Blue Rhino co-founder hopes compact water heater is next big thing

Jerry Callahan solves problems.

That’s what he was trained to do and that’s what he’s done at companies of all kinds over the past 20-odd years.

But it’s the relatively minor problems Callahan has encountered away from the corner offices that have resulted in perhaps his most visible solutions.

It was his inability to fill his cooking grill’s propane tank on a Saturday afternoon in 1995 that led to Blue Rhino, the cylinder exchange company whose gas canisters became ubiquitous at big box and convenience stores across the country.

And it was another frustrating disconnect Callahan confronted while building an outdoor shower at his Sullivan’s Island home that resulted in what he hopes will be his next big splash.

Callahan has invented a football-sized electric water heater with patented technology he believes could save everyone lots of water, energy and money. No more running the water for a minute before it’s hot enough to use, no more plating parts, no more scalding, he promises.

It uses variably spaced electrodes controlled by a microprocessor to pass currents through the water, almost instantly bringing it to the desired temperature and no higher.

“Because we’re heating the water directly, it’s pretty much 100 percent efficient,” Callahan said in an interview last month.

He said the device, in replacing the current closet-sized heaters, could cut a household’s yearly electric bill in half and reduce water usage by 10 percent.

Callahan’s a gruff-voiced businessman, not an environmentalist, but in this case, with fuel prices rising and potable water reserves dwindling, those interests seem to jibe.

“People have to change their habits, not just here but around the world,” he said.

Tanks a lot
Callahan, 56, seems to like change.

The Cape Cod native studied sailboat design at the prestigious Massachusetts Institute of Technology but said he couldn’t afford to finish. After spending nearly a decade at Great Lakes Dredge and Dock Co., he returned to school at the University of Chicago, where he earned an MBA in 1988.

From the late 1980s through when he started Blue Rhino with two men he met through the Young Presidents Organization, Callahan specialized in corporate turnarounds.

For short stretches, he led or helped lead companies including CONCO Food Service, Kindercare Learning Centers and Dynapower/Stratopower as they cut costs to increase profits.

He was president of Dynapower/Stratopower, which brought Callahan and his family to Charleston in 1992, when he made that fateful attempt to buy a propane tank.

Thwarted, he called a colleague in the local YPO chapter, Billy Prim, whose father was in the propane business, and the rest is history.

“Now a gas grill can be an impulse purchase,” Callahan explained to the likes of Home Depot and Sears. “That’s really what got them excited.”

Callahan left the company he helped found before it went public in 1998 and cashed out his shares in 2000.

“It was just one of those things, if the stock hits this price, I’m going to sell,” Callahan said. “I didn’t sell it at the peak, but it was certainly enough for me.”

He made “a couple hundred thousand dollars” but said much of that went toward private school tuition for his two children.

Reverse engineering
It was five years later when Callahan ran into engineering difficulties getting hot water to his outdoor shower from his home tank-type heater.

He went to a local plumbing distributor but was told the tankless electric unit he sought wasn’t worth buying because it didn’t work. Undaunted, Callahan brought the device back to his garage and set to tinkering.

“So I took the unit apart and thought, ‘There’s got to be a better way to do this,’ somewhat naively,” he recalled.

He thought and prototyped and thought some more over the course of 2005 before the idea of variably spaced electrode pairs occurred to him.

“The ‘aha’ moment was that I realized we could manage the power if we didn’t constrain ourselves that adjacent electrodes ... have to work together,” Callahan said.

The concept, firing 680 combinations of the 19 electrodes through the electrical resistance of the water while checking the temperature and power draw 60 times a second, was so “out of the box,” Callahan said that it took an hour to explain to top government scientists at Los Alamos National Laboratory in New Mexico.

“‘That’s brilliant. You should come work here,’ ” Callahan remembers the scientists saying.

He applied for a patent in 2006, and one was issued in 2010: No. 7,817,906.

Heating up
He carried a heavy, metallic prototype almost like a baby during a visit to The Post and Courier last month. If all goes according to plan, Callahan and his team at ISI Technology, which includes a New Mexico-based CEO and four contract engineers, will be sending out production units to potential customers, including General Electric, by summer.

“The idea is we’re going after one of the biggest markets first,” Callahan said, noting water-heating typically makes up to 40 percent of a household energy bill.

Other potential uses for the ISI heater include serving as a “finisher” for houses that mostly rely on solar power and for heating water at fast-food restaurants and hospitals. The patent covers other liquids, not just water, and Callahan envisions developing world applications as well.

“What we’re really trying to do is get a launch customer that allows us to really focus on some of those other areas,” Callahan said. “The niche markets are always more fun.”

While they are marketing the product, ISI is also courting investors, like the local angel groups. The S.C. Research Authority’s S.C. Launch investment program gave ISI a $200,000 check last month.

It remains to be seen whether the little water heater will grow up like Blue Rhino. And Callahan’s hasn’t left his day job, as chief executive officer of SPP, which provides outsourced assembly services to the North American truck market.

But he’d be glad if his “nights, weekends, holidays” project became his next big thing.

“I sure hope so,” he said. “To actually have a product that we know and we’ve demonstrated saves water and saves power is terrific.”

Note: A previous version of this article mistated the name of Callahan’s company. It’s ISI Technology, not ISI Technologies. The Post and Courier regrets the error.