Generating Innovation

The energy sector is pretty well-known for being resistant to change, risk-averse, conservative.  One segment of the energy technology landscape that especially favors “tried-and-true” over “new-and-better” involves on-site generators, typically for standby or emergency purposes.

Scanning the most recent issue of Powerline — the periodical published by the on-site generator industry’s trade group, the Electrical Generating Systems Association — it looks pretty similar to the issues of the late 1990’s that I used to read regularly.  Indeed, I suspect that it looks like issues from when I was in school in the 1970’s, or even earlier. 

Dominated by industrial titans Caterpillar (NYSE:  CAT), Cummins (NYSE: CMI) and Kohler, the most important competitive factors in the generator marketplace are lowest first price, reliability, and service quality.  After all, the primary reason these products are bought is that they have to work on the rare occasions when they are called upon. 

Accordingly, the sector is biased towards incrementally improving upon the past, as opposed to seeking dramatic innovations.  As a result, most generators still employ diesel engines that, while substantially improved and evolved significantly, clearly show their lineage back to the mid-20th-Century.

Other considerations such as maintenance costs, fuel efficiency, emissions and noise can come into play, they are of secondary concern to most buyers of generators, who accept their limitations and disadvantages as long as they are cheap and dependable.

The other considerations listed above are stronger forces for change, and so it is not surprising that innovation in the generation sector is most often driven by those who pursue the niches that are too small for the big guys to care much about.

One such niche for has been the entertainment industry.  When shooting a movie in a remote location, electrical generating capacity often has to be brought along.  But, the on-site generators can’t be very noisy or smoky without compromising the filming (not to mention upsetting the sensibilities of the talent).

Founded in 1973 in the L.A. Basin, Multiquip has long sought to serve the generation needs of the entertainment industry.  This is not to say that the industrial titans of the Midwest (Caterpillar of Illinois, Cummins of Indiana, Kohler of Wisconsin) aren’t good companies or don’t make good products.  However, they probably didn’t fully appreciate the specific needs of customers in the entertainment business, or didn’t think the market was big enough to justify customized solutions.

Multiquip has long prided itself on extremely quiet on-site generator systems, and thus has spent a lot of time innovating on noise attenuation, insulation and exhaust technologies.  But, you can only put so much lipstick on a pig:  a diesel engine is still a pretty loud technology.

What’s much quieter?  Well, clearly solar is.  However, filming locations need megawatts of power, which would entail a massive array of solar panels.  Moreover, a lot of filming occurs at night, for which solar isn’t particularly well-suited.  (Duh.)  So, solar isn’t a great answer for the quiet on-site power generation needs of the entertainment business.

However, fuel cells might be:  Multiquip recently announced a prototype generator employing fuel cells.  This is an outgrowth of Multiquip’s efforts over the past few years to develop portable light towers operating off of fuel cells.

As those who’ve followed energy technologies for awhile know too well, fuel cells have long been seeking good entry points to penetrate the energy sector, in small bites.  Having an economic disadvantage (at least at present state of maturity), fuel cells need to seize upon the benefits that they can uniquely offer. 

One of the main advantages of fuel cells is their virtually silent operation, not to mention their low emissions profile.  As a result, after having established as solid role in the space market, fuel cell developers have been seeking to target their technologies for military applications. 

Now, it appears that fuel cells may be going Hollywood.