| Small & micro cap project

Tecogen Inc.: Signs of moat

by | Jan 15, 2020

The company manufactures natural gas engine-driven cogeneration systems, heat pumps and chillers, all of which are CHP products that deliver more than one form of energy. 

The company manufactures three types of CHP products: (a) cogeneration units that supply electricity and hot water (b) chillers that provide air-conditioning and hot water marketed under the TECOCHILL® brand name; and (c) high-efficiency water heaters marketed under the Ilios® brand name.

Signs of moat

(1) Strong track record: The Company has shipped over 3,000 units, some of which have been operating for almost 35 years.

(2) Ultera Low-Emissions Technology:

  • This breakthrough technology was developed in 2009 and 2010 as part of a research effort partially funded by the California Energy Commission and Southern California Gas Company.
  • The Ultera ultra-low emissions technology gives Tecogen products a strong competitive advantage in markets where severe emissions limits are imposed or where very clean power is favored, such as New Jersey, California and Massachusetts. According to the company, its Ultera® CHP and fuel cell technologies are the only technologies that comply with California’s air quality standards for CO and NOx, which are regarded as the world’s strictest air quality standards.
  • In 2017, a group of generators owned by a single customer in Southern California were supplied Ultera kits because of their particular requirement to exceed the 200-hour annual limit. These units have been tested by the customer and shown to be compliant with the local pollution limits, which the company believes to be the strictest anywhere in the United States, and potentially the world. The company’s CHP products have been permitted to this same standard. However, CHP products are given a heat credit that effectively increases the allowable limit. In 2018, permitting was completed, making these certification levels the lowest the company has achieved. The company believes that no other engines have been certified to these levels since the latest regulations in the Los Angeles region became effective ten years ago.

(3) InVerde Cogeneration Units

  • InVerde is a 100-kW CHP system that not only provides electricity and hot water, but also satisfies the demand for operation during a utility outage.
  • The company’s redesigned version of the unit, the InVerde e+, incorporates an inverter. The company believes that the InVerde is the first commercial engine-based CHP system to use an inverter.
  • Electric utilities accept inverter technology as “safe” by virtue of its certification to the Underwriters Laboratory interconnection standard 1741. InVerde has earned this certification which qualifies its product for a much simpler permitting process nationwide and is mandatory in some areas such as New York City and California, a feature the company considers to be a competitive advantage. 

Suggested further readings

Letter to Shareholders: 2016 Interim Update

https://www.sec.gov/Archives/edgar/data/1537435/000153743516000156/tgn-201610258kex9901letter.htm

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