Hot Opportunity

Puntios has recently successfully completed its project to research the commercial opportunity for low grade waste heat, in part funded by the Technology Strategy Board.  The project set out to identify the potential of the market, technologies and applications for prioritisation, and potential business models to realise the value.

We’ve concluded that a solution based approach is appropriate, and that despite various challenges, we’re sufficiently confident that we’ve set up a new business – Estus Power – which we’ll be launching in the autumn.  The company will offer an innovative business model, using low risk proven capital equipment, in a large industrial markets meeting clearly defined needs.

The project broadly concluded that:

- There is strong awareness of, and interest in, low grade waste heat among industrial site owners.  Many face the same challenge: despite recognising the potential value of the heat, the payback period for investment in capital equipment needed to realise value is beyond normal investment criteria.  So, waste heat to electricity projects are simply not proceeding.  This is a vast missed opportunity, both commercially and in terms of climate impact

- A contracting solution, where a third party in effect buys the waste heat for processing into electricity, addresses the payback barrier.  The site owner realises value from the waste heat with no capex

- Many investors have a low awareness of Organic Rankine Cycle (ORC) equipment.  However, more specialist renewables/infrastructure investors are developing their awareness.  There is a strong demand among investors in the UK and beyond for higher yielding, asset backed investment, and industrial energy efficiency is recognised as an area with potential

- There is increasing competition and technical development among Original Equipment Manufacturers and growing awareness of waste heat recovery equipment among distributers, integrators and others

Despite these broadly positive conclusions, however, the project noted that:

- The lack of familiarity among the investor base with ORC equipment means a high perceived risk, leading to a high cost of capital.  Coupled with relatively high costs of capital equipment, margins on any projects will be very tight for a project developer

- Although competition is growing among manufacturers, cost of equipment is not expected to reduce significantly.  There are, in practice, no useful incentives or subsidies to help grow the market.  Low grade heat realistically has a very low value

- So, any new business in this field will have to take a long term view and not expect to make significant profits in the short to medium term

The Puntios team welcomes the opportunity to discuss the results of its research with interested parties, as we develop Estus Power over the coming months.