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October 6, 2008

Pump power: Two Bangor-area heat pump manufacturers go head to head | Their lawsuit settled, two Bangor-area heat pump manufacturers race to distinguish themselves in the lucrative field of alternative heating

Photo/David A. Rodgers From hot to cold: Donald Lewis (left), owner of Nyle Corp., and Duane Hallowell, Nyle's former general manager, in 2004 when the two worked together on the cold-climate heat pump

Leaving a long and bitter patent dispute behind, two Greater Bangor manufacturers are racing each other to become the go-to manufacturer of a potentially lucrative appliance they claim will transform home heating systems.

Donald Lewis, owner of the 31-year-old Nyle Corp. in Brewer, and Duane Hallowell, founder of three-year-old Hallowell International LLC in Bangor, are former workmates and current competitors with an ambitious goal. They each want to produce a best-selling low-temperature heat pump, a gadget that squeezes heat out of sub-zero air and that could help wean houses off of oil.

Since February, Hallowell and Lewis had been battling in court over whether Hallowell infringed on a heat pump patent held by Lewis. Hallowell certainly had exposure to this heater: He worked for Lewis when Nyle was developing its pump technology with an outside inventor. (For more on this, see “Hot to trot,” Sept. 27, 2004 and “Heating up,” Oct. 3, 2005.) The inventor, David Shaw of Massachusetts, eventually pulled out of his agreement with Nyle and aligned forces with Hallowell, who started his own heat pump company in 2005. In a pre-emptive strike, Hallowell sued first after receiving a cease-and-desist letter from his former employer last year hinting at a lawsuit. And so the fight began.

In September, Hallowell and Lewis settled out of court, and neither Lewis nor Hallowell will disclose the exact settlement terms. Hallowell did not return multiple calls to his office and Hallowell’s lawyer, Stephen Coyle of Hartford, Conn., said his client would not comment for this story. Lewis told Mainebiz he’s received a check from Hallowell and has new plans to manufacture a different low-temperature heat pump.

“The whole thing was an unfortunate, very expensive mistake I made,” Lewis says, referring to his partnership with Shaw and his $2 million investment in the contested heat pump. He licensed his new pump to another manufacturer, which he would not identify because the manufacturer has yet to finalize the details. “We’ve developed a different approach to improve reliability and flexibility.”

Bangor’s Community and Economic Development Director Rodney McKay confirmed that Hallowell provided compensation to Nyle. “[The patent dispute] was kind of a nuisance, so they provided some funding and it’s all gone away now,” he says.

With the suit resolved, Lewis and Hallowell are now pushing two different low-temperature heat pumps, trying to convince Mainers and others living in freezing climates that their products are the best solution to heating woes. The timing could be right for both of them to strike it rich as cold-climate homeowners look for relief from burgeoning oil bills.

Fire and ice

The challenge facing Hallowell and Lewis is whether they can persuade homeowners to make the initial investment in a low-temperature heat pump — it costs between $12,000 and $15,000 to install — and whether the two can avoid the mechanical problems heat pumps have had in the past. Plus, there’s always the threat another competitor could sneak into the market late in the game — perhaps one of the big corporations making older versions of the heat pump, or even students at the University of Maine in Orono, who have also invented a heat pump that could be ready for commercialization in a year or two.

Joel Gordes, a consultant with Environmental Energy Solutions in Connecticut, says if a low-temperature heat pump can compete with oil heating systems on efficiency and price it could become hugely popular in the region. “Because large parts of New England use oil heating, they’ll make a bundle if they live up to the early press,” he says.

James LaBrecque, an engineering and energy consultant in Bangor, says he can’t see anything other than heat pumps becoming the area’s predominant heating source. He’s working with several UMO students to create the “New Age Heat Pump,” which he touts as superior to other pumps.

Heat pumps have been around for several decades, and are frequently found in southern and western states. The pumps work like air conditioners in reverse, drawing warmth out of the outside air, water or ground that is then compressed into usable heat that can be circulated inside a building. The pump is installed outside a building, with ducts connecting to the interior.

Heat pumps have not caught on in northern climates because most have not been reliable below 32 degrees Fahrenheit. That’s why the heat pumps Lewis and Hallowell have could be a gold mine — they’re the first, so the men claim, to work in very cold temperatures. Lewis says his pump will keep homes cozy during nights as frigid as 20 or 30 below zero.

For a long time engineers have seen the possibility of adapting heat pumps to cold environments; it was just a matter of creating workable technology. Lewis started developing his cold-climate heat pump in the mid-1990s, funded in part by a $5,000 grant from Bangor Hydro-Electric Company.

The electricity company has a stake in converting customers from oil-based heating systems to electrical ones: If a 2,000-square-foot house switched to an electrical heat pump system, it would increase its kilowatt usage from about 6,000 kilowatts a year to 15,000 kilowatts per year, according to Calvin Luther, a business analyst at Bangor Hydro. Indeed, Bangor Hydro “spent quite a bit of money” in the 1990s to help develop heat pump technology, Luther says, but to no avail. “The marketing was unsuccessful because oil was so cheap,” he explains.

Maine has one of the lowest rates of electricity usage in the United States, mostly due to the high price of electricity here. But as oil climbs closer to electricity prices, electrical heating systems are looking more attractive. If heating oil prices fall between $3.50 and $4.75 a gallon, heat pump systems will cost 50% to 67% less than boilers to run, according to installer Dave McCue of Radigan Mechanical in Carmel.

The allure of the heat pump, moreover, is the efficiency with which it can use electricity. LaBrecque says heat pumps can take electricity generated by any source — wind, solar, biomass, tidal, garbage, nuclear — and double or triple the output of heat units for every watt supplied by a utility company. “You can consider a heat pump as a magnifier of energy,” he says.

With so much at stake, it is not surprising Lewis and Hallowell had a falling out.

Hallowell’s lawsuit, filed last February, was a move against Nyle to prove Hallowell had not stolen Nyle trade secrets before Nyle itself could file a lawsuit alleging patent infringement. Nyle eventually did file a counterclaim doing just that.

According to the lawsuit, Nyle sent Hallowell letters in 2007 demanding the company stop making its heat pump and give all profits of its sales to Nyle. Hallowell also accused Nyle of pesky acts like buying a website called hallowellinternational.com and then redirecting the site’s visitors to Nyle’s website. Nyle denied these claims, and insisted Hallowell’s product was its own.

“They made basically the same unit we used to manufacture. There were no real changes,” Lewis says. “But we wouldn’t make that again. It was a side trip for me.”

Different strategies

The two companies are now pursuing different heat pump models and different production strategies.

Hallowell’s heat pump, the Acadia, is a low-temperature air-to-air heat pump that can replace home furnace systems, while Lewis says his new cold-climate pump has the capacity to be both an air-to-water or air-to-air pump, which would work with homes that use boilers or furnaces. Of the roughly 80% of Maine homes using oil to heat their homes, 40% heat with a boiler and 40% with a furnace, according to Bangor Hydro’s Luther.

Both Hallowell’s and Lewis’ products could be popular, Luther believes. “I think these heat pump boilers have potential because the efficiency is the same. You’re not using oil, and electricity can be generated by different sources,” he says. “The technology is sound; it needs to be durable, needs to be easy to work on, and it needs to be dependable.”

Those qualities have been hard to come by in the past. Lewis says he stopped producing his cold-climate heat pump in 2005 after running into problems like chilly drafts being blown around customers’ home. Today, he’s abandoned that technology in favor of the older model he developed with Shaw in the 1990s. He recently licensed this product to a Connecticut-based company that would manufacture the appliances in Maine.

Throughout the lawsuit, Hallowell continued producing and selling its air-to-air pump and has recently expanded its manufacturing space in a 340,000-square-foot building owned by Bangor, according to McKay. Moreover, Hallowell has so far met specific long-term employment conditions he agreed to in 2005 in order to receive a $200,000 grant from the city. Half of that money went to equipment purchases for the company, McKay explains, while the other half covered a year’s rent in the city’s building on Hildreth Street.

McKay says in 2007, Hallowell met his employment goal of 20. This year, he promised to have employed 50, but had not yet replied to the city’s letter seeking verification of his employee count when this issue went to press.

Others confirm Hallowell’s business is going well. Luther says Hallowell International added another line of production over Labor Day weekend, doubling its output.

Radigan Mechanical, a heat pump dealer in Carmel that sells the Acadia, reports that sales of Hallowell’s heat pump have been strong all year. Since last January, when owner Dave McCue started selling the Acadia pump, he’s sold a little more than 100, he says, for between $12,000 and $15,000 and he’s installing one every day, with backed-up orders for work through the next month. “We’re seeing demand all over the state, from Machias, Portland; we’ve been everywhere, as far north as Fort Kent,” McCue says.

However, in the distant horizon is the New Age Heat Pump. Though it’s still a couple years from commercialization, LaBrecque says his and his students’ pump could upstage both Hallowell and Lewis.

Luther says that that no one heat pump necessarily will dominate the market if the economy successfully shifts away from its oil base. “There are positions in the marketplace for all these products,” he says. “I don’t know if anyone is going to own the marketplace.”

Rebecca Goldfine, Mainebiz staff writer, can be reached at rgoldfine@mainebiz.biz.

Nyle International Corp.

President: Donald Lewis
Founders: Donald Lewis, Sam Nyle
Founded: 1986
Products/Subsidiaries: Nyle Corp. manufactures industrial drying systems, Nyle Special Products manufactures commercial hot water heaters
Employees: 25
Annual revenues: $4 million
Contact: 942-2865
www.nyle.com

Hallowell International LLC

CEO/Founder: Duane Hallowell
Founded: 2005
Employees: 20 (In 2007, the most recent data available)
Product: Acadia heat pump, hot water heater
Annual revenues: N/A
Contact: 877-322-2342
www.gotohallowell.com

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