New Brunswick

NB Power defends Joi Scientific licence in face of scrutiny from MLAs

NB Power’s CEO is defending the utility’s decision to spend millions of dollars to license secret hydrogen technology from a Florida startup, saying it still has “potential.”

Utility CEO Gaëtan Thomas says technology still has ‘potential,’ but decision on partnership coming

NB Power CEO Gaëtan Thomas posed with Joi Scientific executives Robert Koeneman and Traver Kennedy on a beach in Cape Canaveral, Florida. The utility has a multi-million-dollar licensing agreement with Joi Scientific. (Joi Scientific)

NB Power's CEO is defending the utility's decision to spend millions of dollars to license secret hydrogen technology from a Florida startup, saying it still has "potential."

Appearing before the standing committee on Crown corporations on Friday, Gaëtan Thomas said the utility would make the decision on whether to pull the plug on its relationship with Joi Scientific by the end of 2019 or by the end of the fiscal year, at the latest.

"Especially where we are now, we don't want to create expectation," Thomas said.

"But, obviously, if it doesn't prove out, we'll have to walk away and we'll be the first to come and tell that."

In the meantime, the utility will continue spending about $20,000 per month to run a lab in Florida, as Joi Scientific works on its technology, Thomas told reporters.

"We have rented a lab over there and to ensure we can recoup some of the investment we have made, we are keeping that lab going until we can make a decision whether we can go forward or not," he said.

NB Power spent $74,874.91 on costs associated with the lab between Jan. 1, 2018, and May 15, 2019, according to information CBC News has obtained through access to information. That includes rent, standard lab equipment, instrumentation, utilities, support staff and "H2 specific equipment."

Thomas said the utility has "partners" it is working with in order to come to the determination of whether to continue its partnership with Joi Scientific, but he declined to name them.

Joi Scientific claims to have found a way to efficiently generate hydrogen electricity from seawater, which would be a major scientific breakthrough.

In addition to lab and travel costs, the utility spent $13 million Cdn, with $6.7 million chipped in from the province's Regional Development Corporation, to license the technology.

But earlier this week, CBC News reported that Joi Scientific told shareholders this past summer that it learned its technology wasn't working as previously described.

Chair says technology will take time

Thomas faced a barrage of questions about Joi Scientific at the committee hearings on Friday.

People's Alliance Leader Kris Austin described the Joi Scientific licence as "a Hail Mary roulette game," while Green Party Leader David Coon called it "high stakes gambling" with public money.

Coon told reporters later that he was "flabbergasted" to hear NB Power continues to believe there is potential in Joi Scientific's technology.

"I was expecting them to say 'we made a mistake and we're severing our relationship with that company,' but they didn't say that," Coon said.

Instead, Thomas defended the utility's relationship with Joi Scientific throughout the day, even saying during the hearing that he would have put his own money into the technology if he could have done so.

Joi Scientific received a $13 million licensing fee from NB Power, with $6.7 million from the the Regional Development Corporation. (Karissa Donkin/CBC)

"At the end of the day, we believe we did the right thing," Thomas said on Friday.

NB Power board chair Ed Barrett also doubled down on Joi Scientific, saying the technology still holds promise.

"But we are of the view this is going to take time," Barrett said.

"So many times have I observed in my history in private-sector business that you get right to the point of breakthrough and you step away, when if you'd stayed just a little bit longer, you'd begin to see some evidence of it. And that, in my view, is kind of where we are."

NB Power executives have previously told the Energy and Utilities Board that it's possible it will lose money in the Joi Scientific partnership, but it will be costlier if the utility doesn't find an alternative fuel source for the Belledune generating station.

'High risk'

Thomas told the committee the province's Regional Development Corporation put in its half of the licensing fee first and NB Power hoped the federal government would pay the remainder. But the federal funding never materialized.

"Joi made their commitment so we had to make our commitment or walk away," Thomas said.

"We decided to continue. This is where we went through full [NB Power] board approval to agree to carry on the next $6 million." 

Thomas said the potential of the technology at that point was probably 50-50, "but most of these innovations are like that."

"It's a high risk, but there was some high rewards for NB Power in terms of $1.5 billion hanging over our head," he said later, referring to the cost of phasing out coal at Belledune.

Some assumptions made

Joi Scientific has claimed its technology can create more energy than it uses. For one watt of input energy, two watts of energy in the form of hydrogen gas are produced, according to one of the company's patents.

But a former employee who spoke to CBC News has said Joi Scientific's claim of 200 per cent efficiency is "impossible." At best, the former employee said the company could report 20 per cent efficiency.

Thomas disputed that on Friday, saying the utility has results that are higher than 20 per cent number quoted by CBC News, but he would not say exactly what level of efficiency has been achieved.

"So it depends who you believe," he said.

Thomas later said there was a test that showed 20 per cent efficiency, "but the system was not optimized."

He also said the the technology hasn't yet reached 70 per cent efficiency, the number Thomas cited as an indication of "a breakthrough."

Asked whether he believes 200 per cent efficiency is possible, Thomas said he couldn't say whether it is possible or not.

"Thermodynamics law would say that it's not possible, so right now, we're not hanging our hat on that," he said.

In May, Thomas told CBC News the claim of more energy out than in was legit.

"We have seen results indicating, clearly indicating, independently witnessed, that it does produce more energy than in," Gaëtan Thomas said then.

Austin asked Thomas on Friday whether he could name any of the scientific institutions or experts who have tested Joi Scientific's technology, but Thomas said some institutions do not want to be named when they do testing, noting they would be "hounded" for their results.

Joi Scientific, a company with a multi-million-dollar NB Power partnership, discovered it's been calculating power incorrectly, CBC News has learned. (Karissa Donkin/CBC)

"We did the due diligence," Thomas said.

"We had independent validation and measurements, but there were parts that could not be measured. Some assumptions had been made. We're now back into an area where it's still promising but not to the same levels as we initially thought."

This past summer, Joi Scientific CEO Traver Kennedy revealed to shareholders that Joi had been calculating power incorrectly.

Since June, the company has been using a new method to do its power calculations, Kennedy said in a conference call with shareholders, according to a record obtained by CBC News. 

"The results have been both consistent and disappointing," Kennedy told shareholders on the call.

"We've come to learn that the power measurements coming into our circuitry and going all the way back to the wall fundamentally show our current Hydrogen 2.0 technology has poor system efficiencies."

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