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Neumann Systems Group will close shop after two decades due to changing energy market

Loss of power


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Neumann: Soon to close. - FILE PHOTO
  • File photo
  • Neumann: Soon to close.

Federal budget cuts and a "tumultuous" energy industry combined to cause the downfall of Neumann Systems Group [NSG], which invented and built pollution-control equipment for the downtown Martin Drake Power Plant.

In a four-page statement provided only to the Independent, NSG owner and founder David Neumann details steps that led to his company's closure after two decades of work on software, defense and laser weapons research, and scrubbers to remove toxins from coal plant emissions.

The Indy reported on April 18 on its website that NSG had closed its Elkton Drive office after a decade-long association with Colorado Springs Utilities [CSU], which paid the firm $110 million for Drake's pollution controls. (Another $68 million went to other contractors.)

Neumann's statement says the firm will close after June, noting that "All major contractually specified scrubber performance goals were met or exceeded" on Drake. Sulfur dioxide removal, he said, is "significantly above" required minimums, and operational costs are "significantly lower" than the NSG contract required.

In a statement to the Indy, CSU said NSG fulfilled its contract for emissions control, which will help the city meet new regional haze mandates by the end of this year. The city took ownership of the system last fall, Utilities spokeswoman Amy Trinidad said via email, adding CSU employees have been operating and maintaining it since then.

The city's contract gave the city a percentage of future sales, but those never panned out.

Neumann Information Systems, Inc. was founded in 1997 with a focus on business software. A year later, the firm shifted to research for the Defense Department on laser weapons. From 1998 to 2004, the company — renamed Directed Energy Solutions — won 21 contracts for laser-related projects from military branches and other agencies, such as the National Science Foundation. All contracts were completed on time and at or under cost, Neumann said. But the market for defense laser development dwindled.

Inventing another application for the technology, Neumann researched pollutant removal from coal plants. After successful testing of the technology at less than 1 megawatt, 2 megawatts and 20 megawatts on Drake, the invention was scaled to serve two of three units at Drake. (A third unit has been shut down.)

From 2012 to 2015, the design and development of the technology "proceeded slowly as a result of an environment of political and customer uncertainty." (The invention was sharply criticized for its rising costs, and then-City Councilor Tim Leigh publicly questioned its effectiveness.)

Costs were borne mostly by CSU, though some financing came from four other utilities and the Electric Power Research Institute, which validated its effectiveness, Neumann said.

But the system was doomed when natural gas won its battle with coal after the advent of fracking and horizontal drilling made gas more abundant and cheaper. Gas also yields little or no sulfur emissions and half the carbon dioxide of coal.

"The unprecedented shift in power generation from coal to natural gas and renewables had a significant effect on NSG's ability to generate additional business for a technology that was being scaled to commercial size for sulfur removal," Neumann wrote.

Efforts to market the technology elsewhere were met with a growing list of coal plant closings, he said. Turning to potential customers in China and India, NSG wasn't able to close any deals. Two companies' demands, he said, "would have fully exposed our technology with only very limited protection and at great cost to NSG." NSG then refocused on work for oil companies just as oil prices plummeted and capital investment was curtailed.

The company started laying people off in early 2016, and closed its offices late last year.

CSU reports the NeuStream equipment is working as it should, and warranties are in place on many mechanical components, such as pumps.

See Neumann's statement below.

See related PDF Neumann_Systems_Group_Statement.pdf


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