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Hydrophobic Coatings for Condenser Systems: Complete Technology Strategy


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With global CO2 emissions on the rise and increasing restrictions from coolant effluent regulations, thermal power plants are under tremendous pressure to increase the efficiency of their operations and decrease emissions. One partial solution is implementing a hydrophobic coating for condenser units. In the power generation cycle, this coating increases the efficiency of the condensation process. It creates a larger pressure differential between the inlet and outlet of the preceding turbine, driving it harder and creating more power for the same amount of fuel used. In effect, not only does the coating yield a positive effect on our environment, but it saves power generation companies millions of dollars per year.
Founded out of a collaboration between two research laboratories at MIT, DropWise Technologies Corporation produces a coating that is based on a patented initiated chemical vapor deposition technique. Utilizing this technique, a portable dispenser system applies the superhydrophobic coating to virtually any configuration of condenser - new and old.
This report chronicles a complete strategy for bringing the coating technology to market. It involves DropWise partnering with multi-billion dollar Exelon Corporation, the nation’s leading competitive energy provider. Exelon strives to adopt “smart” technologies and in particular, improve energy efficiency of the company’s pre-existing facilities. With Exelon’s capabilities, DropWise will be able to first apply the coating to each of Exelon’s plants before moving on to other energy providers. This will allow the collaborative to take data from representative plants and condenser units that can then be extrapolated to find a fitting cost and matching return on investment. Armed with the resulting data, the collaborative can expand outward, applying the coating to power plants around the globe. Due to the coating’s limited lifetime, the consumers will re-enter the market every five years, providing a continuous flow of revenue for the company. Due to the strong support from our financial projections as well as the maturity of the coating as it exists today, DropWise and Exelon can collaborate to commercialize this superhydrophobic coating by the end of this year.

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Hydrophobic Coatings for Condenser Systems: Complete Technology Strategy

  1. 1. : Hydrophobic Coatings For Condenser Systems COMPLETE TECHNOLOGY STRATEGY Ben Gallatin Derek Phillips Nigel Walker April 30th, 2015 Vanderbilt University ENGM-221-02, Dr. John Bers
  2. 2. Technology Strategy for Hydrophobic Coatings Gallatin, Phillips, & Walker 4/30/15 2 Executive Summary With global CO2 emissions on the rise and increasing restrictions from coolant effluent regulations, thermal power plants are under tremendous pressure to increase the efficiency of their operations and decrease emissions. One partial solution is implementing a hydrophobic coating for condenser units. In the power generation cycle, this coating increases the efficiency of the condensation process. It creates a larger pressure differential between the inlet and outlet of the preceding turbine, driving it harder and creating more power for the same amount of fuel used. In effect, not only does the coating yield a positive effect on our environment, but it saves power generation companies millions of dollars per year. Founded out of a collaboration between two research laboratories at MIT, DropWise Technologies Corporation produces a coating that is based on a patented initiated chemical vapor deposition technique. Utilizing this technique, a portable dispenser system applies the superhydrophobic coating to virtually any configuration of condenser - new and old. This report chronicles a complete strategy for bringing the coating technology to market. It involves DropWise partnering with multi-billion dollar Exelon Corporation, the nation’s leading competitive energy provider. Exelon strives to adopt “smart” technologies and in particular, improve energy efficiency of the company’s pre-existing facilities. With Exelon’s capabilities, DropWise will be able to first apply the coating to each of Exelon’s plants before moving on to other energy providers. This will allow the collaborative to take data from representative plants and condenser units that can then be extrapolated to find a fitting cost and matching return on investment. Armed with the resulting data, the collaborative can expand outward, applying the coating to power plants around the globe. Due to the coating’s limited lifetime, the consumers will re-enter the market every five years, providing a continuous flow of revenue for the company. Due to the strong support from our financial projections as well as the maturity of the coating as it exists today, DropWise and Exelon can collaborate to commercialize this superhydrophobic coating by the end of this year.
  3. 3. Technology Strategy for Hydrophobic Coatings Gallatin, Phillips, & Walker 4/30/15 3 Table of Contents Introduction......................................................................................................................... 5 1 Macroeconomic/Social Environment.......................................................................... 8 2 Company Assessment ............................................................................................... 11 3 Market/Demand Environment .................................................................................. 18 4 Technological Environment...................................................................................... 25 5 Competitive Environment......................................................................................... 32 6 Technology/Business Intelligence ............................................................................ 37 7 Product Strategy........................................................................................................ 46 8 Operational Strategy ................................................................................................. 52 9 Technology/Collaboration Strategy.......................................................................... 57 10 Intellectual Property Strategy ................................................................................... 59 11 Project Valuation & Financing – DCF Modeling..................................................... 60 12 Project Valuation & Financing – DCF Modeling..................................................... 67 13 Implementation Plan................................................................................................. 72 14 References................................................................................................................. 76 15 Appendices................................................................................................................ 81
  4. 4. Technology Strategy for Hydrophobic Coatings Gallatin, Phillips, & Walker 4/30/15 4 List of Figures Figure 1. Example of Technology in Action ...................................................................... 5 Figure 2. Photo of Water Condensation with and without the Coating.............................. 7 Figure 3. Diagram of Implementation Process ................................................................... 7 Figure 4. Photo of a Power Plant Dumping Effluent.......................................................... 9 Figure 5. Company Capabilities ....................................................................................... 12 Figure 6. Awards (Exelon Corporation, About Us).......................................................... 15 Figure 7. Center of Gravity for Exelon Corporation......................................................... 17 Figure 8. DropWise's Ratings for Triggers and Barriers for Adopting this Technology.. 23 Figure 9. Hydrophobic Technology Timeline .................................................................. 25 Figure 10. The Lotus Effect.............................................................................................. 25 Figure 11. Chemical Vapor Deposition Equipment.......................................................... 26 Figure 12. Diagram of a Steam Condenser....................................................................... 27 Figure 13. Steam Generation Process............................................................................... 28 Figure 14. ISF Map of DropWise Coating vs. Advanced Polymer Coating Process vs. No Coating Present (Incumbent) ............................................................................................ 29 Figure 15. Competitive Landscape of Exelon vs. Key Competitors................................. 33 Figure 16. Market Sizes vs. Total Unit Sales.................................................................... 35 Figure 17. Market Share Projections of Key Competitors................................................ 36 Figure 18. Complete Analysis of ISFs - Relative Advantage vs. Relative Importance.... 40 Figure 19. Penetrating the Market: Bowling Pin Model................................................... 51 Figure 20. High-Level SIPOC Diagram for Hydrophobic Coating Application to Power Plants................................................................................................................................. 52 Figure 21. SIPOC Diagram for Key Process #1 ............................................................... 53 Figure 22. SIPOC Diagram for Key Process #2 ............................................................... 54 Figure 23. SIPOC Diagram for Key Process #3 ............................................................... 55 Figure 24. Total Projected Unit Sales Analysis................................................................ 64 Figure 25. Net and Discounted Net Cash Flows............................................................... 65 Figure 26. Summary of Decision Tree Models................................................................. 70 Figure 27. Option Space Map for DropWise Hydrophobic Coating ................................ 71 Figure 28. Technology Roadmap: DropWise to this Point............................................... 73 Figure 29. Technology Roadmap: Next Immediate Steps................................................ 74 Figure 30. Technology Roadmap: Potential Future Expansion........................................ 75
  5. 5. Technology Strategy for Hydrophobic Coatings Gallatin, Phillips, & Walker 4/30/15 5 Introduction An important concern for the future is how society will adapt current energy generation processes to deal with potential scarcity in resources. One such technology that addresses this issue is water-repellent coatings that would be applied to pipes in steam power plants. The coating increases the efficiency of the condensation and runoff of water on the pipes, an essential step in operating the turbine. DropWise Technologies Corp. will be a leading company in bringing this technology to market. MIT professors Karen Gleason and Kripa Varanasi invented this hydrophobic coating alongside PhD researchers Adam Paxson and David Borrelli. They teamed up with Colin Gounden to start the company DropWise. Previous attempts at this technology have either yielded coatings that are too thin and deteriorate quickly or coatings that are too thick and actually hinder the condensation process. DropWise has developed both a coating and application process that ensures the correct balance of both thickness and efficiency (see Figure 1 below). This coating will in turn reduce the amount of water and other natural resources required to produce equivalent amounts of energy. Figure 1. Example of Technology in Action Technology Description Power plants use cold water running through pipes to condense the water vapor around the pipe creating a vacuum. The turbines connected to these pipes use this vacuum to turn their blades and produce energy. The water repellent coating technology will allow this process to become much more efficient. The hydrophobic coating improves efficiency by saving both water, fuel, and time. As the cold water rushes through the pipes, the steam around the pipes cools as condensation around the pipe. Without a coating, the water sticks to pipe and prevents more water from cooling. Previous coatings prevented the water from sticking, but another issue arose: the coating was too thick, which also inhibited water from condensing. Some thinner coatings have been developed, but they disintegrate in minutes. DropWise has produced a product that can survive years of steam exposure, while conserving resources such as water, fuel, and time. They accomplished this feat in
  6. 6. Technology Strategy for Hydrophobic Coatings Gallatin, Phillips, & Walker 4/30/15 6 efficiency using a technique called initiated chemical vapor deposition. This technique enables the coating to be 2,000 times thinner than a sheet of paper and grafts the coating to the surface of the cold water pipes using strong chemical bonds. This coating has been created and survived all tests with no signs of damage. Application(s) The researchers at DropWise Technologies Corps. have developed a hydrophobic coating, which can be installed in power plants across the globe. Steam power produces 85% of the world’s power. This technology can be installed into existing power plant to reduce the amount of energy and resources that are wasted producing the power that fuels the world. DropWise has the ability to install the technology in existing nuclear, coal and other power plants. These plants will use this technology to cover the pipes in their water vapor condensers. In the near future, the planet's capacity to produce power will double. New plants will rapidly surface to supply society with the power to turn on light bulbs and fuel batteries. This coating will have drastically improved the efficiency of existing plants and become the standard for having an ideal power plant. As new plants enter the power- producing arena, this coating will be pre-installed into their water vapor condensers to begin saving water and fossil fuels from day one. Significance At the moment, the pipes that power plants run cold water through become enveloped in a layer of moisture. This layer drastically hinders the condensation process. The water repellent coating speeds up the condensation process, making the entire process more efficient. Since power plants use thousands of cool-water pipes, this small change compounds to much grander savings on resources. These plants create steam by burning coal or other resources. With this coating, the rate at which steam powered plants use water to create power would dramatically fall. Also the rate at which these plants burn fuel would be cut down from their usual consumption of fossil fuels. This makes it possible for power plants to reduce their carbon dioxide emissions and water use. Nuclear power plants, natural gas, coal, solar thermal, and geothermal processes all use this steam process to generate energy. This coating immensely reduces the energy wasted by power companies, saving millions of dollars each year. Not only will companies benefit, but society will benefit as a whole because the coating will reduce the carbon dioxide emissions, equal (for each plant that adopts the technology) to taking thousands of cars off the road. Team Members Derek Phillips, Ben Gallatin, Nigel Walker
  7. 7. Technology Strategy for Hydrophobic Coatings Gallatin, Phillips, & Walker 4/30/15 7 Innovation Success Factors WITHOUT THE REPELLENT WITH THE REPELLENT Figure 2. Photo of Water Condensation with and without the Coating 1. Efficiency a. This steam process to generate energy is inefficient without a coating. A simple water-repellent coating cuts down on the resources power companies use to generate energy (see Figure 2 above). 2. Resistance to Wear a. Early forms of this technology became too thick. The coatings would inhibit the condensation of water vapor on the pipes. Now new thinner coatings exist, which can be applied to the water pipes. b. Some coatings became too thin and would wear out because of the heavy steam exposure. This technology optimizes the thinness and durability requirements necessary for the steam process. 3. Ease of Implementation a. This technology has the ability to be implemented on existing power plants. Figure 3. Diagram of Implementation Process
  8. 8. Technology Strategy for Hydrophobic Coatings Gallatin, Phillips, & Walker 4/30/15 8 b. Rather than the standard process of a spray coating, this technology is applied by passing two gases over heated filaments and allowing them to react, creating a polymer coating that is resistant to wear (see Figure 3 above). 1 Macroeconomic/Social Environment 1.1 Crisis identification Steam electric power plants diminish the quality of drinkable water sources throughout the country. Every year these plants emit 79,000,000 lbs. of arsenic, 64,400 lbs. of lead, and 35 other pollutants. (US EPA, 2012) These toxins have been associated with cancer, neurological damage, and ecological damage. The crisis exists today and continues to beg for a solution. The DropWise technology makes the steam electric power process much more efficient by increasing the rate at which steam is condensed. This reduces the combustion of fossil fuels that produce that produce the harmful pollutants created by power plants. Not only are less pollutants released into the environment, but less non-renewable resources are burned to fuel these plants. These steam power plants produce most of the energy the world uses. However, these plants also consume vast amounts of fossil fuels, which are irreplaceable. Fossil fuel plants accounted for 32% of U.S. total greenhouse gas emissions in 2012. (US EPA, 2012) This pollution and depletion crisis is driving innovation forward for the coating DropWise has produced. Even if the future shows a turn toward nuclear or geothermal power, the method of power generation involving steam turbines is still the same, and the coating technology will still provide huge efficiency gains in the system. (Mission, DropWise Technology Corps.) Therefore, the overarching crisis is more a matter of guaranteeing a clean earth and sustainable, efficient power generation for future generations. 1.2 Identification of innovation enablers or inhibitors Enablers Steam power plants make up 85% of the world’s power. Steam-powered generators are used in nuclear, natural gas, coal, solar thermal, geothermal, and biomass systems. However, the production process is immensely inefficient. These plants heat and cool water using coal, but without a water repellant coating on the pipes, the plant works harder than necessary costing millions of dollars each year. The DropWise technology offers an immediate solution to the issue of inefficiency. The coating that DropWise invented needs to save these power plants the money they waste each year. The long term financial benefits enable the macroeconomic environment to be conducive to the DropWise technology. Another enabler helping to drive this innovation forward is the environmental movement, which focuses on humanity as a participant in ecosystems rather than an enemy. By making the product known to the masses and garnering support from key environmental agencies, DropWise can overcome any opposing social or institutional
  9. 9. Technology Strategy for Hydrophobic Coatings Gallatin, Phillips, & Walker 4/30/15 9 opposition that would otherwise hinder the implementation of its product. In order for the product to be materialized, it must be accepted and advocated for by this community. Power plants using steam as a resource release liquid waste, called effluent, into natural bodies of water, shown in Figure 4 below. The United States Environmental Protection Agency (EPA) put regulations in place to limit the effect of steam electric power generators on the environment. If a power plant could reduce the effluent it produces without sacrificing power, then the rate at which a plant produces power would increase. DropWise technology allows these plants to accomplish this goal of producing more power without compromising EPA regulations. Following these regulations enables the social environment to be conducive to the DropWise technology. Figure 4. Photo of a Power Plant Dumping Effluent Inhibitors Adopting this coating technology means that power generation companies have to open their doors to an installation company (DropWise), who updates the preexisting condensers with the new coating. The coating is applied via a vapor deposition process. DropWise temporarily integrates the deposition process into the existing heat exchanger in order to apply the coating. Companies may have an issue with letting someone else come in, whether for classification or privacy issues. Companies might also hesitate to upgrade because of the sheer fact that their technology is working and they’re profitable. To convince these companies to upgrade, it takes some careful discussion of the benefits of a hydrophobic coating and an advanced economical explanation of the upfront cost versus the savings provided. In order to gain the trust of power generation companies, the implementation consultant must discuss upkeep, conditions of product failure, warranty/protection in the case of failure, etc. These hurdles inhibit DropWise from implementing their product today. 1.3 Timing With the Earth containing only a finite amount of natural resources, it is increasingly important to begin to explore alternative processes and sources for obtaining the energy that is so vital to society today.
  10. 10. Technology Strategy for Hydrophobic Coatings Gallatin, Phillips, & Walker 4/30/15 10 Methods of harnessing the energy of renewable resources have not been developed and implemented on a wide enough scale at this point. While these innovations continue to progress, it becomes increasingly important to make methods of using nonrenewable resources as efficient as possible. A time may come when energy is easily and cheaply obtained on a large scale strictly from renewable resources, but it is unclear when exactly that time will be. Until it arrives, society must plan is if it will never come, thereby increasing the importance of how people use the resource supplies that will one day run out. Without a radical change to how humanity produces energy, the best possibility is to increase efficiency in pre-existing structures. This kind of engineering will set an example, or new standard, of how steam generators function. DropWise is in a perfect position to begin increasing this use efficiency as soon as possible. The coating can be applied to already existing power plants, allowing it to immediately have an impact on both reducing emissions and lowering resource use. Furthermore, DropWise’s coating can be applied to power plants that use all different types of initial energy source, so not only will it provide an immediate benefit, but it also will have an impact down the line. The coating can be applied to plants that obtain steam-generating energy from solar, nuclear, biomass, and geothermal sources as they become more favorable, while already having increased the efficiency of those that use natural gas and coal. Power plants should also consider the amount of pollutants they introduce into the environment. For example, by reducing the amount of coal needed to be burned in the more efficient process, the DropWise coating will also reduce the amount of consequent pollution generated per unit of energy produced. This in turn will slow the decay in the ozone, reduce pollution in the waterways from the effluent runoff, and decrease the amount of pollutant absorption that could occur in the surrounding soil. It is important to begin tackling the issue of society’s impact on the environment as soon as possible. Continued decay will lead to loss of important resources and ecosystems both for us as humans and for other organisms. Now more than ever, these issues of becoming a more environmentally friendly society have gained momentum. Companies of all industries are now facing questions of how they are working to reduce their environmental impacts. Green organizations will especially interested in the commercialization of the hydrophobic coating. No significant issues exist preventing the DropWise coating from beginning to be marketed to power plants in which it could potentially be implemented. Conversely, the sooner it is implemented, the larger and more significant impact it will have on the global issues of declining resources and environmental pollution. 1.4 Strategic implications First, DropWise needs to focus on current steam power plants in order to gather data to show the effects of the product on the plant. That data will allow us to generate complex economic predictions to demonstrate the financial turnaround and long term benefits. Showing the results of the implementations of the technology will get more companies on board for upgrading their process. At that point, DropWise can focus on
  11. 11. Technology Strategy for Hydrophobic Coatings Gallatin, Phillips, & Walker 4/30/15 11 new developments of future steam power plants. As new plants integrate the coating into their production process, the bar will be raised for energy efficiency standards. The goal for DropWise’s product implementation should be making these condenser coatings the standard for all new developments. Once most plants leading the industry in power production demonstrate the effectiveness of the DropWise coating, a transition can occur from revamping existing infrastructure to a supply network that will focus on incorporating water-resistant coatings into the manufacturing process. This technology, ideally, will be looked at less as an upgrade, and more as an essential part of the steam-powered generation process. This will shift the company’s focus from upgrading existing plants to consulting new steam-powered developments across the globe. 2 Company Assessment 2.1 Capabilities required 1. Environmentally Conscious: the company must have a commitment to increasing the supply of clean energy and decreasing emissions. 2. Application of Technology: The company must have the means to apply the initiated chemical vapor deposition technology to existing power plants. 3. Development of Technology: The company must be able to develop the technology and stay a leader in the industry. 4. Access to Power Generation: The company must have access to pre-existing generation sites or a location to implement the technology. 5. Worldwide Application: In the future, the company must have the means to apply the technology on a global scale. 6. Knowledge of the Industry: The company must have up-to-date knowledge on competitors and leading generation technologies. They must assume and maintain a strategic presence in key competitive markets.
  12. 12. Technology Strategy for Hydrophobic Coatings Gallatin, Phillips, & Walker 4/30/15 12 2.2 Candidate host companies ❖ Exelon ❖ Advanced Polymer Coatings ❖ GVD Corporation Figure 5 below summarizes how well each of the candidate host companies fulfill each of the necessary capabilities that were previously discussed. Companies Advanced Polymer Coatings GVD Corporation Exelon Corporation Acceptance Criteria Environmentally Conscious 1 6 10 Application of Technology 5 7 4 Development of Technology 7 10 4 Access to Power Generation 5 2 10 Worldwide Application 10 2 7 Knowledge of the Industry 6 2 8 TOTALS 34 26 43 Figure 5. Company Capabilities Exelon Exelon has become a leader in power-generation in the U.S. Their commitment to excellence has earned a net income of 1.729 billion, which opens many doors for future investments in innovative technology. According to the criteria for the best company to host the DropWise technology, Exelon rates high among other potential companies. As far as a commitment to clean energy, Exelon ranks high for establishing their program called Exelon 2020. Exelon 2020 intends to remove 17.5 million metric tons of greenhouse gases annually by the year 2020. In 2013, this company removed 18 million metric tons of greenhouse gases beating their goal by 7 years. In addition to being environmentally conscious, Exelon has vast knowledge of the power generation industry, as well as access to delivering their power internationally. They rank high in these categories because of their experience with multiple facets of energy generation, including nuclear, natural gas, and clean energy. Exelon has crossed borders with their product, making them the only one of the three companies to go international. Although, Exelon has only reached Canada outside of the U.S., they have
  13. 13. Technology Strategy for Hydrophobic Coatings Gallatin, Phillips, & Walker 4/30/15 13 immense potential to extend their reach and transform energy generation around the world. Despite their leadership in the power-generation industry, Exelon falls short in the application of technology and development of technology capabilities. They have yet to demonstrate that they have the capacity to innovate towards efficiency. There has been little invested in the research and development of new technology. Even though Exelon has faults in these areas, it excels in access to power generation, evident from its top ranking on the Fortune 500 power company. The company also owns 35,137 megawatts of power in the U.S. alone. Exelon makes up for their shortcomings with their eclectic and extensive resources. Advanced Polymer Coatings Advanced Polymer Coatings produces coatings for power-generating companies around the world. This company provides protection from corrosion which occurs in the infrastructure of power companies. Their accomplishments with durable coatings makes Advanced Polymer Coatings a great candidate for the efficient DropWise technology. When comparing Advanced Polymer Coatings to the criteria for a good candidate for the DropWise Technology, this company ranked above average for the development of coating technology as well as the knowledge of the industry. Their website describes an excellent history of providing coatings for power companies, but no specific mention of hydrophobic coatings, only corrosion prevention. This company also received average 5 out of 10 scores for their access to power generation and application of technology. Despite supplying companies with their coatings, they have no presence in actual energy production. In addition to their poor access to power, this company has zero focus on being environmentally conscious. They supplement this fault with their world wide application capability. Advanced Polymer Coatings has branched out to over two dozen countries, making it the widest reaching of the three companies. The reach of Advanced Polymer Coatings stands out, but the rest of their capabilities do not outrank those of the Exelon. GVD Corporation GVD Corporation specializes in commercializing vapor deposited polymer coatings for multiple applications, while growing and developing to meet new needs. When comparing GVD Corporation to other potential companies that could implement the DropWise Technology, this company was not deemed a good candidate to support the technology on a large scale. However, GVD Corporation ranked above average in Environmental Consciousness and Application of Technology because their coatings have a reduced environmental impact compared to conventional coating technologies, and they have refined the method in which the coatings are applied. Typically, a solvent must be present which is not always compatible with the material being coated as well as providing environmental concerns (GVD). The GVD-developed process is dry, meaning a potentially harmful solvent is not necessary. Furthermore, significantly less raw material is used as compared to conventional methods, resulting in less waste.
  14. 14. Technology Strategy for Hydrophobic Coatings Gallatin, Phillips, & Walker 4/30/15 14 GVD Corporation ranked highest in Development of Technology, scoring a perfect ten out of ten. The founder of the company, Karen Gleason, is also one of the principal scientists working on the development of the DropWise coating. With this connection directly to the innovation team, GVD Corporation is in an ideal position for developing the technology even further. They would not have to research and develop their own version of the coating, but would rather be able to directly implement the coating their founder helped develop. However, it is in the other categories that GVD Corporation was revealed to be a poor candidate to host the technology, as it scored a two on each of Access to Power Generation, Worldwide Application, and Knowledge of the Industry. A vital criteria for a company to host the DropWise technology is its access to the power generation business, allowing for ease in applying the coating. GVD is a relatively small company with no direct connection to the power generation business. Because of this lack of association with power generation companies, GVD also has limited knowledge of the industry. This is preventative in allowing a complete understanding of how to maximize the efficiency and effectiveness of the coating in the power plants. The small size of the company also hinders its ability to score highly in the Worldwide Application category. GVD only has a few locations, and all are located in the eastern United States (GVD). This drastically inhibits the company from having a large global impact on the industry of power generation, an effect that is crucial to meeting the goals of the technology. 2.3 Company’s business, key customers or markets. Exelon Corporation is a utilities service holding company and a leading competitor in the energy generation field. Primarily led by its subsidiary, Exelon Generation Company, Exelon seeks to expand its holding in the energy generation business, while also establishing themselves as leaders in both marketing and distributing energy. Exelon operates through both its owned and contracted electric generation plants, as well as investments in other generation ventures. As stated in the company’s 2013 SEC 10-K filings (United States Securities and Exchange Commission), Exelon strives to take a customer-facing approach to energy generation and supply by marketing wholesale energy operations and offering services in both natural gas and renewable energy products.
  15. 15. Technology Strategy for Hydrophobic Coatings Gallatin, Phillips, & Walker 4/30/15 15 While limited by various risk factors, a primary concern is the regulatory and legislative risks associated with energy production business. However, this concern is lessened thanks to Exelon’s superior commitment to reducing its impact on the environment and providing clean energy. As stated on their website, Exelon strives to not only achieve the regulatory levels for emissions, but to exceed expectations in order to better serve customers and the global community as a whole. This dedication to environmentally conscious energy production coincides with the primary mission of the DropWise coating of increasing the efficiency of the energy production process. Figure 6, below, shows some of the qualities of Exelon that make them a suitable choice for the DropWise technology. Exelon, although not reliant or leading in research and development areas, has the capital and proper business values to host the technology. Furthermore, the coating does not need strong research and development support, but rather needs access to pre-existing power plants and the ability to be implemented on a large scale. The prominence of Exelon Corporation in the energy production business makes it a perfect host candidate. 2.4 Analysts’ views of company's strengths, weaknesses, and future prospects. In April 2014 Exelon secured regulatory approval from the NRC to operate three nuclear energy plants, five reactors total, and in July 2013 integrated three commercial power plants to their nuclear generation fleet in New York and Maryland. These business initiatives streamline revenue margins and strengthen their foothold in the market (GlobalData Analyst Report, Published 2015) and the DropWise coating technology works well with nuclear power generation. A future prospect of Exelon that supports the technology is a company plan called Exelon 2020, which aims to reduce greenhouse gas emissions. While this is traditionally accomplished through a transition to renewable energy and nuclear power, Exelon 2020 plans to adopt “smart” technologies and in particular, improve energy efficiency of the company’s pre-existing facilities (GlobalData, page 12). This is exactly what DropWise should be looking for in a company - its product is perfect for their vision. “...Exelon 2020 plans to adopt “smart” technologies and in particular, improve energy efficiency of the company’s pre-existing facilities...” Figure 6. Awards (Exelon Corporation, About Us)
  16. 16. Technology Strategy for Hydrophobic Coatings Gallatin, Phillips, & Walker 4/30/15 16 One weakness of Exelon is their high debt to equity (0.88%) and debt to capital (0.28%) ratio. This debt was assumed in order to meet its capital expenditure needs (GlobalData Analyst Report). This points to a scarcity in capital resources within the company, and this could hinder the implementation of the new technology. This could also limit the expansion of the company, especially overseas. The limited growth can, however, make a case for DropWise’s technology in the company: if they do not have the capital to expand the sheer amount of power generation stations, they can instead focus on reworking the efficiency of their already existing assets. Also the savings as a result of implementing the coating could gain profits to fund expansion. A further cause of concern is the long term outlook of power prices. Recently, gas prices have plummeted, which is now causing a resultant dive in power prices. For a power generation company such as Exelon, this is alarming as its profits are based primarily on the sale and distribution of energy. If prices continue to stay low due to an oversupply of natural resources needed to produce the power, energy prices will remain low, hurting future profits. However, there are opportunities for growth and increased profitability for Exelon. They have recently announced a merger with Pepco Holdings, another energy delivery company that is based in the Mid-Atlantic region. This merger expands the market that Exelon now reaches by an estimated 2 million customers (Pepco). The increased amount of customers, and therefore, sources of revenue will add an estimated $0.10 per share in earnings in 2016, if the merger is approved by all necessary parties (RBC Capital p.1). This added capital will give Exelon the freedom and encouragement to consider extending their reach into increasing the efficiency of their power generation system. 2.5 Company’s technical strengths Exelon possesses invaluable core competencies, especially with regard to operational leadership. Their company soars above competitors with their focus on using cutting-edge technology to remain the industry leader in environmental awareness. Exelon ranked second in Newsweek’s 2014 Green Rankings demonstrating their lack of impact on the environment. This ranking can only be made possible by their operation leadership in the power-generating field.
  17. 17. Technology Strategy for Hydrophobic Coatings Gallatin, Phillips, & Walker 4/30/15 17 Figure 7. Center of Gravity for Exelon Corporation Exelon Center of Gravity Scores: Product Leadership 2 Operational Leadership 8 Customer Intimacy 5.5 As can be seen in Figure 7 above, Exelon earned high scores for being an operational leader and for customer intimacy, but a low score for product leadership. This company established itself as an operational leader by using multiple facets of energy to produce power. This includes power sources from nuclear to clean energy. Exelon ranked relatively high on customer intimacy. This company is unique because they actively help their customers attempt to conserve energy by distributing Smart Meters. This gives customers access to energy consumption information in order to enable them to make more environmentally friendly choices with their energy use. They also promote energy efficiency in competitive markets through their “Efficiency Made Easy” program which bundles together energy efficient upgrades like building automation and HVAC upgrades to the consumer alongside their electric supply purchases. Exelon also appeals to customers through their Exelon 2020 plan, where they have shown a commitment to the green movement and increasing efficiency by reducing the amount of pollutants and effluent used. DropWise has developed a hydrophobic coating to improve efficiency in power- generating plants. Exelon has acquired plants throughout the U.S. and Canada to produce nuclear, wind, solar, hydropower and natural gas. Exelon has yet to venture into
  18. 18. Technology Strategy for Hydrophobic Coatings Gallatin, Phillips, & Walker 4/30/15 18 developing a coating like the one DropWise has invented. In fact, it has refrained from becoming a product leader and actively seeking out new innovation. Instead it implements the innovations of others to expand its market and network, focusing instead on the operational aspects. Data shows that Exelon is a multi-billion dollar company with the power to invest in technology to make their plants more efficient. Despite the conclusion being that Exelon can develop a coating and become more efficient, the assumption remains unclear whether they will. Their history of efficiency and environmentally-minded focus implies that this company will do whatever it takes to seal the cracks in any energy wasting methods they have. 2.6 Strategic implications The success of the DropWise coating as implemented by Exelon Corporation will be driven by Exelon’s ability to remain profitable and in the top tier of the energy generation business. Exelon has the resources and increasing annual revenue to effectively implement the technology. Furthermore, Exelon has a large holding already in the power generation landscape. This will enable the coating to be put in to use on a large scale and in various locations, maximizing its impact on both resource use and emission reduction. However, if slipping power prices and the presence of already accrued debt prevent Exelon from maintaining its profitable structure, the technology may be in danger as the company scales back its scope. On the other hand, a slight dip in revenue may convince the company to move forward with the technology quickly in order to increase efficiency, reduce costs, and return to, if not exceed, the levels of revenue that it currently is experiencing. 3 Market/Demand Environment 3.1 Ideal market for your technology The ideal market for the DropWise coating technology is one that the host company, Exelon, has immediate access to. Since Exelon has direct access to power plants, the most obvious choice is to go after the energy industry. After implementation the data generated can be used to provide an extended look at the return on investment due to the use of hydrophobic coatings. In the current age, companies are under increasing pressure to increase their “green” technologies and comply with strict governmental regulations. The ideal market will hopefully take advantage of this need, allowing consumers to reduce effluent and pollution from fossil fuel waste. Energy, and clean energy production, is more important than ever - so the timing is right for this product’s application. 3.2 Candidate markets Power Generation The total market the DropWise hydrophobic coating would address is the steam condenser market. Most of the world’s power originates from steam power, and the
  19. 19. Technology Strategy for Hydrophobic Coatings Gallatin, Phillips, & Walker 4/30/15 19 plants that produce it use a process much less efficient than necessary. In this power generation industry, DropWise would market toward the large number of water vapor condensers these power companies own. The market DropWise targets will start small in the existing power companies. Specifically, DropWise will work with “Green” organizations hoping to cut down on their effect on the environment. Power plants owned by companies like Exelon aim to create clean energy. This market would develop the results, which reflect the benefits of the hydrophobic coating. These results will show the reduction of harmful substances like arsenic and lead, not to mention the financial gain of producing more energy in less time. Ideally, the market will continue to grow as other companies witness the benefits of using initiated chemical vapor deposition to install the coating. Power generation is the market DropWise should pursue because of the clean energy crisis and environmental crisis. The demand for cleaner energy production grows as “green” organization spread awareness about society’s impact on the environment. Also by focusing on the power generation industry, DropWise would have an immense environmental and financial impact, which would eventually influence the standard for a cleaner energy production process. Desalination The DropWise coating has more applications than just power generation. The market would also eventually reach desalination processes. Nearly half of the water produced by the desalination process uses a steam condenser. The desalination process involves a large system of condensers to produce drinkable water, and the hydrophobic coating shrinks the surface area necessary to produce the water by 30%. (Applications, DropWise Technologies Corps.) This market is an excellent candidate from DropWise, but the timing is better for power generation companies to begin producing cleaner energy. Power generation is a more pressing issue currently in the scope of decreasing the environmental impact society has on the world. While the DropWise technology can at some point branch in to this market, the largest benefit and immediate impact will be felt from its application to the power generation industry. HVAC/R In addition to desalination, heating ventilation air-conditioning and refrigeration, or HVAC/R, uses water vapor condensers to remove heat from air. This requires a hydrophobic coating to improve the efficiency of the cooling process 2% for every 1ºF decrease in condenser temperature. (Applications, DropWise Technologies Corps.) According to a market research report, 87,501 HVAC contractors operated in 2002. (U.S. Census Bureau) This large market could use the coating, however a bigger environmental and financial impact could be made if DropWise pursued power generation first. As with the desalination market, DropWise could easily transition to this market, as well. It is simply a matter of determining where the technology will have the greatest effect, both in terms of reducing the industry's environmental impact and in terms of providing economic savings to potential investors and consumers. After becoming established in the power generation industry and initiating the transition of making the
  20. 20. Technology Strategy for Hydrophobic Coatings Gallatin, Phillips, & Walker 4/30/15 20 coating the norm, DropWise will be in a stronger position to delve into other industries and expand its reach into other markets. 3.3 Market size According to The U.S. Energy Information Administration (US EIA) and their Electric Power Annual report, there were 3,115 power plants in operation specifically designated as members of the electric utilities sector at the end of 2012 in the United States (US EIA). Of these 3,115 plants, 1,961 of them were operating using coal, petroleum, natural gas, or nuclear power as their primary energy source, providing an opportunity for DropWise’s coating to be implemented and representing the served market. It should be noted, however, that each plant potentially, and in most case does, possess more than one generator system within it. This report collectively counts the plant as a single unit if every generator present is fueled by the same energy source. Therefore, the number of generators on which the technology could be implemented is in fact larger than just the 1,961 units reported. In order to be conservative in the estimate, the reported number of 1,961 will be used as the market size. A 2014 report from MarketLine on the United States Power Generation, indicates that 87.2% of the power generated in the U.S. in terms of total TWh comes from energy sources that are compatible with the hydrophobic coating system (MarketLine). Coupled with the report’s projected compound annual growth rate of 0.7% over the course of 2013-2018, it is clear that DropWise Technologies will have an available and viable market for the foreseeable future, both in existing power plants, and any potential new developments that may come. 3.4 Technology's key benefits for this market Current condenser coatings, if used at all, are mostly to resist the corrosion and to protect the system against a harsh environment, leading to maintained performance and increased unit longevity. (ACHR News) The issue with these coatings is that often times there is a negative effect on the performance of the condensing unit when compared to a unit with uncoated coils. This leads some companies to forgo the coating process and use uncoated coils with (what they believe is) “high efficiency”. The DropWise coating boosts this efficiency to a new level, setting a bar for what it means to have a high efficiency condenser; a high efficiency condenser is a DropWise-coated condenser. Currently there isn't any quantitative data showing either specific raw number or percentages of how much money the product will save a consumer or exactly what the increase in efficiency will be. There are only estimates. That being said these estimates provide a strong basis to support the technology's implementation. According to DropWise Technologies, if the coating were to be present on every power plant's condensers, CO2 emissions would decrease by 0.58 gigatons, which is more than the current savings of either the global solar or wind power industries (Intro Video). Furthermore, most of the current coatings with the same designed purpose are destroyed in the harsh environment of the condenser within a matter of minutes. The DropWise coating has successfully survived lab testing in a recreated steam condenser environment for over 48 hours without any signs of deterioration.
  21. 21. Technology Strategy for Hydrophobic Coatings Gallatin, Phillips, & Walker 4/30/15 21 In order to show exact quantitative data on how this technology will help the customer, rather than just the initial estimates currently available, it needs actual application on a steam condenser system. This is why the plan for the technology’s implementation should be to initially focus on existing plants – the hope is that after application, data will exist that shows an actual, numerical increase in efficiency rather than the estimates currently available. Taking this increase in efficiency, quantitative data will be able to show the world that DropWise coatings are not just helpful - they are essential in the future of clean power generation. The goal should be to make DropWise coatings the industry standard, and guarantee that every new development will be built with a hydrophobic condenser coating. 3.5 Pricing – customer willingness to pay Pricing for this technology is very difficult to gauge. As is the case with all current competitors and incumbent technologies, the price will vary greatly depending on the many factors. The type of material being coated, the surface area of the material, and the type of condenser being coated are just a few of the considerations that need to be made in order to determine how much the customer will be charged for both the product and the service of applying the coating. It was discovered on the websites of both Advanced Polymer Coatings and GVD Corporation as well as other companies involved in the coatings industry that pricing was strictly based off quotes. The company required information involving the previously stated concerns in order to accurately determine the cost the customer could expect. Pricing was further complicated due to the relatively new use of initiated chemical vapor deposition in the coating industry. The equipment necessary for the process also needs to be customized to account for the large scale of the surfaces that will be coated in the power plants, with costs estimated to run well into the thousands. The materials themselves involved in the coating will be the cheapest component of the customer’s total cost. The chemicals necessary can be purchased for relatively low prices from chemical manufacturers and distributors such as Sigma Aldrich. The thinness of the DropWise coating is a cost benefit, as less starting materials are necessary to cover the same area as previous coatings. That being said, the scale of the project as well as the specific chemicals required will cause the total price of the materials to vary on a case-to-case basis. Overall, a price estimate of $10,000 was set as an initial basis. Again, this price could increase significantly for a larger power plant, or potentially decrease for one on a smaller scale. A deep investigation into all possible surfaces to be coated as well as the various surface areas of the piping in the 1,961 units of the served market could potentially provide us with enough quotes. However, because the technology is so new and each data point could be vastly different from each other, that process is not viable. Part of this price will be for yearly maintenance and up-keep provided by DropWise. This will ensure the coating is serving its designated purpose and maintaining a high level of performance. The portion of the price allocated to these purposes will go towards the cost of bringing in experts to analyze the efficiency of the system, providing any necessary repairs, and affirming the success of the coating. It is estimated that the service life of the coating will be about 5 years. DropWise’s coating has not yet been tested on a large-scale equivalent to a
  22. 22. Technology Strategy for Hydrophobic Coatings Gallatin, Phillips, & Walker 4/30/15 22 modern power plant. To this point, tests have still only been conducted in controlled labs on small scale, power plant replicas. Furthermore, the trials have not been carried out over a long enough time period to definitively determine the coating’s life. That being said, the coating showed no signs of deterioration or loss of efficiency during the tests carried out. After speaking to DropWise CEO, Adam Paxson, an estimate of 5 years was given as the goal for the technology’s life span. The idea is that this duration will allow the power plant to remake its initial investment in the form of cost savings and energy efficiency within the first 2-3 years. The remaining 2-3 years would then provide further profit to the power plant. The lifespan also ensures that DropWise will be able to sustain business in the form of future reapplications. 3.6 Triggers and barriers to adopting this technology The DropWise hydrophobic coating has many triggers enabling the adoption of the technology as well as a few limitations (see Figure 8). The coatings that predate DropWise do not offer the durability and thinness that this new coating makes possible. This company has developed a technology compatible with the power generation market. The power plant companies in this market understand the process of steam power generation and the regulations the United States Environmental Agency (US EPA) has put on plants. The DropWise coating easily adapts these complexities in small scale trials and as power companies apply the technology across many factories. Once power plant companies understand the benefits of the technology, they have the ability to install their condensers with a coating that can be customized to fit all services and condensing vapor types. As a new technology coming to the market, this hydrophobic coating has what the market needs to succeed. As far as competing with the current coatings on the market, DropWise has more benefits. Current coatings in use are too thick to feasibly conserve resources used in the vapor condensation process. Otherwise, coatings are too thin to last a reasonable length of time before wearing out. The coating needs to have a thickness around 100 times thinner than a piece of paper; DropWise’s coating reaches way beyond that benchmark. This new coating not only is 2,000 times thinner than a sheet of paper, but also withstands the corrosive environment of a condenser. Furthermore, the use of initiated chemical vapor deposition to apply the coating provides more effective results than the typical spraying method. All of these implications combine to give the DropWise a large relative advantage over incumbent technologies. The only prevention keeping DropWise from maintaining a complete advantage is that GVD Corporation is working on a similar technology. This thin and durable coating easily applies to vapor condensers through a vapor- based process, making it compatible with market needs. Also for environmentally conscious companies, like Exelon, this product appeals to the “green” habits, which reduce emissions and conserve water and fuel. All American power plants fall under the US EPA regulations that limit the rate at which the condensers produce power (US EPA). This coating reduces the ratio of toxic emissions to power production to meet these US EPA regulations. No process or aspect of the industry will have to change to adopt this technology. However, power plants will have to temporarily cease operation during the
  23. 23. Technology Strategy for Hydrophobic Coatings Gallatin, Phillips, & Walker 4/30/15 23 technology's initial application, leading to a slight decrease in score in the compatibility category. Once a company decides to partner with DropWise, the company has the ability to adopt the technology on a limited basis. The steam condensers have the ability to quickly produce results, which demonstrate the effectiveness of the coating. However, there are barriers for the technology’s trialability because no results exist the effect of the hydrophobic coating on a large-scale factory, or over a prolonged period of time. Despite the uncertainty, the first plant to take a trial-run can quickly produce the data showing the financial and environmental gains of DropWise’s coating. The inability to be certain of the effect of the trial on a power plant decreases the score in the trialability category, but this is not a very important category in the long run. In the end, power plants can buy this hydrophobic coating and install it on a water vapor condenser of any kind. The coating has the ability to be grafted to all metal surfaces and the polymer film of the coating can be customized to fit the condensing vapor environment. The potential barrier still exists of how service and support will be approached over long term implementation. As previously discussed, the technology has not been tested on a scale equivalent to an operational power plant, or for a time period long enough to provide a lifespan that justifies its implementation. Initially, the results of the coating will have to be closely monitored, but as any potential complications are worked out, the amount of service necessary will decrease. Therefore, the technology still scores relatively high in service intensity, with a decrease in score resulting from the initial uptick in required support. However, the technology’s ability to work on a small scale will give DropWise the opportunity to learn how to solve issues that arise. Figure 8. DropWise's Ratings for Triggers and Barriers for Adopting this Technology
  24. 24. Technology Strategy for Hydrophobic Coatings Gallatin, Phillips, & Walker 4/30/15 24 3.7 Strategic implications The hydrophobic coating DropWise has developed has a high relative performance and cost advantage. Power generation plants that use condensers emit tons of metric carbon through their condensers burning fuel. These plants also waste money because they have a poor “heart rate”, measure of efficiency. (Applications, DropWise Corps.) This coating has the potential to reduce the carbon emissions of a power plant equal to that of taking thousands of cars off the road, saving the plant millions in fuel and coolant costs. This capability makes the coating a high relative performance and cost advantageous product. This coating easily customizes to the needs of a plant using any type of metal in their condenser as well as different types of vapor processes. Before launching a full scale commercialization product, DropWise needs to partner with a “green” organization like Exelon. Exelon 2020 is a project started by Exelon to reduce the production of greenhouse gases by 17.5 million metric tons annually. (“Linking Environmental Stewardship to Our Business Strategy”) Exelon stands for environmental friendliness, which makes it perfect for trials with the coating to verify the compatibility with nuclear power, steam power, fossil fuel power and other applications to vapor condensers. With a partnership with a powerful company, this coating rates high with compatibility. The DropWise hydrophobic coating should be adopted by a power plant in a low- level trial in order to demonstrate the financial and environmental gain. This minimizes the risk of the product because DropWise will be able to focus on improvements. As DropWise documents this trial, a power company, like Exelon, will gradually extend the use of the coating to plants all over the nation and beyond. This method of implementation will validate DropWise as a fiscally responsible and environmentally friendly product. This hydrophobic coating rates high when it comes to its trialability. Several advantages exist for DropWise, but every technology has barriers in addition to triggers involved in the innovative success factors of its adoption. These barriers arise for the service intensity of the hydrophobic coating, giving the product a low service intensity. This affects the strategic implications by requiring DropWise to pay close attention to which approach best solves the complications the coating might have. A power plant has yet to install the technology on a whole factory, which may make the market hesitate to adopt the product. Without the results of a trial, the low service intensity for DropWise’s coating stands as a potential initial barrier to adoption. However, once the process is carried out and observed, it can be fine-tuned and improved to reduce the amount of necessary service and support. As with any new technology, the coating will want to be monitored in depth at first to ensure it is functioning correctly. A company willing to look past this initial question of service and test the coating will learn that this coating has the flexibility to graft to any metallic surface as well as choose a polymer which best suits the vapor condenser in which it performs.
  25. 25. Technology Strategy for Hydrophobic Coatings Gallatin, Phillips, & Walker 4/30/15 25 Figure 10. The Lotus Effect 4 Technological Environment 4.1 History of the technology Figure 9. Hydrophobic Technology Timeline Humanity has used several methods to generate energy throughout time. However, steam power generation has surfaced relatively recently. Before steam power companies introduced hydrophobic coatings to their energy generation method, the process was very inefficient. Steam powered generation uses a steam condenser, which contains a system of pipes with cold water running through them. Steam enters the condenser, surrounds the pipes, and condenses on the metal surface of the pipes. The absence of steam creates a vacuum in the condenser, which results in a powerful suction force that turns the blades in a generator creating electricity. (DropWise - Intro Video) Without a hydrophobic coating, this process executed inefficiently. The condensation on the pipes would form a layer of water hindering more steam from condensing, which slowed the generation of electricity. While looking for a solution, Scientists turned to nature to observe the “lotus effect” – the phenomenon of lotus flower leaves having superhydrophobic characteristics, as shown to the right in Figure 10, allowing water to roll off without sticking to the leaf. (Lesson Superhydrophobicity) If the lotus effect could be applied to steam condenser pipes, the coating would save millions in resources and improve power output of generators. Thus, the first hydrophobic coating was The First Lotus Flower •The Lotus Effect Typical Spray Coating •Advanced Polymer Coatings •1993 Vapor Deopsition Coating •GVD Corporation •2001 DropWise Coating •DropWise Technologies, Inc. •2015
  26. 26. Technology Strategy for Hydrophobic Coatings Gallatin, Phillips, & Walker 4/30/15 26 Figure 11. Chemical Vapor Deposition Equipment used on a flower rather than a power plant. Once companies began to apply a hydrophobic coating to the pipes in their steam condensers, the water would condense, slide off, and allow the energy generation process to become much more efficient. As steam condensers grew to become responsible for much of the world’s power, hydrophobic coating companies developed products to install in steam condensers. Companies like GVD Ultrathin Polymer Coating and Advanced Polymer coatings developed their own coatings to sell to the power generation market (see Figure 9 above). However, incumbent technology has been too thick. These coatings prevent a layer of water from sticking to the pipes; however, the coatings themselves still slow the condensation process. The market has a demand for a thinner coating. The coating GVD offers is possibly the thinnest on the market: 50 nanometers to 10 microns thick (About GVD Corporation). This is largely thanks to the development of the vapor deposition process by company founder and MIT professor, Karen Gleason. The equipment involved can be seen in Figure 11 to the left. The DropWise coating, comparatively, uses the same type of technology to apply to surfaces, but offers higher levels of performance. It is 30 nanometers thick, making it 2000 times thinner than a piece of paper (DropWise - Intro Video). Other hydrophobic coating prototypes manufactured to be thinner have been tested in the harsh environment of a steam condenser and worn in a matter of minutes, but DropWise withstands the environment. DropWise offers the market the thinnest coating as well as a long-lasting one, and once partnered with a host company, like Exelon, the product can be launched swiftly in no more than a couple years' time. 4.2 Physical architecture A power plant works by turning water into steam using heat, and then using the steam to drive turbine generators. Depending on the method of generation, the source of the heat is different. A coal-fired station will be used for this demonstration. The coal is first pulverized into a powder, then mixed with hot air and fed into a boiler firebox. Here the powder burns and heats up the pipes inside the boiler. The pipes inside the boiler contain highly purified water that is turned into steam by the heat from the coal. The steam reaches to temperatures of up to 1,000 degrees Fahrenheit and pressures up to 3500 psi (Duke Energy). This high-pressure, high-temperature combination guarantees the maximum amount of kinetic energy and enthalpy that the water can take on. The steam is then piped into a turbine, where the pressure of the steam against the blades turns the central turbine shaft. This transforms thermal energy from the fluid into mechanical energy. The blades of the turbine are a series of airfoils, where the flow induces a low pressure on the bottom surface of each blade and a high pressure on the top surface. This creates a pressure upwards which compounds on each blade of the turbine. The turbine
  27. 27. Technology Strategy for Hydrophobic Coatings Gallatin, Phillips, & Walker 4/30/15 27 shaft connects to the shaft of a generator, where magnets spin against wire coils to create electricity. The technology comes into play after the turbine, in the region known as the condenser. The condenser remains an extremely important part of steam turbine generation and plays a large role in driving the turbines as well. When the steam exits the turbine, it must be cooled and depressurized into usable water that can be used again in the process. The steam is cooled by a series of metal tubes carrying millions of gallons of cold water from an outside source like a river or lake. The hot steam condenses into water on the cold surface of the tube. The extraction of heat by these effluent tubes causes the volume of the steam in the surrounding air to go to essentially zero. This pressure differential between the high pressure steam before it enters the turbine and the extremely low pressure after condensing creates a powerful vacuum force that drives the turbines even harder, creating more energy. This condensing process is shown in Figure 12 below. After being condensed the water will be cooled further and sent back to the steam boiler. This condenser is the point of application of this technology. In particular, focus will be on the tubes that carry effluent and the condensation process from steam to water. As mentioned above, this condensation process is the driving force behind the vacuum force used to generate electricity. Typically, when steam condenses on the tubes it forms a barrier of water (because the water is actually prone to sticking on the metal tubes of the condenser). The hydrophobic coating allows the condensed water to bead up and roll off the tubes, allowing more surface area for condensation and greater efficiency in heat transfer. The application of the thin, high-strength hydrophobic coating relies on a process based on initiated chemical vapor deposition, developed by the Gleason Lab at MIT. The process uses a very small amount of polymer precursors and chemically grafts an ultra-thin film to the surface of the tubes using strong covalent bonds. The left-behind coating is both strong enough to persist on the tubes through the strenuous working conditions as well as thin enough to still allow steam to condense with great efficiency. The process of coating the tubes with the polymer has been specifically designed to work on the tight spaces of heat exchangers and condensers. The entire process is vapor-based, sending a gas across the condenser tubes that will leave behind the coating. The excess gas is brought out and recovered after passing through the condenser. This makes the technology useful for coating pre-existing condensers - coating support equipment will be brought in and attached to the condenser unit, creating a closed system. Figure 12. Diagram of a Steam Condenser
  28. 28. Technology Strategy for Hydrophobic Coatings Gallatin, Phillips, & Walker 4/30/15 28 On the small scale, this may not seem like that much of a change. The real effect of the product is seen, however, in the application of the product to the tens of thousands of condenser tubes that a power plant will use. When compounded to a larger scale, this small increase in efficiency per pipe leads to huge savings in effluent and fuel. The plant will produce more electricity per unit fuel, in less time, with less emissions. Below is a chart (Figure 13) outlining the generation process described above. Figure 13. Steam Generation Process
  29. 29. Technology Strategy for Hydrophobic Coatings Gallatin, Phillips, & Walker 4/30/15 29 4.3 Comparison with alternative technological approaches Figure 14. ISF Map of DropWise Coating vs. Advanced Polymer Coating Process vs. No Coating Present (Incumbent) Figure 14 above is the ISF map of the DropWise Coating vs. the Advanced Polymer Coating (APC) process vs. No Coating Present as the incumbent technology. It compares the newly developed DropWise coating with the APC alternative technology in relation to their relative advantages over the incumbent technology (on the y-axis) as well as the relative importance of the factor to the technology's success (on the x-axis). The DropWise hydrophobic coating has already proven its superiority over similar developments intended to serve the same purpose. Current coatings in use have proven to be too thick, forming an insulating layer on the condenser and hindering the condensation process. Coatings that have been specifically designed to be thin enough to be efficient are not durable and deteriorate quickly, often within minutes. The DropWise coating on the other hand combines both the necessary thinness with strength and durability, resulting in high levels of performance that previously haven't been achieved. Advanced Polymer Coatings, according to the OneSource business profile, only earns $736,000 in sales annually. This indicates a relatively low popularity as a coating supplier as other companies far exceed those sales. Although Advanced Polymer Coatings has been on the market for over 20 years, their experience in the field has not boosted the momentum of their product. This is indicative of a lower level of performance compared to other alternatives. Both DropWise and Advanced Polymer Coatings offer a multitude of applications for their technologies. The ChemLine coatings from Advanced Polymer Coatings are installed on road and rail transportation, tank (ISO) containers, power generation, and
  30. 30. Technology Strategy for Hydrophobic Coatings Gallatin, Phillips, & Walker 4/30/15 30 many others. (ChemLine Coatings for Industry) Furthermore, the technology can be adapted to apply coatings beyond just hydrophobic ones, giving a wider range of extensibility. DropWise has not yet brought their product to market, so their known reach and extensibility is harder to determine. It has been shown that the initiated chemical vapor deposition process employed can be adapted to function with many different coatings being applied to various types of surfaces. While there is no demonstrated extent of DropWise's product yet, there is promise of the ability to expand in the future. Finally, scalability is a must for a hydrophobic coating because the power generation industry involves starting off on one steam condenser and expanding to large scale factories as the coating becomes more popular. DropWise's implementation of the initiated chemical vapor deposition process allows them to adapt their scale to meet all requirements. The coating can be applied to preexisting condenser units, and even just a portion of the unit. Furthermore, the process can be adopted to a large scale to cover all condenser units in a power plant. While DropWise scores well in scalability, Advanced Polymer Coatings lacks small scale experience, reducing their advantage. ChemLine coatings does not seem to have options for small scale implementation. (ChemLine Coatings for Industry) This hinders the company's ability to succeed in the market by limiting the options available to their clients. 4.4 Pipeline (follow-on) technologies Hydrophobic coatings such as the one developed by DropWise Technologies present the ability for improvements in any system that requires a condensing unit to operate. Specifically, this product will have enormous implications on the energy generation industry, changing the outlook of both the country's and potentially the globe’s view of the sustainability and associated timeline of its resources. There are not necessarily any new technologies to follow in succession and replace this product, but as it becomes more widely used and its success is acknowledged, improvements will be made. One area to consider is the chemical make-up the coating itself. If other compounds both are able to be applied in the same initiated chemical vapor deposition process while providing even greater performance ability, larger jumps will be made in the energy generation industry. Research into the ideal chemical makeup of the compound will be at the forefront of development in this area moving forward. This equates to the important ISF factor identified above, technology development. By further searching for the most efficient makeup of the coating, improvements will continue to be made as the technology develops. Along similar lines, it will be important to consider the proper makeup of a coating that can be used for condensing other vapors besides steam. Not all condensing units in all processes are operated with a steam vapor. The technology has bountiful potential to be applied to all condenser systems, but it must be ensured that the coating used is compatible with the chemical makeup of the vapor used in the process. If various coatings can be developed for different vapor condensation processes, even more resources can be saved and the efficiency of a variety of industries will increase. This aligns with the ISF factor of extensibility discussed previously. The technology should
  31. 31. Technology Strategy for Hydrophobic Coatings Gallatin, Phillips, & Walker 4/30/15 31 be able to expand its influence beyond just a single industry, and this is a foreseeable advancement with future developments. Finally, the technology will need to be refined to allow for implementation of the coating into the production process of the condenser. Currently, the obvious use of the technology is to place the coating on units that are already in place in power plants with the goal of increasing efficiency in established systems. In the future, the technology should be expanded to allow for the coating to be directly applied to the hardware that will be used in new condenser units. This addresses the important ISF factor of scalability. Not only will the coating be applied to single units that are already a part of working processes on an individual basis, but it should be able to be implemented in large scale production. All of these developments will work to improve the technology as its shortcomings are identified after initial implementation. Furthermore, they will all serve to increase the efficiency of the energy generation process by requiring fewer resources to be used to produce the same amount of energy. This will open up the industry to further developments in other areas of the process. Specifically, the issues will arise of where to store and how to transport all the additional energy that is able to be produced. A ripple effect will be felt in both the battery and electric cable industries as new developments will be needed to meet the additional demands. 4.5 Implications for your technology strategy At this point in time, almost no challenge arises that would need to be addressed prior to the launch of the minimum viable product. The coating has been developed and tested with results proving it both increases efficiency while remaining durable in the harsh steam environments. Potentially further long-term testing may be required to simply convince investors of the coatings durability. Without long-term running data, companies may be hesitant to adopt the technology with the worry that a short lifespan will make it financially impractical. That being said, the product itself is ready for implementation currently. Looking to the future, all issues and improvements to the technology can be addressed in future releases. The coating will initially be implemented on a small scale basis, as it is currently in a perfect position to do, with large scale production becoming available as the initiated chemical vapor deposition process is refined and expanded. Furthermore, the coating is proven to have significant effects as it is designed now. This will allow researchers to continue to fine tune the composition while the current version still provides both environmental and financial benefits across the board. Research in coatings that can be similarly be applied that are compatible with other vapors can also be delayed initially. The energy production industry is clearly the area in which the greatest benefit will be felt by the technology initially. It is the application that poses an answer to the most pressing issue presented by condenser systems, and therefore should be the initial focus.
  32. 32. Technology Strategy for Hydrophobic Coatings Gallatin, Phillips, & Walker 4/30/15 32 5 Competitive Environment 5.1 Top competitors and basis of competition Baosteel Group Corp. - Supporting Baosteel Group Corp. became incorporated on January 1, 1992 in Shanghai China. (Baosteel Group Corp.) As the world’s third largest producer of steel, Baosteel Group competes in a variety of industries. Some of these industries include: petrochemical, nuclear power, metal products, energy and transportation, and machinery manufacture. Although Baosteel Group does not manufacture their own hydrophobic coating, as a metal production leader, they serve as a supporting technology provider. Not only is Baosteel the third largest producer in the world, but they are also the metal industry leader in sales by raking in an annual revenue of over $300 billion. The next highest in sales only earned $80 billion. (Baosteel Group Corp.) Other companies look to Baosteel Group as a model of success. Given that 57% of the geographic segmentation for the primary metal industry is located in China, Baosteel influences a major portion of the metal that power plants purchase to place in their steam condensers. If the DropWise coating manages to have Baosteel support the implementation of the coating on their steel for steam condensers, then DropWise will capture a large portion of their potential market. GVD - Potential Entrant Dr. Pryce Lewis founded GVD Corporation in 2001 in Cambridge, Massachusetts. GVD only accumulates $15 million annually in revenue, which cannot begin to compare to Baosteel Group. (GVD Corp.) However, what makes GVD a threat as a competitor is not their monetary resources, it is their role as a potential entrant technology. Like DropWise, GVD uses an initiated chemical vapor deposition process to produce an ultrathin hydrophobic coating. The Paint & Coatings Industry released an article explaining how GVD has used their coating to tap several different markets, like tire production, septic tanks, and several others. (Commercializing a New Generation of Polymer Coatings) GVD stands as a strong competitor because in addition to their market reach, their product improves the efficacy of power production. The coating
  33. 33. Technology Strategy for Hydrophobic Coatings Gallatin, Phillips, & Walker 4/30/15 33 specializes in adhesion to complex surfaces, dry, solvent-free coating process, and ultra- thin (50nm - 10 microns). (About GVD) These features can push GVD ahead in the power production industry, if plants begin to coat steam condensers with their product. However, the hydrophobic polymer coating DropWise has developed is 30 nanometers thick, making it 2000 times thinner than a piece of paper (DropWise - Intro Video). Other hydrophobic coatings manufactured to be thinner have been tested in the harsh environment of a steam condenser and worn out in minutes, but DropWise withstands the environment. DropWise offers the market the thinnest coating as well as a long-lasting one; not to mention DropWise has been tested in steam condenser conditions, whereas GVD has not, which gives it the edge on the market to beat out GVD. 5.2 Competitive Landscape Figure 15. Competitive Landscape of Exelon vs. Key Competitors Differentiation in the market comes most broadly in two variables: where the technology is physically applied in the lifetime of the condenser, and to what type of business it is applied. Exelon will focus in the beginning on applying the technology to their pre-existing condenser units. This will establish them as a market leader in this field, and power generation companies will trust them to refit their condensers with the new technology. This is an overwhelming portion of the market - as companies are less focused on building new systems when they can improve the efficiency of their old systems for less.
  34. 34. Technology Strategy for Hydrophobic Coatings Gallatin, Phillips, & Walker 4/30/15 34 Another market Exelon can specialize in is condenser manufacturing: developing a process to apply the coating to the condenser before it leaves the assembly plants. This strategy would allow Exelon to capitalize on both new and old developments, and extend its own power generation systems with new, ready-made high efficiency systems. This would, however, require that the DropWise-Exelon collaborative pair with a condenser manufacturing company like Graham Corporation or Alstom. The coating technology, then, could be licensed to these manufacturers. The product is also contingent on DropWise becoming the market leader in hydrophobic condenser coatings, as well as a general acceptance throughout the condenser market that hydrophobic condenser coatings should be essential in all new developments. Baosteel would be most effective in applying coatings to the steel before it leaves their plants because of their large manufacturing presence. Many condensers use steel produced by Baosteel and it’s possible that Baosteel could take precedence over the coating process by applying coatings directly during manufacturing. This would make them leaders in the metal-manufacturing with hydrophobic coating industry, and with their large supplier base, it is possible that they could apply the coating before Exelon even gets their hands on the product. The main barrier is a lack of knowledge of the process - Exelon would have a much better product initially and be able to establish themselves as a market leader. Baosteel could also be effective in the replacement of condenser units to existing generation companies, so that when companies need repair they can also upgrade to higher efficiency. Here the biggest block is price - when companies need a repair they are likely to seek the cheapest option that will put the plant at operational conditions again. This will change as hydrophobic coatings become more widely accepted as an industry standard, and companies see the benefits of paying more to upgrade their systems. GVD Corp would be most effective in applying the technology to new power- generation plants before they start operating, as they would lack the skill set to apply it to systems that have already begun operation. They pose a threat to Exelon because they could possibly undercut the price for new developments (less research and development needed). GVD Corp does not have a product tested for the implementation at the high pressure and temperature required of the product, however, and would not be seen as the main name in the industry - DropWise and Exelon would. They also lack the depth as a company to expand overseas or trap markets that Exelon could not reach. 5.3 Customer Value Proposition For power generation companies who want to lead their industry in power production, the DropWise hydrophobic coating is an initiated chemical vapor deposition polymer that improves the efficiency and rate at which steam condensers generate power. Unlike GVD, DropWise specializes in creating a coating tested at the high temperature, high pressure conditions that steam condensers require - to outperform and outlast all other condenser coatings that came before. (Intro Video)
  35. 35. Technology Strategy for Hydrophobic Coatings Gallatin, Phillips, & Walker 4/30/15 35 5.4 Projected market share Figure 16. Market Sizes vs. Total Unit Sales As can be seen in Figure 16 above, it is estimated that DropWise’s coating as hosted by Exelon will initially be slow to penetrate the market, entering at only 1%. Power plant owning companies may be slow to implement the technology at first, as coatings have not had widespread success in this application before. They will want to see how much more efficient the coating makes the process as compared to the incumbent technology before committing to pursuing the DropWise technology. However, with strong potential for success and demonstrated ecological and financial benefits, DropWise’s coating will soon grow to take control of a much larger portion of the served market. With the implementation of DropWise’s coating by Exelon, competitors, like the previously discussed GVD Corporation and Baosteel Group Corp., will pursue the technology as well. As all previous attempts at implementing this type of technology have been relatively unsuccessful, there is not much of an incumbent to compete with. However, with many potential players possessing either the resources, technological knowledge, or established position in the market, competition will most likely be widespread at first. Regardless, it is foreseeable that Exelon will maintain control of a large portion of the market over time. A “Rule of Three” market will most likely develop as the technology progresses, as shown in Figure 17 below, favoring a few large companies, such as Exelon and Baosteel. They will have greater resources and capital available to more widely distribute the technology, as well as a potential partnership with the originators of the technology. For this reason, GVD Corporation may find it difficult
  36. 36. Technology Strategy for Hydrophobic Coatings Gallatin, Phillips, & Walker 4/30/15 36 to gain a large enough hold of the market, leaving them just outside of the “Big Three” companies and opening the door for a third large company to become the third part of the market triarchy. Most likely, the third arm of the proposed "Big Three" will be occupied by a large chemical production company, such as DuPont. A company such as this is vastly experienced in the production process that is necessary to create the chemical components involved in the coating. Furthermore, they will have an established presence and reputation for producing high functioning materials of all functions and distributing them to necessary clients. Until the identity of this lead company is established, the third arm will be split by many smaller companies or larger companies not fully invested in the pursuit of the market. From this group, one will begin to emerge as the dominant force as the client base is extended and the commitment level increases. Figure 17. Market Share Projections of Key Competitors Finally, slight growth in the served market is predicted in the future, as can be seen in Figure 16. According to a report by the International Atomic Energy Agency (IAEA), the percentage of energy generated by nuclear power is projected to increase in the United States moving forward. The report forecasts out to 2050, which is beyond the scope of this analysis. It should be noted that the report does predict a slight increase in nuclear power in electricity generation through 2020, but the more significant growth will occur towards 2030 and beyond (IAEA). For this reason, only a 2% increase in served market is estimated through 2022.
  37. 37. Technology Strategy for Hydrophobic Coatings Gallatin, Phillips, & Walker 4/30/15 37 6 Technology/Business Intelligence 6.1 Priority issues for intelligence collection 1. Price the market is willing to pay: We have yet to identify the profit margin of the coating.  What is the cost of similar coatings currently on the market?  What is the approximate cost to manufacture the chemical components involved in the coating?  How valuable to power generation companies view efficiency savings?  This information will enable us as analysts to better gauge whether the DropWise coating is financially feasible both to make and to purchase. 2. Market share: We have struggled to identify what portion of the market is open and available for a new technology or company to infiltrate and what portion is closed.  What percent of the steam condensing units in power plants utilize hydrophobic coatings or similar technologies?  Would power generation companies be interested in adopting this type of technology if they do not have a coating in place currently?  Would power generation companies be interested in switching to the DropWise coating in place of the technology currently in place on their condensers?  Answering these questions will provide a greater understanding at how large of a potential there is for the DropWise coating, as well as how easily it can be infiltrated 3. Complimentary hardware system: We would like to learn more about the external technologies and equipment required to apply the coating, and if there are any of these systems on the market today.  What types of dispenser systems are required to apply the coating?  Do similar dispenser systems currently exist?  Will the systems be designed and manufactured specifically for the use of the DropWise coating, or can similar systems be implemented?  What will the cost be to manufacture the supporting equipment?  Gathering this information will lead to better insight into the operation of the technology, as well as the logistics involved with its application. 4. Turnover time: It is important to determine how quickly the condenser can be shut down, the support system attached, the coating applied, and the machine returned to proper function.  What type of preparatory work is involved before applying the coating?  How long does the polymer bonding process take after dispensing the chemical components?  Does the coating have to be reapplied at regular intervals?  These details will provide more information about how invasive the coating process will be, as it is important to not hinder or delay the power generation companies' operation.
  38. 38. Technology Strategy for Hydrophobic Coatings Gallatin, Phillips, & Walker 4/30/15 38 5. Efficiency Gains: We would like to gauge the quantifiable increases to efficiency expected from the technologies application to a condenser system.  How much more efficiently will energy be produced in a power generation system implementing the coating?  What will be the resource savings (coal, water, etc.) associated with the coating's use?  What kind of financial savings/return can be expected by the customer after applying the coating?  All of this information will help promote the technology to future customers by providing hard numbers to the savings that are promised with the coating. 6.2 Interview questions 1. What is your most popular package offered to customers as a product? (GVD) 2. What share of the market do you control? (GVD) 3. Where do you see the hydrophobic coating's place in the market? (DropWise, GVD, Professor Jennings) 4. What supporting technologies does the coating require? (DropWise) 5. When installing this popular package, how long does is the turnover time for installation? (GVD, DropWise) 6. What costs come out of your revenue for installing your coating? (GVD, DropWise) 7. How long does it typically take a customer's return to match their investment? (GVD, DropWise) 8. Is a hydrophobic coating or similar technology used on steam condenser units in your power plants currently? (Exelon) 9. How large of efficiency gains/fiscal savings would you need to see to be interested in the technology? (Exelon) 10. To what extent can hydrophobic coatings increase efficiency in a typical steam powered turbine? (Professor Jennings) 11. In your research, is this type of technology advanced enough to make it close to reaching market and being implemented? (Professor Jennings) 12. Who do you recommend we contact to find out more information on the logistics of commercializing a hydrophobic coating? (All) 6.3 Interview sources Neal Miller, Exelon Corp., Senior Manager Exelon is our main consideration for a host company, and they own a large portion of the energy production market in the U.S., qualifying them as a reliable source. Neal will ideally provide us with the perspective of the power generation companies concerning this DropWise coating technology, as well as providing details about current technologies that are implemented. Email: Phone: N/A
  39. 39. Technology Strategy for Hydrophobic Coatings Gallatin, Phillips, & Walker 4/30/15 39 Austin Nowak, GVD Corporation, Sales Engineer Contact with Austin will provide information about both incumbent technologies as well as the perspective of a potential competitor. GVD is an established member of the coating industry, specializing in initiated chemical vapor deposition, leading to many similarities to DropWise. Email: Phone: 617-661-0060 Kane Jennings, Vanderbilt University, Professor of Chemical and Biomolecular Engineering Professor Jennings researches thing films and coatings for implementation on surfaces. He will have a vast knowledge of the quantitative energy efficiency and heat transfer gains associated with similar coatings, as well as providing insight into the efficacy of the product in the market. Email: Phone: 615-322-2707 Adam Paxson, DropWise Technologies Corp., President & CEO Adam Paxson is the lead behind the DropWise coating technology. He was at the forefront of its development and has more information than anyone else concerning this specific coating. He will provide many of the missing details we have pertaining to this coating in particular. Email: Phone: 509-637-4936 Mark Petty, Vanderbilt University Plant Ops, Director Mark Petty is responsible for overseeing the operation and utility production on campus. He ensures utility infrastructure, buildings, and grounds are in order, as well as focusing on energy conservation and operating the building control systems. He will provide us with a perspective of a power generation entity, particularly in relation to interest in the technology. Email: Phone: N/A 6.4 Interview summaries Notes and information gathered from interview sources can be found in Appendices section 15.2. 6.5 Contact log Contact log detailing correspondence with interview sources can be found in Appendices section 15.1.
  40. 40. Technology Strategy for Hydrophobic Coatings Gallatin, Phillips, & Walker 4/30/15 40 6.6 Summary of Strengths, Weaknesses Opportunities, and Threats This section presents ten of the most critical innovation success factors surrounding the introduction of the DropWise hydrophobic coating technology to market. A wide-ranging list of innovation success factors was developed, and subsequently ranked on both: -Relative Performance: how does the technology compare with competing technologies? And -Relative Importance: what importance does the market place on the factor? These rankings were taken and used to create the matrix shown below (Figure 18), which plots the relative importance along the horizontal axis and the relative advantage along the vertical axis. The following sections will be a discussion of the ten most critical of these factors, and their impending strategic implications. Figure 18. Complete Analysis of ISFs - Relative Advantage vs. Relative Importance 6.6.1 Readiness of Society for the Innovation Importance Rank: 5 Performance Rank: 4 In the current age, companies are under increasing pressure to increase their “green” technologies and comply with strict governmental regulations such as pollutant and effluent levels. Energy, and clean energy production, is more important than ever - so the timing is right for this product’s application. This factor scores high in quadrant 1, with a 5 on importance and a 4 on performance. The high importance comes from the green movement and society’s focus and burgeoning obsession with clean energy. DropWise ranks highly on performance because they can neatly accompany this push