Small Businesses are the Next Big Thing in Energy Innovation
April 28, 2018 | Q&A with Jen Derstine, Director of Strategy and Policy, Capstone Turbine Corp. and Lynn Abramson, President, Clean Energy Business Network
Company: Capstone Turbine Corporation
Contact: Jen Derstine, Director of Strategy and Policy
Location: Washington, DC and Van Nuys, CA
# of Employees: 168
Small businesses are the backbone of the American economy, making up more than 99 percent of all U.S. firms. They’re also what’s driving our clean energy future. In fact, the majority of the 1.9 million energy efficiency workers in the U.S. work for small businesses with five employees or less, and about 70 percent work for companies with 10 employees or less.
We sat down with Capstone Turbine Corporation’s Jen Derstine, Director of Strategy and Policy, to understand how her growing business and others like it are making a big impact in America’s energy innovation leadership.
Rep. Steve Knight (R-CA-25) tours the Ronald Reagan Presidential Library in 2016, powered by Capstone Turbine Corporation’s combined heat and power microturbine array.
(Credit: Sean Paul Franget Studios, courtesy of The Pew Charitable Trusts)
Can you tell us a little bit about Capstone Turbine Corporation’s technology?
Capstone Turbine Corporation is the world’s leading developer and manufacturer of clean-and-green microturbine power generation systems, and was first to market with its high efficiency air bearing turbine technology. We make small-scale (<500 kW) combustion turbines that provide an efficient source of onsite power generation, and can be combined in parallel to serve larger loads. Microturbines serve multiple industries around the world, including oil and gas, renewable biogas and combined heat and power (CHP). The movement towards decentralized energy in a distributed generation model has allowed microturbines to flourish, particularly in CHP where a single fuel source, such as natural gas, is used to generate electricity and heat. This brings the overall efficiency of the system above 80%, making microturbines a cleaner and greener solution than utility power in many cases.
Microturbines are also getting attention right now for their “microgrid” capability. In this application, the microturbine works in conjunction with other technologies such as solar, wind and battery storage. This provides a higher level of reliability and efficiency than traditional power or any one technology alone. The reliability benefits of our technology were obvious during Hurricane Irma when one of our clients held out as the only hotel in the U.S. Virgin Islands to retain power and water during the storm. Or when another client, a fast-food store in Puerto Rico, kept the lights on during Hurricane Maria.
Do you think small businesses play an important role in energy innovation? If so, how?
Small businesses’ work in energy innovation is critical to paving the way for America’s clean energy future. Thanks to small businesses just like ours, energy innovation is booming all across the country. Despite being the world’s leading technology manufacturer of microturbine systems, Capstone Turbine is still a relatively modest size company, with less than 200 employees. I think that is one of our great strengths. There’s not a lot of bureaucracy, so everyone in the company can have an impact, make suggestions, and be included in the company direction.
With less than 200 employees, Capstone is considered a small business per Small Business Administration standards—but it’s still fairly huge compared to many businesses in the Clean Energy Business Network (CEBN). Can you tell us more about how the company grew from an innovative startup to the world’s leading provider of microturbine solutions?
Strong patents, smart partnership to support development, good timing and a recognition of the importance of branding and market shaping have been continued themes in Capstone’s growth. Capstone was founded in 1988 by a pair of aerospace engineers with a handful of patents. With some financing from Ford, NASA and a few others, their initial plan was to produce microturbines to be used in electric cars. In 1993, the company attracted the attention of some private investors interested in developing a turbine-powered electric hybrid car and an initial prototype was released. The EV market was still very immature so the company looked to stationary power applications – particularly for remote power and cogeneration. Capstone continued to develop products and improve performance until the company’s initial public offering in 2000. With California in the midst of their energy crisis with rolling blackouts, microturbines were seen as an ideal solution. Capstone was able to sign a large number of distributors in the U.S. and abroad to provide access to the global market. With support from both federal and state R&D funding opportunities, we continued to add to our product line and improve performance. Access to global markets and sales and applications across multiple market verticals lowers the risk to our business if there is a disruption in a particular market or application. We have a large number of patents and still maintain control of our design and manufacture of critical components. We also have invested in establishing a strong brand and promoting awareness of microturbine technology. To retain our position as the market leader in microturbines, we believe it is critical to continue to innovate and identify new markets.
What attracted you to working for a small energy innovation-focused business?
I ended up in energy innovation because my Foreign Service letter came a little too late. A few years after finishing college, I applied to the U.S. Foreign Service, hoping to work in public diplomacy. By the time I got the letter inviting me to join an incoming class of officers, I had already paid the deposit for graduate school! I decided to go ahead with pursuing a Master’s at Johns Hopkins and after graduation, I was selected to become a Presidential Management Fellow.
For the fellowship, I landed a position in the U.S. Department of Commerce (DOC), where I served as an International Trade Specialist and helped to organize the first Renewable Energy and Energy Efficiency Advisory Committee to address issues impacting the growth of and export opportunities for U.S. clean energy companies. On a trade mission to Saudi Arabia, I got to work closely alongside one of the companies in the group—Capstone Turbine Corporation—and was really excited about their technology. I accepted an offer to join their team in 2012 and have been there ever since.
Being part of an innovative technology company like Capstone has put me at the forefront of distributed generation technology. It is an exciting position to be in, but also challenging. The marketplace changes rapidly, so having an agile business that can react and adapt to market conditions is critical to our growth. I’m thrilled to be working to grow awareness and adoption of such a groundbreaking technology.
Your experience highlights an important point about public-private collaboration in energy innovation. What role have public programs and investments through the Department of Energy and other programs played in the development of the company?
As a small business, research and development opportunities funded through public programs have supported the continued enhancement of our product performance and expansion of our product line. Capstone has a history of R&D collaboration with the U.S. Department of Energy (DOE). The Advanced MicroTurbine System program launched in 2000 focused on development and implementation of technology for a 200 kWe scale high efficiency microturbine system and the development and implementation of a 65 kWe microturbine capable of meeting the California Air Resources Board’s (CARB’s) stringent emission standards effective in 2007. The C370 Program awarded in 2010 supported design and testing of the most electrically efficient recuperated microturbine engine at a rated power of less than 500 kWe. Capstone also partnered with Argonne National Lab in 2015 to participate in the DOE’s Technologist in Residence program. This program supports exploration of research focus areas to advance the adoption of low-emission, high efficiency power solutions such as hydrogen and syngas fuel products and introductions to complementary technologies such as the ability to test a new fuel injection technology.
From a market development perspective, Capstone is a member of the U.S. Environmental Protection Agency’s Combined Heat and Power Partnership (CHPP), which is committed to improving the efficiency of the nation’s energy infrastructure and reducing emissions of pollutants and greenhouse gases by increasing the use of CHP. Similarly, for the oil and gas market, the EPA’s Natural Gas STAR program encourages oil and natural gas companies to adopt cost-effective technologies and practices that improve operational efficiency and reduce methane emissions, including the use of microturbines running on associated gas as an alternative to flaring that gas.
What do you think the role of public programs and investments through the Department of Energy is in the energy sector overall?
Public programs and investments support both market development and continued innovation. Often, small and mid-size businesses like ours need a boost to bring the next big idea in energy innovation to reality. Programs like the Department of Energy’s Advanced Manufacturing Office invests in small businesses’ research and development in energy technologies and encourages commercialization. The DOE’s Advanced Research Projects Agency – Energy, which resulted in the creation of 56 new energy innovation companies in 2017, help bridge the gap between scientists in the lab and entrepreneurs in the marketplace. The DOE’s CHP Technical Assistance Partnerships located regionally across the U.S. also work to promote and assist in transforming the market for CHP through engaging potential end users to provide education on CHP as a solution and offer pre-engineering support as well as engaging stakeholders such as regulators, utilities and policymakers to identify and reduce barriers to CHP.
Long-term U.S. investment in small businesses and energy innovation has a positive impact on our economic growth, our manufacturing and operational competitiveness and our ability to retain leadership in innovative and emerging technology. We see what happened with the solar industry where after decades of public-private collaboration, solar companies now employ 370,000 people, and nearly four-fifths of firms have fewer than 50 employees, with a third having five or fewer.
What does energy innovation mean to Capstone Turbine Corporation and why does it matter?
The EIA projects a 28% increase in world energy use by 2040, and the countries that have a reliable and affordable clean energy supply will be the strongest and most secure. For us, energy innovation is a security issue. But we’re also concerned with how to provide flexibility, reliability, and lower operating costs to our customers while reducing their impact on the environment. Simply put, innovations in clean energy technology allow us to provide reliable power when and where people and companies need it most.
What sets Capstone apart in the energy innovation sector?
We are a U.S. manufacturer. We’re headquartered in Van Nuys, CA where we design and manufacture all of our microturbine energy solutions. Our products help our customers all over the world to improve business operations by reducing operational expenses, ensuring high power availability and helping to preserve the environment with a near-zero emissions profile. We work with a broad variety of clients, from the oil and gas industry to hospitality to data centers to manufacturers. Capstone’s microturbines even provide a highly efficient CHP solution to the Ronald Reagan Presidential Library.
All Capstone Turbine dual mode microturbines can be considered microgrids, and all of our microturbines are microgrid-ready due to our DC output potential. Microgrids are designed to provide uninterrupted power through multiple generation sources and to balance load demands which can help save money. Because microgrids aren’t dependent on the traditional grid they can also provide stability in bad weather.
What do you think the future of energy innovation in this country looks like? How do you think your company helps shape the future of energy innovation in America?
When Rep. Steve Knight visited the Ronald Reagan Presidential Library in 2016, he said the library’s combined heat and power facility, “… is an example of how American ingenuity and innovation can be used to solve problems in communities across the country.” We at Capstone completely agree.
Families and businesses have a need for dependable energy. Innovative technologies like ours are an efficient and powerful remedy to that challenge. As we saw in Puerto Rico, these systems are emergency ready and can help lead to fewer blackouts, greater cost savings, and less dependence on fossil fuels. Microturbines are clean and reliable and I have no doubt that their role and Capstone’s role will only continue to increase in the future. The best way to ensure that America’s clean energy future is bright is to support small businesses working in energy innovation. This National Small Business Week (April 26-May 5), we’re encouraging lawmakers to continue to support America’s small businesses and our nation’s leadership in energy innovation.
The Clean Energy Business Network (CEBN) works to advance the clean energy economy through policy, public education, and business support for small- and medium-size energy companies. Started in 2009 by The Pew Charitable Trusts, the CEBN is now a small business division of the Business Council for Sustainable Energy. The CEBN represents 3,000+ business leaders across all 50 U.S. states working with a broad range of clean energy and transportation technologies.