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What if every gallon of gas in our cars and lump of coal in our power plants did extra duty? What if we could get more work out of our fuel? That's the basic idea of waste heat recovery systems. A young venture based in San Francisco, California, called Alphabet Energy aims to take the decades-old idea of generating electricity from captured heat, and deploy it at massive scale on the cheap with a little help from nanotechnology and the semiconductor industry.

By providing a thermoelectric chip that can be inserted into any exhaust flue or engine to convert heat into electrical power, Alphabet hopes to become the "Intel of waste heat," said Matt Scullin, the company’s chief executive and co-founder.

A thermoelectric device is simply a device that can make use of heat to generate power with no moving parts (just as a solar cell generates electricity from light.) It is based on the long-known principle that electrons can be pushed through a material by heat. Alphabet says its innovation is in both the choice of material and proprietary technology that gives it low thermal conductivity, and makes it highly suitable for both scale and miniaturization—for use in small devices as well as in large factory flues. The device is connected by wire to the plant’s electrical system or to the grid, so it feeds in power converted by heat in real time.

Only a year old, Alphabet has the ambitious goal of leading what it believes could be a $200 billion global market for technology at the core of waste heat recovery systems.

Alphabet's efforts come as part of a larger drive by researchers, entrepreneurs, and trade groups to make use of heat energy that's currently thrown away by factories, power plants, cars and even laptop computers. U.S. policymakers have generally lagged behind that push, said Scullin. But recently a bipartisan group of lawmakers, led by Democratic Representative Paul Tonko of New York, former head of his state’s public power research authority, introduced a bill that would provide a 30 percent investment tax credit for installation of waste heat recovery systems in industrial settings.

Making Power More Productive

The opportunity could be huge. According to a 2008 report (pdf) from the Oak Ridge National Laboratory, more than two-thirds of the fuel used to generate power in the United States is lost as heat. In fact, the United States has the lowest energy productivity (a measure of how much raw energy goes into every dollar of GDP) of any of the world’s developed economies, according to the report.

Technologies for recovering waste heat have been around for more than a century, according to Tom Casten, founder and chairman of Recycled Energy Development (RED), a Westmont, Illinois, company that aims to retrofit large factories to convert waste heat into electricity and useful thermal energy (typically steam or hot water), and then sell it to the grid, host, or nearby facilities.

For example, cogeneration (also called combined heat and power) systems, can generate electricity or mechanical power and useful heat at a facility that requires thermal energy, or convert waste energy on-site into electricity and mechanical energy. In 2008, the Oak Ridge researchers reported that the 3,300 cogeneration sites in the United States accounted for nearly 9 percent of the country's total electricity generating capacity, and called for a push to raise that to 20 percent by 2030—a level already exceeded by some European countries. Cogeneration accounted in 2008 for more than half of total national power production in Denmark, nearly 40 percent in Finland and more than 30 percent in Russia, according to the Oak Ridge report.

One reason the U.S. trails much of the pack in tapping power from waste heat, said Casten, is that regulations generally bar utilities from reaping financial rewards from efficiency gains—they’re required to pass the savings along to rate-payers, robbing of them of the incentive to invest. In addition, higher taxes on energy in the European Union make energy efficiency and conservation more valuable, said Casten.

Despite the regulatory barriers, Alphabet is one of a number of companies trying to achieve a waste heat breakthrough. A handful of startups, such as Nextreme, in Research Triangle Park, North Carolina, are working on thermoelectric devices. Many academic institutions are researching the technology, and corporations like General Motors and General Electric have longstanding development programs, said Scullin.

A New Heat-Power Equation

But Alphabet claims it can radically change the price point in the heat-power equation by using a relatively abundant, low-cost material that ordinarily wouldn't be effective as a thermoelectric semiconductor. The company employs technology originally developed at the Lawrence Berkeley National Laboratory to adapt this material and lower its thermal conductivity, basically allowing it to produce more electricity with less heat.

Although Alphabet envisions that the earliest application of its technology will be in places like factories—traditionally, waste heat projects have been concentrated at the largest and hottest sources at industrial sites and power plants—the startup’s technology (if it works as planned) could pave the way for economic recycling of energy in a wider variety of settings, from cell phones to cars. Scullin emphasized that Alphabet remains in the very early stages of commercializing this technology for mobile applications, however.

Alphabet says its chip is produced in a way that’s similar to how microchips for electronic devices are made. Tapping into the semiconductor industry's economies of scale will allow the company to slash costs enough to install its systems for "well under $1 a watt," said Scullin, compared to installation costs double or triple that amount for some competing waste heat recapture systems.

Depending on the flow rate, chemical composition, and temperatures of the exhaust coming out of an industrial flue, he said, Alphabet's technology could deliver a payback time of two to four years for a manufacturer.

According to Scullin, Alphabet plans to complete a pilot installation at an industrial facility with a large waste heat source next year, with an aim of winning commercial customers by 2012. So far, most of the potential customers in discussion with Alphabet are multinational corporations, said Scullin, noting that waste heat is one of few power sources that the U.S. government does not subsidize. While fossil and renewable energy projects can benefit from subsidies and tax credits, Scullen said, the lack of incentives for waste heat recovery translates to a disincentive for investments in energy-saving technology.