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ASSESSMENT OF MARKET PROSPECTS FOR IMPULSE DEVICES’ SONO-FUSION ENERGY GENERATION TECHNOLOGY

Prepared by NextWave Energy, Inc. (September 20, 2000)

NextWave Energy, Inc. is pleased to provide a preliminary assessment of the market prospects for an innovative sono-fusion energy generator (SFEG) being developed by Impulse Devices, Inc.

This assessment was prepared under the presumption that Impulse Devices will be able to successfully develop and manufacture the SFEG in commercial quantities at targeted cost and performance levels. NextWave Energy has not performed any technical analysis to validate the scientific and engineering feasibility for Impulse Devices to achieve its desired targets. NextWave Energy is not in a position to offer comments on theoretical issues associated with the technology.

Please note further that this analysis does not represent a financial valuation of Impulse Devices or its technology. No assessment has been made of Impulse Devices’ strategies and organizational plans to achieve the technology’s full commercial potential in the marketplace, nor of how economic value could be captured by Impulse Devices, if all economic and performance targets for the SFEG are met.

NextWave Energy, Inc. is not liable for any pecuniary damages that might accrue to any party resulting from any use of this analysis.

The contents of this document are considered privileged and confidential, for the sole proprietary use of Impulse Devices, Inc.

CONCLUSION

Assuming Impulse Devices is able to achieve targeted cost and performance levels for its new sono-fusion energy generator (SFEG), the market potential for the technology is staggeringly large – with the potential to economically serve virtually all end-use energy markets worldwide, representing about $2 trillion in annual expenditures today.

Based on current projections and goals set by Impulse Devices, the SFEG would produce usable energy at cost levels far lower than all known competing technologies either currently available or projected to be available. Correspondingly, the SFEG’s adoption throughout the energy marketplace would be limited only by restrictions on its supply, deliberately pricing it at levels in excess of its costs, or failing to convert potential buyers motivated primarily by non-economic factors.

To formally arrive at this conclusion, NextWave Energy:

• Estimated the cost of usable energy that the SFEG would be able to produce in commercial applications
• Compared this cost to the analogous costs of other competing energy production technologies
• Assessed the markets for which the SFEG would be more cost-effective than alternatives

The remainder of this document is organized into these three sections.

SFEG ECONOMICS

Impulse Devices’ SFEG technology would produce energy in the form of heat, to be exploited for motive power or electricity generation through conventional transfer mechanisms (e.g., steam turbines, piston engines) widely used today in stationary and motive power applications.

To produce electrical energy, an SFEG would be comprised of two major components:

• Reaction core. Based on advanced physics concepts, the SFEG would generate heat energy via nuclear fusion reactions within a core of metallic material. The metallic core would be loaded with gaseous deuterium as a fuel to precipitate fusion reactions.
  
  As shown in Attachment 1, the current price of deuterium (in the form of deuterium oxide) is approximately 5,000 times the price of natural gas on a comparable molecular basis. However, Ross Tessien, the developer of Impulse Devices’ SFEG, notes that nuclear fusion produces about 1 million times as much heat energy as a fossil fuel combustion reaction – even accounting for the energy spent to disassociate free deuterium from deuterium oxide. Therefore, the net effective variable cost for the SFEG core would be only about 0.5% (=5,000/1,000,000) the cost of fossil fuel combustion. Given that the variable cost of electricity production from natural gas (at $2.00/thousand cubic feet) is about $12/megawatt-hour (Mwh) for a very efficient new combined cycle powerplant, the SFEG would be able to produce electric energy at a variable cost of $0.06/Mwh. This already low cost could decline by another order of magnitude, if the SFEG is commercialized in volumes that necessitate a major expansion in deuterium production capacity.
  
  The fixed costs associated with the reactive core would also be virtually nil when amortized over the lifetime output of the SFEG -- estimated to last several years, or tens of thousands of hours. The fixed costs would consist of the metallic core, some basic electronics, and a containment vessel:
  
  Metallic core. Impulse Devices is considering the use of several materials for use in the core, each of which are available for well below $100/kilogram. Since only a few kilograms would be adequate to provide a core of one megawatt of reaction capability, the $/Mwh cost of the metallic core would be very small over the productive life of the SFEG unit.
  
  Electronics. Ultrasonic equipment will be necessary to produce acoustical forces that will provide the appropriate operating environment expected to generate nuclear reactions in the SFEG. For a one megawatt installation, the size and complexity of this electronic equipment is almost trivial, as much of the appropriate hardware can be cannibalized from inexpensive off-the-shelf consumer applications (for instance, from fishing sonar systems). Conservatively, this equipment will cost well under $1000 per unit, so that its lifetime $/Mwh cost would be negligible.
  
  Containment vessel. The SFEG apparatus consisting of core, fuel and electronics will be submerged in conventional (distilled) water, so that the core’s predicted heat generation can yield boiling water (steam). Although the SFEG is not expected to produce radioactive emissions in excess of natural background levels, a limited amount of x-ray radiation might occur. To contain any possible radiation, a vessel comprised of various forms of shielding (such as lead) will be constructed around the steam-generation unit. However, the entire apparatus for a one megawatt machine would be very small (less than 10 cubic meters), so the volume production cost of such a containment vessel can also be expected to be around $1000, again negligible on a $/Mwh unit basis.
  
  To be conservative in accounting for these fixed costs, we will round the estimated variable cost of energy from the SFEG core up from $0.06/Mwh to $0.1/Mwh as an estimate of its total costs.

• Steam cycle. The SFEG is designed to produce heated steam, but this steam would then need to be converted into economically-useful energy. For the purposes of this analysis, we will assume that the SFEG would be used to create electricity – the most versatile form of energy, which can be converted to heat or motive power as necessary at the final end-use.
  
  To create electricity from heat, the SFEG will require a steam cycle consisting of a heat recovery steam generator (HRSG) and steam turbine, which is the equivalent of the "back-end" of a traditional combined cycle unit. By subtracting the costs of a combustion turbine installation from a combined cycle installation, we estimate that an HSRG should cost about $200/kilowatt in capital plus about $2/Mwh for operations and maintenance (O&M), equivalent to $5.8/Mwh over the SFEG’s lifetime.

In summary, if development efforts are successful, the total unit electric energy production cost from Impulse Devices’ energy generation technology should be well under $10/Mwh:

• Reactive core:.....$0.1/Mwh
• Steam cycle:.......$5.8/Mwh
• TOTAL:..............$5.9/Mwh

These costs should serve as a reasonable estimate for the SFEG if Impulse Devices is successful in attaining the performance targets in its development efforts.

Because of the SFEG’s small size and lack of anticipated emission by-products, the costs associated with siting and environmental protection should be minimal. Some land and power grid interconnection costs could be incurred for larger SFEG installations, although such large facilities should be the exceptions rather than the rule, since the SFEG’s small scale creates enormous economic advantages (e.g., eliminating the cost of power transmission) to be exploited via on-site deployment. As a result, these cost issues can be generally ignored without affecting this assessment’s conclusions.

Furthermore, unlike conventional fission-based nuclear powerplants in operation today, the SFEG’s basic design should ensure that no dangerous forms of radiation with long half-lives would be produced. Consequently, the economic costs associated with dismantling equipment and removing/storing wastes after an SFEG has reached the end of its economic life should be negligible, and therefore do not require consideration in this analysis.

COMPARATIVE ECONOMICS

To assess the ultimate market potential for Impulse Devices’ SFEG technology, it is first necessary to estimate the costs associated with energy supply alternatives for the market segments that the SFEG can possibly reach.

Since the SFEG could be practicably constructed in modules as small as 1 kilowatt (0.001 megawatt), it can serve very small applications – but could also be combined in sets to develop installations as large as hundreds of megawatts. Furthermore, while the most obvious market for the SFEG would be stationary electricity generation, the materials of the SFEG do not require fixed installation, so mobile applications for transportation purposes are also feasible. Finally, the SFEG would be able to "ramp" up and down its output very quickly, thereby permitting variable speed operation and modulation.

Consequently, the SFEG can realistically address virtually all energy market needs, except for hand-held portable devices employing low voltage batteries.

Therefore, the relevant competition for SFEG will be all prime mover energy technologies, applicable to either stationary or mobile uses, with greater output than available from small batteries.

Competing prime mover technologies currently available for new installations include:

• Conventional steam powerplants, fueled by coal, gas or oil (nuclear fission no longer deemed a viable option)
• Gas-fired combustion-turbine based powerplants (either stand-alone in simple cycle or with a steam cycle for combined cycle mode)
• Internal combustion engines, fueled by natural gas or diesel
• Renewable energy sources, such as geothermal, biomass, wind and solar energy

Some of these technologies are undergoing continued refinement, so the future potential performance of these technologies must be assessed when comparing to expected SFEG economics.

In addition, entirely new energy production technologies are under development for future commercialization, and thus may also represent potential competition for the SFEG, including:

• Fuel cells
• Stirling engines
• Integrated gasifier combined cycles
• Tidal and wave energy

Attachment 2 compares estimated unit energy production costs for each of these alternative supply approaches, based on a synthesis of several information sources that monitor these technologies’ current and projected costs. In all cases, favorable assumptions were used (e.g., locally low fuel prices, most efficient utilization patterns, optimal sizes) to develop unit cost estimates that represent a lower-bound of each technology’s economic potential.

As the chart below demonstrates, the costs of each of these electric energy generation technologies are now -- and would continue to be – very much higher than the $5.9/Mwh cost levels anticipated from Impulse Devices’ SFEG technology (as evaluated above).

Therefore, from a purely economic perspective, the SFEG would be able to compete very effectively (and probably could dominate) for new installations or applications in any or all market segments that non-battery energy technologies serve.

Just as significantly, the projected economics of the SFEG are sufficiently favorable that it could economically displace (i.e., retire) currently operating energy supply installations. Ignoring the sunk costs incurred in constructing existing energy supply sources, merely the ongoing cash costs of current power generation sources are also higher than the costs of the SFEG.

As a reference point, the average delivered price of electricity in the U.S. today is slightly less than $70/Mwh. However, the long-regulated electric utility industry is just beginning to deregulate, and increasing cost efficiencies stimulated by the emergence of competition is expected to drive electricity prices down by perhaps as much as $20/Mwh in the coming years.

Of the remaining $50/Mwh electricity price post-deregulation, roughly half of this price will be attributable to transmission and distribution of electricity across the power grid. This implies an average market price associated with electricity generation of about $25/Mwh.

Although there will be some regional variation in generation prices, in no case should average wholesale electricity prices fall below $10/Mwh, because variable operating (i.e., fuel) costs of the even the most economic marginal generation units exceed $10/Mwh. The average operating cost for the widely prevailing fossil steam powerplants in the U.S. is approximately $20/Mwh.

Thus, with the exception of existing hydroelectric or nuclear plants (which are never on the economic margin, and furthermore comprise a small and shrinking share of power generation), all competing energy generation alternatives (both new and in-place) will have costs far in excess of $10/Mwh (and probably above $20/Mwh).

Since the SFEG should produce power at cost levels well below $10/Mwh, the potential penetration of this technology in electricity markets – even absent the need for new construction -- is therefore virtually limitless. Alternatively stated, all regional power markets will have wholesale prices that exceed the cost of power production expected to be achievable from the SFEG.

Note further that, since the SFEG can be deployed in very small scale at customer sites, the relevant economic comparison for the technology’s penetration should not be the wholesale generation price (averaging $25/Mwh), but rather the expected retail delivered electricity price (averaging $50/Mwh, probably never below $30/Mwh). Therefore, evaluating the SFEG at the retail level therefore provides an even greater economic rationale for postulating its near-universal penetration.

MARKET POTENTIAL

Given the SFEG’s anticipated compelling economics, it would be positioned to penetrate virtually any segment of the energy marketplace.

The table attached summarizes the annual expenditures in the U.S. on each form of energy at its end-use. (Download Table Here)

 

All told, the U.S. energy end-use markets represent roughly $580 billion in annual expenditures:

• About 44% petroleum based, 39% electricity based, 16% natural gas based
• About 43% for residential and commercial buildings, 30% for transportation, 27% for industrial uses

Since the U.S. accounts for about 26% of worldwide energy consumption, and since energy prices in the U.S. are among the lowest in the world, global expenditures on energy easily exceed $2 trillion annually. While energy prices have been generally declining in the past decade, growth in global energy demand is expected to continue at robust rates, such that the overall energy marketplace should expand for the foreseeable future from this already huge level.

Assuming that Impulse Devices’ SFEG development efforts are successful, the above comparative economic analysis suggests that it is theoretically possible that the SFEG technology could ultimately capture and serve all energy end-use markets in their entirety.

Aside from the subsequent risk that Impulse Devices does not effectively execute a sound commercialization strategy, the only potential limitations in the economic ability to deploy SFEG would stem from:

• Restrictions on supplies. There may be constraints on the ability to deliver large numbers of SFEG units, either due to finite production capacities of the SFEG itself or limitations on required supplies (e.g., deuterium) in massive quantities.

• Value pricing. To maximize profitability of market deployment, Impulse Devices might prefer to price the SFEG at levels far higher than its costs as estimated herein (i.e., just below the price of the next-best alternative), which would make the technology uncompetitive for certain (presumably less attractive) market segments.

• Non-price buying factors. The issue of x-ray radiation from an SFEG unit might limit its applicability in the transportation sector, either due to excessive weight (if shielded with lead) or health concerns (if unshielded).

While the SFEG might be viewed by potential buyers as unattractive for home use because of potential x-ray radiation exposure, the SFEG should still be able to cost-effectively serve mass market customers via conventional central-station generation deployment, utilizing the existing power grid to deliver SFEG-based electricity.

* * *

The potentially vast market penetration for SFEG suggested herein would generate tremendous quantities of aggregate amount of economic rents attributable to the emergence of the SFEG technology. However, no estimation has been made of these economic rents, nor of the allocation of these rents to various parties that might play different roles along the value chain. This aggregate value would need to be shared among:

• The patent-holder
• The manufacturer/vendor
• Project developers (for electric plants) or vehicle integrators (for transportation)
• Project equity owners (for electric plants) or vehicle owners (for transportation)
• Ultimate consumers of energy (electricity or transportation)

Consequently, the above assessment of market potential should not be viewed in any way as a valuation benchmark for Impulse Devices.

The analysis assumes that Impulse Devices’ SFEG technology works as expected and can be produced at the costs and quantities consistent with the above analysis. Furthermore, it is also assumed that no other energy generation technology surprises the market and is commercialized at even more favorable cost and performance levels, thereby severely curtailing the promise otherwise offered by this innovative technology.

ATTACHMENT 1

CALCULATION OF RELATIVE COSTS:

DEUTERIUM VS. NATURAL GAS

 

Deuterium Oxide (D₂O, 99.9% D):

Molecular weight: 20

D₂O density: 1105 kg/m³, or 2456 lb/m³, or 73.7 lb/ft³.

Equivalently, D₂O 0.0136 ft³/lb.

D₂O price: $655/kg (from Wilmad Glass).

Given D₂O density of 1105 kg/m³, price = $723,775/m³, or $21,713/ft³.

Consequently, D₂O $295.30/lb.

Natural gas (methane):

Molecular weight: 16

Natural gas density: 23.7 ft³/lb

Natural gas price: $2.00/thousand ft³, or $0.02/ft³

Consequently, natural gas $0.0474/lb

Comparison:

D₂O is 6230 (=295.3/0.0474) times as expensive as natural gas on $/lb basis.

Adjusting for relative molecular weights, D₂O is 4983 times as expensive as natural gas on a $/molecule basis.

 

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Impulse Devices' Articles ( 1, 2, 3 )

A small company here is doing research that could solve the world's energy and pollution problems.
by, Don Baumgart

Impulse Devices, Inc., is hard at work trying to derive power from the fusion of hydrogen found in all water. The energy in one gallon of water is the same as the energy in one million gallons of gasoline, so everyone on the planet has access to free fuel. The challenge is to figure out how to build a machine capable of tapping into this vast energy resource.

"In our laboratory experiments we expect to drive tiny but detectable numbers of fusion reactions this year," says Impulse President Ross Tessien.

Impulse Devices is developing Sonofusion electric power generators based upon a technology called ultrasonic fusion. "Ultrasonic fusion extends to higher temperatures the process called sonoluminescence," Tessien explains. "This is nearly identical to a process the National IgnitionFacility at Lawrence Livermore National Labs (LLNL) is investigating." There the government is creating a billion dollar laser system to drive inertial confinement fusion reactions.

Tessien thinks commercially viable fusion can be produced on a scale less grand than that of the federal government. "We're the quintessential high tech in a garage operation right now.

"We're building tiny little test experiments to try to drive tiny numbers of reactions," he says. "Thomas Edison had to try hundreds of materials before developing the filament for light bulbs. We are in that phase right now. Ultrasonic fusion will work, it is just a question of how soon."

Impulse Devices shares a 2,400 square foot space on Loma Rica Drive near the Nevada County airport with Impulse Engineering, an engineering/manufacturing business Tessien has operated for 14 years. His engineering facility produces parts for other companies which manufacture a range of products including computer controlled fabric cutting machines, tools for orthodontics and soils testing, and lasers. "My degree is in mechanical engineering," he says, "but I've always followed leading edge physics... looking for emerging technologies." Tessien worked for 3M as a design engineer before starting his own company.

Since incorporation, IDI has filed 20 patents and expects to file another 100 by this fall. "Our patent attorneys are Townsend & Townsend in San Francisco, one of the nation's best patent law firms," says Tessien.

Tessien's efforts have already attracted the attention of investors. Impulse Devices has received nearly $1 million in initial funding and expects to receive an additional $5 million this year. "What is difficult is to find people who have both money and vision." Tessien says. "Investors claim they want to find the next Microsoft in a garage, but when they find it they usually don't recognize it. Of course if it were easy to grasp our techniques then someone would have already done it. Fortunately, physicists do understand our approach, so we haven't had problems with the due diligence phase of evaluation."

With the second round of funding, Impulse hired Dr. Felipe Gaitan as chief scientist. "Dr. Gaitan is a leader in the field of sonoluminescence, the technology upon which ultrasonic fusion is based," Tessien says. "We also hired six Los Alamos physicists who have a combined 50 years of laser fusion experience and well over 100 years experience at the National Labs. They have contracted to do computer analyses of our designs and concur that this is a possible path towards driving fusion reactions."

So how does ultrasonic fusion work?

"The process begins when ultrasonic energy is applied to a small bubble. This causes the bubble to expand to a larger diameter," Tessien says. "By 'larger' I mean to the diameter of a hair on your head."

"Then you reverse the ultrasonic energy and slam that bubble shut. As it converges, all of the material in the bubble wall accelerates to tremendous velocities (10 to 100 kilometers per second). The collapse is so intense all of the material inside the bubble is ionized, gives off light, and is intensely hot for an instant. The temperature you must achieve to drive fusion is on the order of a hundred million degrees centigrade." Sonoluminescence may already be achieving temperatures near 1 million C according to Dr. William Moss at LLNL.

"The thrust of our current research," Tessien says, "is increasing the temperature created by the collapsing bubble. We are confident we have discovered a way to increase the temperature to the needed level. Success, he adds, will literally change the world."

"When we drive the first detectable numbers of fusion reactions, well build a test reactor that laboratories and corporations could purchase from us to study the possibility of building a power generator."

"The next product will be a small power plant that will support a manufacturing business or a group of homes. We could ship that plant anywhere in the world where people needed electricity," predicts Tessien.

"Impulse will manufacture the core component that produces the energy, and sell it on an OEM basis to companies like GE and Westinghouse who would package it into their power generators. With success, IDI is positioned to play a role in future electric power generation similar to the role Intel plays in PCs. Future Sonofusion electric power generators will have IDI technology inside."

" And," he adds, "IDI will capture a significant percentage of the planets $2 trillion a year energy sales."

Although he and his researchers are in pursuit of a break-through that could make them fabulously wealthy, Tessien speaks more of the benefits to society, talking in a calmly energetic way.

The people in developing nations will benefit the most. Their low standards of living are directly proportional to how little electrical energy they have. They are moving in the direction of building more coal fired electric power plants to supply their electricity needs, which will inundate the atmosphere with pollutants.

The amount of air pollutants worldwide is increasing, and will continue to climb dramatically until a new energy technology is installed.

Developed countries have become dependent on foreign oil to fuel their larger energy appetites. "Sonofusion electric power generators will break this dependence, not only for the United States, but for all of the world," Tessien says. "My personal favorite benefit of ultrasonic fusion will be that no more wars will be fought over oil once we can harness the energy available in water."

Fusion reactions, contrary to popular opinion, have been successfully driven with lasers, magnetic field confinement, plasma pinch, linear accelerators, and hundreds of devices.

"But the devices that have driven fusion reactions to date expend a thousand dollars of electricity to get a few dimes worth of heat energy from the fusion reactions," Tessien says.

"Steady progress is being made but so far no one has figured out how to build a fusion power generator that produces more energy than it consumes. The goal of IDI is to achieve just that.

"Ultrasonic fusion is beautiful," Tessien says, "not only because of what it will do one day, but because it's such a simple technology that a small company like Impulse Devices can afford to develop it. We could not afford to develop laser fusion. The National Ignition Facility at LLNL will be a billion dollar installation; a football field sized four-story building employing laser beams three feet in diameter and of high intensity, converging on a target the size of a pea. They're still trying to break-even, to get out as much energy as they put in. One estimate at NIF is that a laser fusion power plant could cost $40 billion before achieving break-even. Sonofusion electric power generators could achieve break-even in small, thousand dollar devices."

"How close are we to doing that with simpler methods? We could drive the first successful ultrasonic fusion reactions in our laboratory this week," Tessien says, "but Mother Nature makes the rules, so we are concentrating on how and not when. I'll tell you a secret: ultrasonic fusion has already been achieved. Whether ultrasonic fusion is conquered in our labs or elsewhere, our patents will be in force for twenty years."

-Don Baumgart

 

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