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Practical Experience Reveals That Energy is a Business' Third-Highest Cost.

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Author: John Hurst

Practical Experience Reveals That Energy is a Business' Third-Highest Cost.

John Hurst www.RenewableEnergyStocks.comJanuary, 2006

With America's commercial business sector leading demand, the cost of providing energy to the nation's business and residential consumers is expected to easily exceed $200 billion this winter.

Walter W. 'Chip' Schroeder, President of Distributed Energy Systems Corp. (NASDAQ: DESC), which started out as a hydrogen company, succeeded originally on the strength of the excitement surrounding fuel cells five years ago. "The reality is that nobody has succeeded with fuel cells," he said, "to anything like the degree of performance and particularly cost that they were aiming to achieve by now."

With fuel cells still not ready for prime time, Distributed Energy adjusted its sights by adopting ready-for-market technologies and acquiring a company that builds projects and delivers power to end users looking to supplementing their grids and getting more control over their electricity supplies. It worked and Schroeder now says, "We're trying to do above ground what a number of technologies have proven very successful below ground.

"Things like directional drilling, seismic and measurement well drilling have greatly improved the ability to turn marginal resources into profitable production. Above-ground technologies are letting us direct energy to its highest and best uses, more effectively. All electricity is not demanded equally. Now, control over the price, reliability and quality of the power is achieved." The subsidiary, Northern Power Systems, designs and installs systems in parallel with a grid at points where the value of electricity is highest.

"People need energy for all sorts of different uses, and some are much more valuable than others. Technology is helping to achieve differentiated quality of service in a way that really wasn't commercially feasible even five or 10 years ago. We are building high efficiency (70% or better) systems that yield three to four year payback and significantly improved reliability." he said.

George Burnes, President of SmartCool Systems, Inc. (OTC.PK: SSCFF; TSXV: SSC), explains the primary driver towards commercial energy efficient technology as being the desire to reduce operating costs. Energy, he added, is typically the third largest operating expense for a business, ranking behind only salary costs and rent.

"In addition to this as we move forward into the 21st century," Burnes stated, "pressure from governments and environmental lobby groups as well as geo-political events is accelerating global demand to reduce the dependence on fossil-fuelled electricity generation. International treaties such as the 'Kyoto Accord' have resulted in many countries formally committing to significantly reduce 'green house gas' emissions.

"Recent geo-political instability in major fossil fuel producing regions has only served to increase public demand within North America to reduce dependence on fossil-fuelled electricity generation. This has resulted in cash and tax incentives being offered by utilities and local governments in many states and provinces to encourage industrial, commercial and institutional users to reduce electricity consumption through the installation of energy savings equipment."

Burnes said businesses are looking for the means to reduce costs, increase profits and satisfy ever-increasing demands to reduce greenhouse gas emissions and preserve the environment.

The Dow Chemical Company (NYSE: DOW) said it has established relationships with a number of organizations on energy efficiency. Dow is an active member of the American Chemistry Council's Energy Team. Dow is also a member of the Consumer Alliance for Affordable Natural Gas (CAANG), which advocates for a renewed nationwide focus on energy efficiency and conservation, as part of a comprehensive and balanced U.S. energy policy. The Company is participating in an industrial energy efficiency campaign initiated by the U.S. Department of Energy and is also a major corporate sponsor of the Alliance to Save Energy's "The Power is in Your Hands" consumer energy conservation campaign, launched in December, 2005.

A Dow spokesman in Houston, TX, commented, "Dow is also committed to helping consumers reduce their energy consumption by producing products that help lower electric bills while making a positive difference for the environment. Cars, homes and buildings use significant amounts of energy. Dow offers many energy efficient solutions including STYROFOAM™ insulation products and GREAT STUFF™ Insulation Foam Sealants. All can help reduce energy use for homeowners and businesses by 20-30 percent. We also help consumers spend less at the pump. Dow Automotive offers a variety of plastics, composites and adhesives that make vehicles stronger, yet lighter, improving overall gas mileage.

"Dow is also an innovator in cogeneration - the simultaneous production of electricity and steam, currently used to produce 75 percent of the electricity needed to manufacture Dow products worldwide. Cogeneration typically uses 20 to 40 percent less fuel than conventional power generation, while reducing emissions of carbon dioxide and improving air quality."

Steven P. Eschbach, spokesman for FuelCell Energy, Inc., (NASDAQ: FCEL) said, "High efficiency means less fuel per kilowatt hour of output and that essentially means lower operating costs or being able to control your energy costs. If you have on-site generation, that gives you more control over your energy costs and if you're using direct fuel power plant at 45-47-percent electrical efficiency that is the best distributed-energy technology in its size range. All the other technologies are up to about 41-42 percent and, believe it or not, a three, four or five-percentage points of efficiency means a lot when it comes to controlling your energy costs."

Eschbach added that a powerful driver is the reduction of greenhouse gases. "Again, getting the high efficiency back into the equation, the more efficient you are, the less harmful greenhouse gases you emit. Our technology not only provides electricity, but also uses the thermal output for co-generation applications, so our efficiencies can go continually higher - 45-47 percent for electrical efficiency can go up to 60-70 and beyond in terms of total thermal energy efficiency. And that goes a long way in terms of controlling your costs and reducing greenhouse emissions."

He said energy efficiency clearly is becoming a paramount concern with end users and if less fuel is used, that does a lot in terms of energy security: "Not only do our power plants operate on natural gas, a domestic resource, it also operates on other methane fuels such as waste water treatment gas from an industrial or municipal waste water treatment facility. There, you are able to bypass oil use altogether and just use the existing domestic sources that you have. For a wastewater treatment plant, the economies are even greater because the fuel that's generated from the wastewater treatment process is actually the fuel that generates electricity to treat the water. So clearly, you have an opportunity to clear away from foreign sources of energy and stick with the domestic resources that are here at home."

International Rectifier (NYSE: IRF) semiconductors enable the exact delivery of electricity to allow the end product to work efficiently, company spokesman Graham Robertson said.

"Power management technology can help the world save a remarkable amount of energy. There are three areas where advancements in power management that can help save about 30 percent of the world's projected energy demands. The first area is the ubiquitous electric motor, consuming over half of the world's electricity today and where electronic motion control technology can be applied to tame it. Next, are automotive systems that, with the aid of power management technology, can cut fuel consumption by 50 percent. Lastly in lighting, power management can help save half of the electricity by hastening the move to energy-saving alternatives such as high-efficiency fluorescents, digitally-dimmable ballasts, and LED technology," Robertson said.

He added, "We have seen a change in consumer and supplier behavior as our products are nearing price neutral and performance neutral and the cost of energy is increased. Consumers are more aware of the energy-efficiency options they have available. Suppliers are increasing their desire to have energy-efficient products available in the marketplace."

John Hurst

John Hurst has focused on marketing and communications for public and private companies in the United States and Canada.


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About the Author

John Hurst has focused on marketing and communications for public and private companies in the United States and Canada.

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