Alphabet Energy, which says it can make electricity for around $1 a watt out of waste heat in factories or data centers, has raised $1 million from Claremont Creek Ventures and the CalCef Clean Energy Fund.

Waste heat -- which is one of our favorites sources of energy here -- essentially revolves around capturing heat from engines and machinery and using it to run things like water heaters or converting it into electricity. The U.S. consumes around 100 quads (100 quadrillion BTUs) of energy a year, and 55 to 60 quads get dissipated as waste heat, according to Arun Majumdar, the UC Berkeley professor who came up with a lot of the technology behind Alphabet (he now runs ARPA-E, the advanced projects group inside the Department of Energy). Thus, there is a lot of waste heat out there and it could be cheaper than solar. Alphabet estimates it could be a $200 billion market.

Heat-to-electricity can be accomplished in two ways. Companies such as Recycled Energy Development (RED) and Ormat have successfully retrofitted factories to capture waste heat, but these systems largely rely on mechanical engineering. Heat is captured and then channeled into productive uses. One of RED's showcase projects -- coming next year -- is a system at West Virginia Alloys, a silicon manufacturer, that will generate 45 megawatts of electrical power from the waste heat generated by factory operations. The company uses 120 megawatts at the current time, but the waste heat system will effectively allow Alloys to recover about one-third of the power it now buys but wastes. Fuel cells can also be used to harvest waste heat.

Semiconductors could potentially be the next wave for the industry, and this is where Alphabet comes in. Traditional waste heat chips -- heat goes in one side, electricity comes out the other -- cost around $20 a watt and are made out of bismuth telluride. Alphabet won't say what its semiconductor is made from, but sources say the chief material is silicon nanowires.

The company, one of the finalists for the Cleantech Open last year, hopes to get a prototype plant running in about a year or so. Potentially, it could move into mass manufacturing 18 months to two years after that. The chips initially will be bought mostly by industrial manufacturers, which would use the material wrap hot steam pipes in manufacturing facilities. Later, the company could move into the auto industry, but the amount of heat and often lower temperatures involved could make that a challenge.

GMZ Energy, Promethean Power and Cypress Semiconductor are all also experimenting with thermoelectric devices and various semi materials like gallium. GMZ and Cypress want to turn heat into power while Promethean converts electricity from PV panels directly into heat.

MC10 and Photonic Devices also received grants from ARPA-E last year to develop waste heat semiconductors.

Tags: alphabet energy, arpa e, claremont creek ventures, gmz, promethean, waste heat