*Transcribed from BillTuckerTV
Bill Tucker: Welcome to the podcast My Two Cents. I’m Bill Tucker. In this edition I’ll be speaking with Jeremy Feakins, the Group Executive Chairman of the OTE Corporation. OTEC takes its name from an old process known as “ocean (thermal) energy conversion.” OTEC is attempting to take this well-known process and do something no other company has ever done before, which is make it commercially viable.
I began by asking Mr. Feakins where his company is located and if he could describe to us what kind of processes they are currently involved in.
Jeremy Feakins: Our headquarters are in Lancaster, Pennsylvania, we have an engineering office in Manassas, Virginia, and then we have sunlight offices in the farmost U.S. Virgin Islands and Cayman Islands.
Bill Tucker: What are the purposes of the sunlight offices?
Jeremy Feakins: Well, we have a project that’s ongoing in the Bahamas. We are doing a feasibility study as authorized by the Virgin Islands legislature which was authorized last year. So the feasibility study is to determine the appropriateness of both ocean thermal energy conversion (OTEC) and seawater air conditioning (SWAC) for the U.S. Virgin Islands to supply power and cooling.
Then, in the Cayman Islands, we have a general terms agreement with the Health City. This is a large campus that’s going up, phase 1 is already open. It’s a medical facility doing heart surgeries and some other types of medicine. So, we have projects in all three of those locations. The Bahamas and the U.S. Virgin Islands are obviously very intensive because there is a lot of work involved in both the project in the Bahamas and the feasibility study.
Bill Tucker: Tell me what it is that you do. What is the technology that you are using or are developing? I don’t know what the correct term for it would be.
Jeremy Feakins: The technology produces electricity from the sea by using the temperature differential to create a heat cycle, which produces power. It does that by using the warm seawater to boil working fluid which produces steam (which) drives a turbine generator, and then we use cold seawater to turn that steam or that gas back to its liquid state. That’s called the Rankine cycle, by the way. It’s the same cycle that’s used in oil and coal-fired power plants. Except, in oil and coal, of course, you use oil and coal as a heat source. We use the heat that’s trapped in the sea as our heat source. So, we are environmentally benign and we don’t use any fossil fuels to produce the electricity.
The second technology, which is kind of similar to the first, is called seawater air conditioning. Except, we only use one pipe, and that is a cold-water pipe to bring up cold seawater from the bottom of the ocean, which we use for cooling large commercial structures such as hotels, airports, hospitals, and so on.
Bill Tucker: You talk about this technology like it’s established technology. Is this technology that has been around for a while?
Jeremy Feakins: Ocean thermal energy conversion has been around since the 1800s, at least in its theoretical form. The U.S. Department of Energy, Lockheed Martin Corporation, DCNS — the French naval defense contractor — and our company (among others) have spent a lot of time researching and developing the technology.
As you can imagine, since the 1880s, technology has moved on quite a bit, right? That is particularly apparent when you look at the advancements made in the oil and gas industry that use a lot of the components we do. For example, they use big, huge pipes. So do we. Well, in recent years, those deep seawater pipes have gotten even larger. They are now more robust. They are actually less money because the materials used for those pipes have come down in price. The same as with pumps, or with heat exchangers. That technology is also more efficient today, and is actually less money.
There’s a lot of things that have happened in the past 5 years or so, certainly in the last 10 years that has made OTEC a more compelling technology, whereas before it was economically difficult to make a case for OTEC. It has now become very viable. You’ve got government agencies like NOAA, for example, that have come out with studies and reports that say OTEC is now ready for commercialization using mostly off-the-shelf components. So it becomes a very attractive proposition for countries around the equator and just north and south of the equator, which are mostly developing nations, for the most part, (where) about 3 billion people live. What do they need? They need affordable energy. They are importing their fossil fuels which makes electricity expensive, so they need something cheaper than that. I think it’s a given that we need to be a little more careful about what we’re doing to our planet, and so we want and try to reduce CO2 emissions, which OTEC does.
There are some other spinoff technologies too, which have been proven on the big island of Hawaii, which is where a lot of the modern day research of OTEC has taken place. What’s happened there is these spinoff technologies (are using) the nutrient-rich water that’s brought up from these big seawater pipes for secondary applications such as fish farming, agriculture, and desalinating the water for drinking or for bottling. If you go to the NELHA website (nehla.org), you’ll see all these different companies that have sprung up using this seawater. When you look at providing this technology to developing nations, you’re giving them affordable, clean electricity, you’re giving them fresh water, and you’re giving them economic development opportunities in the form of food production.
Bill Tucker: Are you participating in those technologies and the research in Hawaii?
Jeremy Feakins: Our engineers, both Dr. Oney and Dr. Ted Johnson — who headed Lockheed Martin’s ocean engineering division for a number of years — and Dr. Panchal, who’s a consultant to our company and works with us on these projects, have all worked on not only on the projects in Hawaii, but they have worked with research and development on OTEC for Lockheed Martin Corporation, and with others. So, they are marine scientists, they’re engineers, they’re oceanographers, and they have spent their entire careers working OTEC.
Bill Tucker: So it’s an old technology. How long has Ocean Thermal Energy Corporation been around?
Jeremy Feakins: We trace our roots back to 1988 when OCEES began to research and develop OTEC, including, by the way, the building of the big plant in Hawaii where Dr. Oney was a part of the team. That was a Department of Energy-sponsored project. People often ask me, “Well, why hasn’t OTEC been done before?” The answer is there hasn’t really been a company out there that has had the experience to be able to go out there and do OTEC, because the OTEC community is very small. When I made my investment back in 2009, one of the things that I was very excited about was the skills of the oceanographers, marine scientists, and engineers that were around.
The other thing is that these plants are very expensive. They’re a large capital expenditure. One of the things that I looked at when I came onboard was changing the business model to direct more to our customers and providing them with an opportunity to acquire the technology and take advantage of the drinking water, the electricity, or the cooling. Paying for the service — for the electricity, for the cooling, or for the water — rather than having to come up with a capital expenditure for the plants, which in the case of many of our customers, would be kind of impossible.
Bill Tucker: So you kind of have a more traditional business model, or of a utility in essence. What is the cost comparison? I’m curious. In situations like along the equator where we have ideal conditions for what you’re doing, you seem to me to be probably the best cost alternative.
Jeremy Feakins: We really are. I think people often say, “Why don’t you do this out of the United States?” First of all, there not many resources around the United States to do OTEC. There are some, but not many. In this country, we’re paying $8-$10 per kilowatt hour. In our markets, they’re paying 30, 40, 50 cents per kilowatt hour. In those markets, we can be extremely competitive. When you start to take into account the production of water for drinking, aquaculture, and agriculture, we can reduce the price of our electricity still further.
Bill Tucker: Do you sell those as separate products?
Jeremy Feakins: Yes, because we’re not in the fish farming, or the agriculture, or the bottled water business, for example. We just want to sell the water.
Bill Tucker: So you basically have two revenue streams; a power stream, and you have a water product.
Jeremy Feakins: Yes, that’s exactly right. With the water we have two streams; water for drinking, and then we have water for aquaculture and agriculture, and then we have the water for the cooling.
Bill Tucker: Can you make a third? *chuckles*
Jeremy Feakins: We could. You know, when Dr. Johnson was at Lockheed, he spent a lot of time researching the production of hydrogen from OTEC plants. Over the past three years or so, we’ve been working with a number of potential customers and a number of different locations where we now have several MoU’s, general terms of agreement, we have one contract for the seawater cooling, and we have this feasibility study going on in the U.S. Virgin Islands which we’re getting ready to present. Our hope there is that we can convince the U.S. Virgin Islands to embrace OTEC and embrace the production of water for those islands. DCNS, by the way, the French defense contractor, is our partner in that feasibility study.
Bill Tucker: This sounds like a viable, real, commercial, profitable enterprise. Am I correct?
Jeremy Feakins: Yes! I don’t know any other company that has the kind of people onboard that we do. Again, to bring it back to a more personal level, one of the reasons why I got interested in it is because I could immediately see the benefit to mankind that this technology could bring. It’s not just about the affordable, renewable electricity, although that’s important. It’s about the production of water and the economic development opportunities.
Bill Tucker: You have three viable commercial operations? Is that correct?
Jeremy Feakins: Yes, three projects that are in full swing at the moment. They’re at various stages of their lives. They’re all early-stage, but our hope is to have at least five projects moving forward to completion within the next 5 years. That’s our plan.
Bill Tucker: So, is it fair to say this is an established technology, but it’s also somewhat developmental?
Jeremy Feakins: OTEC is ripe for commercialization now. It’s ready now. People also say to me, “Now the price of oil has come down. How am I affected?” Well, one of the things that OTEC does, it decouples the price of electricity from the price of oil. That’s been the singular focus of our customers; trying to get away from being hooked to the price of oil. They want to be able to predict their energy costs into the future, and OTEC allows them to do that.
Bill Tucker: Jeremy, can you give me an idea of (realistically) what your customers would expect to pay? If they’re paying 30-40 cents per kilowatt, what does OTEC project or think they can sell the electricity for?
Jeremy Feakins: Well, at least half.
Bill Tucker: Really?
Jeremy Feakins: Yeah! There’s nothing complicated about the good ol’ Rankine cycle. It’s not that complicated, and when you explain it to potential customers, they really get it. Because they are hoping to wean themselves off of fossil fuels, or at least to reduce their dependency on fossil fuels, to bring down the cost of electricity that they’re supplying to their customers: many of whom can’t afford these big 30, 40, 50-cent kilowatt hour prices.
Some of the markets that we’re in … some of these customers of the electricity company or of the utility have to turn off their lights at 8:00 at night because they can’t afford electricity. We’re in 2015 for heaven’s sake. The fact that OTEC produces affordable electricity is huge for them.
Bill Tucker: When do you expect your first commercial operation to go online?
Jeremy Feakins: The first commercial operation will be our seawater air conditioning plant in the Bahamas. We should be online by the backend of 2016, or the first part of 2017. There is probably about an 18-month to 2-year construction time. That’s for when you’ve got the contracts signed with the customer, you’ve completed your environmental impact assessment, you’ve arranged all the project financing under our business model. So, by the time you’ve done all that, and some negotiating with the contract, there’s a usually about a lead on time of about a year to do that, and then, as I said, about an 18-month to 2-year construction period.
Bill Tucker: Just one last question I think I want to ask you, and that is: as you’ve described it to me, your business model is a business model most people can understand, and that you operate as a traditional utility. But, have you ever, or has the company ever looked at licensing this technology? Or, are you more interested in maintaining the intellectual property rights and possessing this and profiting from it yourself?
Jeremy Feakins: No, I think the most important thing for us is to get the technology out as fast and as quickly as we can. So, we would look at any sensible business arrangement in order to accomplish that objective.
Bill Tucker: Jeremy, thank you very much for your time. I appreciate it.
Jeremy Feakins is a British born (naturalized US Citizen), multi-talented, diverse senior executive and entrepreneur who has achieved extraordinary success as a founder and investor/advisor to dynamic growing businesses. Aside from his duties as CEO and Chairman of Ocean Thermal Energy Corporation, Jeremy also serves as the Founder and CEO of JPF Venture Group, Inc; a team of experienced, successful investors who have years of experience investing in companies.
For more on Jeremy Feakins and Ocean Thermal Energy Corporation, visit their websites below!