connect remotely to the SOC system and receive current performance information. The SOC’s flexibility also enables it to be retrofitted to existing generator sets for complete system optimization.

Technology Partners

Pratt and Whitney has sold 100 ST5 turbines to DTE Energy Technology for an undisclosed amount. The ST5 is derived from the PW207 aero engine, which is used as a powerplant in various helicopters. The proven technology was further outfitted with a recuperator, boosting efficiency 8 to 9 percent. These engines will directly drive high-speed generator systems from Turbo Genset, which employ a unique technology that allows high performance and reliability at one-tenth of the size and weight of conventional generators in this power range.

A Market Evolves

Going forward DTE Energy Technologies has entered into agreements with Pratt & Whitney and Turbo Genset to develop a 1.2 MW miniturbine. Further demonstrating confidence in large scale micro- or miniturbine generation the company will employ the same marketing channels to serve medium-to-large industrial and commercial customers. Such an engine would deem most combinations of competing microturbines unnecessary.

For more information on this article or on other energy related topics please contact:

Cynthia Cabral
Frost & Sullivan
Media Relations Executive -Industrial
Phone: 210.247.2440
Fax:210.348-1002
Email: ccabral@frost.com

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