1.1        Company Introduction

 

Kinetech Power Company LLC (“KPC”, or the “Company”) located in Allentown, PA was formed to exploit the emerging market for flywheel energy storage systems (“FESS”).  KPC is a successor organization to Tribology Systems, Inc. (“TSI”), whose founder Lewis B. Sibley is a recognized expert in the science of friction (known in the trade as “tribology”), the inventor of numerous advanced bearing systems, and the developer of a breakthrough mechanical improvement in the technology of FESS stabilization and control.  Mr. Sibley (Lew) is a former manager of research for SKF Industries’ Engineering and Research Center where he developed the current day theory of elasto-hydrodynamic lubrication.  Since founding TSI in 1981, Lew has utilized his tribology expertise to formulate, develop and patent unique solutions for controlling the kinetic energy stored in flywheels.  KPC has designed, assembled and tested multiple small-scale FESS prototypes which out-perform existing FESS solutions available from incumbent market leaders.  The Company seeks funding to scale-up its designs for larger power storage applications, expand its testing programs, and tool-up component manufacturing capacity.

 

1.2        Market Opportunity

 

Energy storage requirements have been traditionally served by various technologies for the past 150 years including hydro, mechanical, and battery.  Lux Research predicts that the overall market for energy storage (served primarily by batteries) will grow from $2.8 billion (3.2 GWh) in 2012 to $113.5 billion (185.4 GWh and 51.89 GW) by 2017 (109.6% CAGR[MC1])[1].  The use of flywheels to store energy mechanically and convert it on demand to electrical power has gained momentum in recent years, with several market entrants vying to replace traditional battery applications such as uninterrupted power supply (“UPS”) systems and other on-demand energy needs.  The advent of cost-effective FESS solutions also enables new applications where (1) high duty cycle charge-discharge needs, (2) low maintenance requirements, (3) long useful lives, and (4) environmentally friendly components are better served by flywheels.  Examples include power grid management arrays (“Grid Storage”), wind and solar energy power system storage (“WSEG”), energy recapture applications (“Recapture”) such as elevator, crane, and locomotive braking power storage, and many other “behind the meter” applications where power is stored for use as either a standby source or for load leveling applications.

 

FESS market viability is validated by the current list of entrants, including Beacon Power (Grid Storage), Active Power (UPS), Piller (UPS), PowerThru (Grid Storage, UPS), Vycon (UPS, Recapture) and Temporal Power (Grid Storage).  Further, Boeing is actively working on an FESS solution for deployment in Grid applications.

 

The Lux report shows that flywheels comprised 8% of the grid storage market in 2011, or about 100 million, 14% in 2012, or about $300 million.  This represents gaining 4% market share against a storage market which had a year over year growth of 46% since 2009.  The Company expects an even faster rate of market share growth for the significantly lower cost KPC-FESS. However, without factoring that in, other research shows an expected to grow at the rate of flywheels of CAGR 12.35% over the period 2011-2015[2].

 

According to the Lux report, the major application driving grid storage growth (54%) will be time shifting of renewable energy sources.  In 2012, storage constituted only 0.79% of the grid storage capacity, yet with increasing adoption of transient renewable energy reaching the critical 20 – 30% of generation capability in many regions, the industry is finding itself playing catch-up. Current flywheel solutions are limited to short duration, fast charge/discharge operation, with regular service requirements and bearing failure due to limitations in the magnetic bearing technology they all utilize.  There is a void in energy storage solutions market of devices that can provide longer charge/discharge durations and longer maintenance-free operation. KPC has demonstrated that its FESS technology can overcome the limitations posed by existing battery and flywheel technologies by providing fast charge/discharge capability (e.g., high kW capacity) over longer periods (higher kWh ratings) in a 20-year maintenance free system.

 

KPC has designed and patented a unique combination of inventions to produce a FESS solution that has fewer parts, lower cost and higher performance than the current market players.  Volume production cost estimates for the KPC design are below $1,000/kWh, which we believe is roughly half the delivered cost of FESS systems today.