This week’s Green Scene column in Crain’s Chicago Business: Clean-tech motor startup gears up for electric vehicle age

A Chicago clean-energy startup is betting that growth in electrified motors will extend beyond electric cars

Hybrid Electric Vehicle Technologies, a Chicago-based firm, designs unique motors and other components for electric transport and appliances. While the technology is being tailored to work with the next generation of hybrids, plug-in hybrids and pure electric vehicles, company engineers also are designing motors that are compatible with electrified bikes and other devices using fuel alternatives, says CEO Heidi Lubin.

HEVT was the runner up in the 2012 Brinks Innovation Competition last month at the annual Midwest Clean Tech 2012, which was held at McCormick Place in Chicago. Finalists presented their company ideas to a panel of early-stage investors, venture capitalists, and business development executives. The competition was sponsored by Brinks Hofer Gilson & Lione, a Chicago-based intellectual property law firm. HEVT also was a finalist in the Clean Energy Trust’s Clean Energy Challenge last spring in Chicago.

HEVT got its start as a spinoff from the Illinois Institute of Technology’s Power Electronics and Motor Drives Laboratory in 2005. Its founder and chief technologist, Ali Emadi, is an expert in power electronics and hybrid and electric vehicle design. One of the most unique aspects of HEVT’s designs is the avoidance of rare earth materials in its compositions, which pose environmental concerns and potential problems on the business side as well, notes Ms. Lubin.

While the arrival of electric cars is grabbing headlines, HEVT is already making inroads in the electrified bike arena. The company recently received initial orders from two bike companies for electric motors and motor controllers and is working with manufacturers to gear up for production, Ms. Lubin says.

Thus far, HEVT has been funded by angel investors and a $300,000 grant it received as part of its work on a U.S. Department of Energy coalition to develop the power electronics for an electric vehicle application.

Crain’s spoke with Ms. Lubin from Las Vegas last week, where she was attending Interbike 2012, the largest bike trade show in North America.

Why did the company founders choose to focus on designing motors and motor components in particular in the clean tech sector?

Heidi Lubin

Ms. Lubin: Motors are a fundamental building block for all sorts of technologies, ranging from more efficient appliances, industrial drives, and enabling high performance and cost-effective electrified transportation. And our technology enables cleaner, greener motors to be made without rare earth materials.

Why is it a big deal that rare earth materials aren’t necessary for your company’s designs?

Rare earth materials actually aren’t that rare. They’re a class of materials pretty low on the periodic table. The issue with them is that they’re co-present with a mineral called Thorium, which is radioactive. At one point Thorium was considered to be used in nuclear power plants in lieu of uranium, and still could be at some point. So when you mine and refine these rare earth materials, there’s radioactive waste, which causes water, land and air pollution and leads to political discord.

Okay, so designing clean energy motors without the environmental impact makes sense if you want to be a green company. Are there business reasons to stay away from these materials as well?

Yes, the refining capacity is what’s rare here too. China continues to mine this and there are some who believe that China will be a net importer of rare earth in the next few years. There’s a concern that the supply and demand cycle over the next 3-10 years looks extremely volatile. When you start talking about industries where the entire supply chain depends on just-in-time manufacturing, volatility is an enormous concern, even more so than cost. For a supplier, there are massive relationship consequences for a default like that.

Our motor technology gets us clear away from all those problems. It requires less raw materials, just copper and steel, and it’s a simpler manufacturing process so we can recoup value throughout the value chain in many ways.

Can you briefly describe HEVT’s technology that’s apparently very different from the way other motors are designed?

Switched reluctance motors, the type of motor that we use, have particular performance benefits for propulsion. Those benefits include improved continuous efficiency, better reliability, and higher starting torque. Amory Lovins (a co-founder of the Rocky Mountain Institute), called switched reluctance machines a demand side alternative to the challenge of rare earth materials.

Our team happens to be expert at this type of technology. We’re one of the only teams in the world with the expertise to design this type of motor and the software for the motor controller. There used to be problems with this technology, especially with noise vibration and harshness. Our team figured out how to solve that.

What happens to your company if the electric vehicle market doesn’t grow in a big way?

Electric transportation is much more than electric vehicles. Right now, the global electric motor market is in excess of $32 billion annually. And that’s just the high performance segment. All vehicles are having their accessories electrified. On average, there are 73 electric motors in a regular vehicle, so there’s a long trajectory of how we make our vehicles more efficient. We’re also talking about motors and components for appliances, including washing machines, and all sorts of pumps.

We want to be a leader in the EV (electric vehicle) market, but we’re not sitting around waiting for that market to take off.

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This week’s Green Scene column in Crain’s Chicago Business: Artisanal candymaker leaps into bricks and mortar

When you walk through the front door of Katherine Anne Confections’ new storefront in the Logan Square neighborhood, it’s immediately obvious why the young entrepreneur took that big step to open a shop of her own.

The aroma of fresh-made chocolate truffles and exotic caramels and marshmallows hits you like a wall of sweetness and compels you to take some home.

Katherine Anne Duncan
Photo by: Judith Nemes

Katherine Anne Duncan, 28, launched her small-batch, locally sourced line of confections six years ago in Chicago and has been gradually building her business through sales at other small retail outlets around the city, as well as Whole Foods Market. About half of her revenue comes from direct sales to consumers through her website, food shows, and farmers markets in the summertime.

Sales have grown steadily. In 2009, revenue rose 50 percent from the year before, says Ms. Duncan, but she wouldn’t provide specifics. Since then, sales have increased between 30 and 40 percent each year. She expects the new store opening will propel direct-to-consumer sales to double this year from the year before.

Ms. Duncan, who grew up on a sustainable farm in Wisconsin, has been making caramels and other confections since she was about 8 years old. Back then, she set up a pretend shop in her home and sold them to her siblings.

She never attended pastry school. Instead, Ms. Duncan learned her craft making caramels and chocolates alongside her mom, as well as through trial and error. She read some chemistry books too. An entrepreneur long in the making, she began selling her creations for real at her dad’s workplace when she was 15.

Before leasing her current spot on Armitage Avenue in Logan Square, Ms. Duncan was producing small batches of traditional and offbeat flavors of her confections at area professional kitchens where she rented space by the hour. Some of her favorite local sources for sustainably produced ingredients come from Seedling Orchard in South Haven, Mich., May’s Honey Farm in Marengo, and dairy products from Kilgus Farmstead in Fairbury, Ill. This week’s selection of goodies includes hand-dipped truffles made with peanut butter and apples, goat cheese and walnuts, and espresso beans. Fluffy pillows of marshmallows include some blended with Earl Grey tea, lemon ginger and salted caramel.

The doors open officially on Saturday, but Crain’s got a sneak preview — and a tasting of truffles and hot chocolate — with Ms. Duncan earlier this week. She shared some of her startup challenges along the way, as well as what may come next.

Crain’s: Your chocolate isn’t locally sourced, but much of your other ingredients are. Why is sourcing close to home so important to you?

Ms. Duncan: There isn’t any local chocolate, so the one I use comes from Guittard Chocolate in San Francisco. Aside from that, the first reason I use local is for the taste. I use fresh fruit because it tastes 20 times better than frozen pureed fruit. If I can get peaches so juicy that tomorrow or the next they’re going to be bad, that flavor is going to be awesome today when I use it.

The second reason is because I like to know what I’m eating. I like to know my farmer, and say, “Pete, have you sprayed any fruit this year?” He’ll tell me what has been sprayed minimally and what hasn’t been sprayed at all and I can make my choices from there.

Isn’t it more expensive to get sustainably grown and natural or organic ingredients for your treats?

Of course it’s more expensive. But you’re not eating truffles every day, so it’s easy for me to justify than someone who might be trying to make an entire meal out of organic foods. This is a luxury, so if you’re going to eat these kinds of calories, it should be worth it.

We get pushback on the price all the time. A truffle costs $2.50. But I can’t get excited about a product that I know is not the best. We talked about using cheaper cream, but Kilgus’ cream is just gorgeous. I pay twice what everyone else pays for sugar because I’m buying organic sugar that’s less refined, but it has some of the molasses still in it and it tastes better. If we used pureed fruits from Sysco, we’d lose half our customers.

Who do you consider your competition and is the local, artisanal market getting more crowded?

Companies like Vosges (Haut-Chocolat) are on a different level and I don’t see them as direct competitors because they’re so huge. In the last five years, because of the economy, more people are going back to school and learning how to do this. There are about 20 small, local truffle makers. I see some of these artisans using fruit extracts made from corn syrup and they’re charging prices for truffles that are the same as my cost. I know they’re not using the best ingredients that I’m using.

What was the catalyst that led you to open your own shop?

It goes back to that 8-year-old girl trying to sell sweet things to her family. But seriously, a lot of consumers go to the bigger names because they’re more well-known. It’s essential from a branding standpoint. I don’t think people take you seriously unless you have a storefront. It makes people think you’re established.

Also, we sell chocolate and you have to be able to see it and eat it. It might look good on a website, but you have to think about whether you’d spend $19 for seven truffles. That’s a hard leap to make. You really need to be in a storefront so people can come in and try a truffle and come back the next week and buy 10 boxes because they’re going out of town.

Besides, we were already here in this space for our production, with my desk and a couch upfront for our bridal tastings. But the wall wasn’t beautiful and we didn’t have chandeliers. We’ve been building our brand for six years, so we’re really excited to open this store.

Speaking of design, you worked with 2 Point Perspective, an eco-friendly architecture and design firm, on the look and feel of your new space. Can you describe some of the green features and why it was important to focus on sustainability there too?

Growing up on a farm, you know you can’t just throw everything in the trash when you’re done with it. You should find a way to reuse it. It hurts me to see new lumber cut down when there’s so much great stuff already out there.

All the wood in our space is reclaimed. My husband and I made the tabletops and hanging wood panels. The chandelier is made by a local artist who uses recycled chandelier crystals. We have ice cream chairs from the 1950s and a vintage couch too.

What do you see as one of your biggest challenges going forward?

We’re so specialized I worry about how I can succeed. But I’ve always been a big believer in “do one thing and do it really, really well.” We work on products a long time before we launch them. Is it going to be enough? We’ll see.

Where do you see your company five years from now?

I’m basing my five-year plan off of what happens in the next little bit. I’d love to open a dessert lounge and be open till midnight so people can go somewhere for dessert. Not everyone wants to go to bars.

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