The Future of Green Tech Investment

green technology investmentAccording to a recent article in Green Technica by author Joshua S. Hill, green tech investment could “skyrocket” by 2030. Hill cites research from Bloomberg New Energy Finance, including a detailed analysis of three different potential scenarios. As their research shows, wind and solar could have the efficiency and popularity needed to bring the renewable energy industry into its own.

Although clean energy ETFs have been underperforming in an era where fossil fuels have largely recovered from recession-era prices, each of the three scenarios explored by Bloomberg New Energy Finance shows an increase in green technology investing. A 230% increase in annual investment by 2030 would mean increasing to a total of $630 billion per year. Bloomberg New Energy Finance largely attributes this to the decreasing cost of wind and solar technologies, as compared to fossil fuel alternatives. The report also shows increased use of hydro power, geothermal and biomass.

Michael Liebreich, Bloomberg New Energy Finance’s chief executive, believes that we have already passed the “tipping point” for clean energy technology. He points out that, even though most news coverage is discussing the future of fossil fuels, costs for green energy and implementation are falling. He says, “The news right now is dominated by stories of pain caused by overcapacity on the supply side of clean energy, and the lure of cheap shale gas, but this is playing out against the falling costs of renewable energy and of all the technologies required to integrate it into our energy system, and falling costs win. What it suggests is that we are beyond the tipping point towards a cleaner energy future.”

The three scenarios explored by Bloomberg New Energy Finance are “New Normal”, “Barrier Busting” and “Traditional Territory”. “New Normal” is cited as the most likely, and ends with a probable $630 billion per year in green tech investing. Each scenario calls for growth in the renewable energy sector, notably in solar and wind energy, along with decreases in fossil fuels. Even the modest “Traditional Territory” scenario shows green tech investment increasing to $470 billion by 2030.

Guy Turner, the head of economics and commodities for Bloomberg New Energy Finance, says that renewable technologies will be the “anchor of new generating capacity additions” in all scenarios. He points out, “The main driver for future growth of the renewable sector over this timeframe is a shift from policy support to falling costs and natural demand.” Read the original article.

When we last looked at solar energy in particular, we noted that 2013 is a slower year for installations due to an oversupply of solar panels. However, by bringing this technology to end-users more quickly and at lowered prices, we explored the idea that solar energy may be closer to being at parity with fossil fuel based energy. Also helping the situation is a budgeted increase in spending for the Department of Energy, including a 75 percent increase in spending on advanced vehicles to $575 million, and a 29 percent increase in spending on the ongoing effort to integrate solar and wind power into the national electric grid.

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Obama Budget Proposes Big Increases for Spending on Clean Energy

Photo courtesy of KMBC.com

Photo courtesy of KMBC.com

President Barack Obama’s fiscal year 2014 budget proposal made headlines this week mainly for its changes to Social Security, but the increases proposed in US government support for clean energy spending did not go unnoticed. Reuters News Service called the increases for electric cars, wind power and other green technology “dramatic,” particularly because they arrive in the face of Republican criticism.

While many government agencies get slimmed down in the budget proposal, the Department of Energy would get an 8 percent increase to $28.4 billion next year, Reuters reported. Included are a 75 percent increase in spending on advanced vehicles to $575 million and a 29 percent increase in spending on the ongoing effort to integrate solar and wind power into the national electric grid, Reuters reported. Support for biofuels would increase by 24 percent.

“These increases in funding are significant and a testament to the importance of clean energy and innovation to the country’s economic future,” the Obama administration wrote in the budget proposal, according to the Reuters report.

While Republicans have criticized the US backing of companies like Solyndra, a solar panel maker that went bankrupt, and Fisker Automotive, a hybrid sports care maker which is struggling and laying off employees to hold off bankruptcy, President Obama has maintained that clean energy is a key to the country’s future.

Government support for the clean energy industry “has nearly doubled (the US) energy generation from wind, solar, geothermal and other renewable energy sources” since Obama took office in 2008 and maintaining this level of support “could lead to breakthroughs in the years to come,” Reuters reported.

We’ve been following several wind and solar energy companies, including:

Newbury Park, CA-based Sauer Energy (OTC: SENY, http://www.sauerenergy.com/) is a development stage company developing vertical axis wind turbines for commercial and residential uses. Formerly BCO Hydrocarbon Ltd., the company disposed of its oil and gas interests and in July 2010 purchased Sauer Energy and in May 2012 purchased Helix Wind Corp. Back on Dec. 24 it was trading for $0.24. It closed April 12 at $0.10, down 1 cent for the day. Its market cap is now $9 million and 52-week range is $0.08-$0.39.

China-based China Ming Yang Wind Power Group (NYSE: MY, http://www.mywind.com.cn/) is a wind turbine manufacturer focused on designing, manufacturing, selling and servicing megawatt-class wind turbines. Last July, MY announced it was considering a joint venture with China-based Huaneng Renewables Corp. to develop wind power and solar power projects in China and overseas markets. MY stock closed Dec. 24 at $1.21. It closed April 12 at $1.35, up 1 cent for the day. Its market cap is now $169 million and 52-week trading range is $1.06-$2.47.

Chatsworth, CA-based Capstone Turbine Co. (Nasdaq: CPST, http://www.capstoneturbine.com/) develops and markets microturbine technologies, including technologies used to provide on-site power generation for wind power. It closed Dec. 24 at $0.91 with a market cap of $278 million.CPST closed April 12 at $0.93, down 4 cents for the day. Its market cap is now 282 million and 52-week trading range is $0.73-$1.20.

San Mateo, CA-based SolarCity Corp. (Nasdaq: SCTY, http://www.solarcity.com) designs, installs and sells or leases solar energy systems to residential and commercial customers, as well as electric vehicle charging products.  It closed March 15 at $16.74 with a market cap of $406.5 million. SCTY closed April 12 at $19.97, down 41 cents for the day. Its market cap is now $1.5 billion and 52-week trading range is $9.20-$21.40.

Ontario, Canada-based Canadian Solar (Nasdaq: CSIQ, http://www.canadian-solar.com/ ), which sells a variety of solar products, closed back on March 15 at $3.50 with a market cap of $151 million. It closed April 12 at $4.07, down 3 cents with a market cap of $176 million. Its 52-week trading range is $1.95-$5.15.

San Jose, CA-based SunPower Corp. (Nasdaq: SPWR, http://www.sunpowercorp.com/), which makes a wide variety of solar products and systems, closed back on March 15 at $11.80 with a market cap of $1.4 billion. SPWR closed April 12 at $11.06, up one cent for the day. Its market cap is now $1.8 billion and its 52-week trading range is $3.71-$13.88.

China-based Trina Solar Ltd. (NYSE: TSL, http://www.trinasolar.com/) designs, manufactures and sells photovoltaic modules worldwide. Back on March 15, TSL closed at $4.11 with a market cap of $291 million. It closed April 12 at $4.19, up one cent, with a  market cap of $335 million. Its 52-week trading range is now $2.04-$7.99. 

China-based Yingli Green Energy Holding Co. (NYSE: YGE, http://www.yinglisolar.com/) makes photovoltaic products including cells, modules and systems. YGE closed back on March 15 at $2.47 with a market cap of $387 million. It closed April 12 at $2.12, down 5 cents, with a market cap of $324 million. Its 52-week trading range is $1.25-$4.12.

China-based Suntech Power Holdings (NYSE: STP, http://am.suntech-power.com), the world’s largest producer of solar panels, closed at $0.70 back on March 15 with a market cap of $127 million. It closed April 12 at $ 2012, and then rose to $1.87 in early January, but has been falling since. STP closed March 15 at $0.75, udown 12 cents for the day, with a market cap of $135 million. Its 52-week trading range is $0.30-$2.96.

St. Peters, MO-based MEMC Electronic Materials (NYSE:WFR, http://www.memc.com) manufactures and sells silicon wafers and photovoltaic materials. Through SunEdison, it’s a developer of solar energy products. It closed March 15 at $4.53 with a market cap of $1 billion. WFR closed April 12 at $4.76, down 6 cents, with a market cap of $1 billion. Its 52-week trading range is $1.44-$5.70.

1603 Babies: Another Year of Life

The so-called “lame duck” Congress has gotten itself into a productive fit over the last couple of weeks, and passed more important legislation than it had done all year long — much of it bipartisan.  In many ways nothing was more surprising than the action that preserved the “1603 Program” this morning.  Widely reported today, the 1603 Program (so-called because it was created as section 1603 of the American Recovery and Reinvestment Act of 2009 — or ARRA) will be extended by a year, allowing the clean and renewable energy industries to continue to be boosted by a 30% subsidy for qualifying projects.   Proponents of the program claim that it has been responsible for the creation of 100,000 jobs.  Here is a take on the news by Pete Danko of EarthTechling: http://www.earthtechling.com/2010/12/clean-energy-grants-get-another-year/.

Fellsmere FL large-scale Petroalgae R&D facility for algae-based fuels

The Treasury had doled out nearly half a billion dollars this year to solar projects alone: http://www.solarindustrymag.com/e107_plugins/content/content_lt.php?content.6920, and the support was very widespread, with 42 out of 50 states getting at least one grant.  Here is a brief summary from WilmerHale of the provisions of the program and related programs: http://www.wilmerhale.com/publications/whPubsDetail.aspx?publication=9682.

What does this mean for the renewables industry?  According to the American Wind Energy Association, the 1603 Program enabled the construction of 10,000 MW of new wind capacity in 2009, along with 10,000 construction jobs and 2,000 permanent jobs.  The solar industry grew by more than a third in 2009 and may grow by more than 50% in 2010 when the numbers are tallied: http://leadenergy.org/2010/12/the-importance-of-extending-the-1603-treasury-grant-program/.

What does that mean to investors?  Well, to begin with, many of the renewable-energy companies had seen their valuations whacked over the last several weeks as doubt mounted about whether 1603 would be extended.  So there may be some bounce-back profits to be made simply from that.  Look at the giants like First Solar (Nasdaq: FSLR; http://www.firstsolar.com/), whose shares have moved up nearly 10% over the last 2 weeks.  But since the trickle-down effect may not be either as fast or as efficient for the smaller companies and the supply chains, you may have more time to take a position.

Biomass

Biomass companies are definitely included in 1603 — and that includes companies that grow their own biomass (jatropha, algae) as well as companies that use decomposing waste to create fuels.  An article from Popular Mechanics talked about 5 of them: http://www.popularmechanics.com/science/energy/biofuel/4333722.  One of those is South San Francisco-based Solazyme (http://www.solazyme.com/company-profile), but the choice is not wide if you are looking for companies that trade on the stock markets.  The largest is Melbourne, FL-based Petroalgae Inc (EBB: PALG; http://www.petroalgae.com/), with a market cap of over $1.1 billion. 

Solar

 

Solar concentrator looking like a ferris wheel

There are as many solar companies as Arabian Nights in the story book, it seems, divided into those that make the gear (photovoltaic cells, thin film, solar concentrating devices, a myriad of different parts and pieces); those that install the gear, and those that generate electric power from the installations.  There seem to be many claimants for the title “Largest Solar Installation in the World,” but one of the most recent is due to be installed in the eastern Mojave desert near the California city of Blythe: http://www.renewable-energy-news.info/worlds-largest-solar-installation-blythe-ca/.  About 2 months earlier, First Solar announced its own “world’s biggest”: http://solarhbj.com/news/worlds-largest-solar-pv-power-plant-now-operating-in-ontario-canada-0989.  But the “dream team” solar project still has to be the electrification of the Sahara desert, even though it has no hope for 1603 funds: http://inhabitat.com/worlds-largest-solar-project-sahara-desert/

 
 
 
 
 

And pretty-made turbines all in a row (at sea)

Wind

Perhaps the most controversial renewable is one of the oldest: harnessing the wind.  When I was a kid I was taught that waterwheels and windmills were some of civilized man’s first non-combustible attempts to harness natural energy.  But as the applications have gotten bigger, the windmills and waterwheels have become gigantic — and some folks don’t like them one little bit.  The highest-profile new projects tend to be offshore these days, like the huge project planned for the area around Nantucket Island, described here: http://www.capewind.org/.  Wind farms are probably no larger than solar farms, but they stick up really high, and they create what some people see as visual pollution — “that big white thing with the rotating arms is ruining my view.”  Most of the big vendors are BIG, but there are a few smaller makers who might be good places to place a bet.  One is Irvine CA-based Composite Technology Corp (EBB: CPTC; http://www.compositetechcorp.com), founded in 1980, and with a market cap of about $66 million.  CPTC makes wind turbines for the electric utility industry, and so stands to be a fairly direct beneficiary of 1603.   Or there’s Hamburg-based REpower Systems AG (DAX: RPW; http://www.repower.de/), which just last week announced 51 additional MW for the US to be installed in PA, NY, OH and WA.  RPW is a much larger company, with a market cap in the range of 1.1 billion euros, and in the US there is an ADR, RPWSF.PK.

Hydro

Hydroelectric dam (best not to mention fish around them)

If there’s anything more picturesque than an old windmill (think Mykonos), it’s an old waterwheel, and if there’s anything more gargantuan than a big wind farm, it is the modern descendent of the waterwheel, a huge hydroelectric dam.  But if there is anything that is renewable it is mountain streams and the rivers they power, and from the time that Buffalo was electrified by Niagara Falls, the attempt to harness every fast-flowing river has been universal.  And when there are no fast-flowing rivers, we create artificial lakes to run the turbines.  Most big dams are owned or operated by utilities or groups of utilities, and many small dams are under the authority of the Army Corps of Engineers, with a popular estimate that there are 20,000 small dams in the US alone that do not yet generate any electric power. Thus the growing demand for what is called “small hydro” — miniturbines that can generate smaller amounts of electricity but that can also be installed with a minimum of environmental impact and capital expenditure: http://en.wikipedia.org/wiki/Small_hydro.  Earlier this year Russell Ray had a look at the regulatory and funding environment for small hydro: http://www.renewableenergyworld.com/rea/news/article/2010/04/regulating-small-hydro

It’s not easy to find a small hydro smallcap stock, because most of the hydroelectric stocks are big companies like Idacorp (NYSE: IDA) or AECOM Technology Corp (NYSE:ACM).  Smaller utilities in the northeast and northwest can be good places to look, and some very small nonpublic technology companies like Hydroring, a privately held Dutch company with an innovative “fish friendly” small turbine for riverine applications.  Very little data is available on Hydroring, based in The Hague, but there is a website at http://hydroring.nl/.

Storage: the 800-pound gorilla

One of the conundrums of renewables is that although they smile a lot, utilities frequently are not well-disposed toward renewables.  They present a lot of technological and cost problems.  They are frequently remote from the grid and very costly to build long lines to.  Talk to most utilities and you will quickly believe that the key to renewables is a way to store the energy generated until it is needed.  And that means batteries.  Some lithium-ion companies have major smart-grid initiatives underway, but they represent a super-expensive way to store wind-turbine energy.  Regular old lead-acid batteries are a heck of a lot cheaper, but they don’t charge up and charge down fast enough, and they wear out very quickly.  As with other areas of potential 1603 beneficiaries, there are a lot of energy storage companies, so you might look at NYC-based Ener1 Inc (Nasdaq: HEV; http://www.ener1.com/)  , which has a lot of Russian and Japanese lithium-ion technology know-how.  Another option would be Tyngsboro MA-based Beacon Power (Nasdaq: BCON; http://www.beaconpower.com/), which has a flywheel technology.  And the low-cost leader looks to be New Castle PA-based Axion Power International* (EBB: AXPW; http://www.axionpower.com), a company with a battery that is a relative of the lead-acid battery in your car, but turbocharged with nanocarbon to eliminate corrosion and increase the ability to charge/recharge.  It is worth saying that none of the 3 companies has been a mass manufacturer of their products to date, so all require due diligence with regard to their ability to scale up and serve the market.

*client of Allen & Caron, publisher of this blog.

Offshore Wind Energy Projects Generating a Buzz

Wind energy and its potential to power a large swath of the East Coast has generated a surge of news activity in recent weeks. First, in late September, conservation advocacy group Oceana released a study suggesting that offshore wind over the Atlantic Ocean could indeed power much of the East Coast and at the same time be much friendlier to the environment than other energy alternatives including natural gas, coal, oil or nuclear energy. The Oceana study (http://na.oceana.org/en/our-work/climate-energy/clean-energy/offshore-wind-report/report) came on the heels of a U.S. Department of Energy draft plan for creating a offshore wind energy program for the U.S.

Wind Turbines, photo courtesy of Western Wind Energy

Those studies were followed by a blockbuster New York Times piece on October 12 (http://www.nytimes.com/2010/10/12/science/earth/12wind.html?_r=1&scp=1&sq=matthew%20wald&st=cse) reporting that Google and two other companies, one a New York financial firm, have agreed to invest millions of dollars in a 350-mile underwater transmission “spine” cable along the Atlantic coast that would transfer the energy created by offshore wind turbines to what the Wall Street Journal estimated to be 1.9 million households along the East Coast from Virginia to New Jersey. Along with Google, the investment firm Good Energies and Marubeni, a Japanese trading company, have all agreed to invest in what is called the Atlantic Wind Connection.

As now envisioned, the five-phase project would begin in 2013, be completed in 2020 and be constructed 15 to 20 miles offshore, thereby eliminating much of the criticism of visual blight from the turbines that has plagued other high-profile wind turbine projects such as the country’s first offshore wind project called Cape Wind off Cape Cod.  The cable would have a 6,000 megawatt capacity, which The Times says is equal to the output of five large nuclear reactors.

Most experts agree that an offshore transmission line would spur the construction of various offshore wind farms since developers would not need to create their own individual transmission lines, according to the Journal story.

This has to be good news for the burgeoning smallcap companies involved in wind farms and turbines, but just who might capitalize is hard to say at this point. Here is a short list of some of those smallcaps:

Fergus Falls, MN-based Otter Tail Corporation (Nasdaq: OTTR, http://www.ottertail.com) is involved in wind energy transmission but is now focused soley on Minnesota and the Dakotas. The stock price ($21.27 this week) has rallied with the rest of the market since September but is still off its 52-week high of $52.39 set last January. Since wind energy is a small part of its business and its base is in the heartland, not the coast, this could be a stretch.

Vancouver-based Western Wind Energy (CDNX: WND.V, http://www.westernwindenergy.com) is also based far west of the Atlantic. It’s currently trading for about $1.20 but since it doesn’t trade on a U.S. exchange there is little news on progress. The last headline noted that the company had closed a $2 million corporate loan but otherwise there is not much to go on.

London-based Clipper Windpower (OTC: CRPWF.PK, http://www.clipperwind.com) is a pure wind energy play but is another small stock with very little trading. It seems to be sitting at about $0.78 with no recent activity. While it’s based overseas, it does have operations in the Americas.

Geothermal Companies Getting Hotter: Carbon-free is the New Black

Geothermal energy is like a crazy genie who is sometimes helpful and sometimes a weapon of mass destruction.  The natural escape valves of subterranean nature are volcanoes, geysers and bubbling hotsprings, not to mention the massive energy stored in tectonic plates butting into one another, which causes earthquakes.  As a source of useful energy, it has been slow to be harnessed in a big way other than by locals — Iceland, for instance, is powered almost entirely by renewable hydro and geothermal energy.  This article encapsulates the most common ways of using geothermal energy, and is descriptive of the Icelandic exemplar: http://www.energy.rochester.edu/is/reyk/works.htm.  Note the generation of hydrogen, a clean-burning fuel whose only emission is water. 

But in these days when renewable energy is approaching Holy Grail status (for good reason), geothermal companies merit a good look-see.  See this virtually evangelical message from the very persuasive Jigar Shah regarding carbon emissions: http://news.carbonwarroom.com/2010/10/04/creating-wealth-by-reducing-carbon/.  There is a useful survey of geothermal generating companies in this article by Tom Konrad in Seeking Alpha: http://seekingalpha.com/article/229522-8-geothermal-stocks-for-your-consideration.  As he points out, the clear leader as a pure-play geothermal company is Reno-based Ormat Technologies Inc (NYSE: ORA, http://www.ormat.com/), which, at $1.35 billion market cap, is a bit large for this blog — but worth looking at for its relatively complete picture of geothermal potential.

In the United States, federal government incentives can be a powerful impetus toward “clean” renewable energy (keeping in mind that almost every industrial process, no matter how “clean” generates some detritus that can present problems at some point).  As with most such incentives, the big bucks are frequently sucked up by big companies that in some ways don’t need them, but on the other hand may be more likely to create jobs, an unmitigated political good. 

One company to look at is Boise ID-based US Geothermal (NYSE Amex: HTM; http://www.usgeothermal.com/).  Like a lot of semi-development-stage companies, it is pretty short on revenue, long on cash consumption, with revenue of less than $1 million in its latest (June 30) quarter, and a cash balance that dropped from $13 million to $8.7 million in 90 days while the P&L only showed a loss of $1.5 million.  Its projects are all in the Idaho-Oregon-Nevada area, over the hotspots they need to produce their electricity.  Numerous analysts in Canada and the US cover HTM, a list of them being available on the HTM website.  HTM shares are at about half their 52-week high, selling for $0.84 vs the high of $1.74 on average volume of 200,000+ shares per day.  Market cap is about $66 million.

Provo UT-based Raser Technologies (NYSE: RZ; http://www.rasertech.com/)  is not a pure play in geothermal energy, but close enough.  It qualifies on price action as a “fallen angel,” having sold for as much as the mid-teens a couple of years ago (you could hear the champagne corks popping), but today it is a pennystock, trading at about two bits ($0.25) vs a 52-week high of $1.69.  The low price seems to indicate a skepticism on the part of investors about RZ’s ability to achieve power production goals, and a conservative position about what looks like fairly sizeable financing needs in the short and medium terms.  Revenue is moving up (looks like an annual rate of $4.5 million, mas o menos), but the losses are staggeringly large compared to current revenue size, and much of the “game” here is dependent on government grants — which, to give credit where credit is due, RZ has been good at so far.

There are other geothermal plays, several of them mentioned by Tom Konrad in his Seeking Alpha article referenced above: Magma Energy (OTC: MGMXF.PK); Nevada Geothermal Power (OTC: NGLPF); and Ram Power Corp (OTC: RAMPF.PK).

But no serious discussion of renewable energy makes total sense without a discussion of how to USE the energy that is produced.  The part of most renewables is that they are time-and-space-restricted, and geothermal is more so than most.  Geothermal energy can only be generated when there is access to the hot core of the earth, or to the hot water/steam that is generated by the heat of the core.  That’s a relatively uncommon situation: being able to tap into the earth’s molten core.  In most cases the geothermal fields are pretty far out in the middle of BFE, as this picture of US Geothermal’s San Emidio plant aptly demonstrates: 

The practical side of that is that in order to USE the energy that is generated, there are 3 options (and possibly only 3): (1) build power lines to the site, with the cap-ex and ongoing maintenance that implies; (2) convert the power into a power substitute, such as hydrogen, so that it can be transported to a place where it can be used; or (3) store the energy in a battery or by other means, such as a flywheel contraption or as compressed air (which could drive a turbine when released).

It seems sensible at this point in time to just eliminate expensive energy storage technologies, because even with stimulus money, nobody is in a mood to light cigars with $100 bills these days.  That means there are principally 2 or 3 small-cap companies to look at for energy storage.  There is a useful survey of such companies in this article by Swiss expatriate John Petersen, also from Seeking Alpha: http://seekingalpha.com/article/229197-battery-technologies-no-secret-sauce.

Of the companies mentioned by Petersen, there are two that are worth a deeper look: New Castle PA-based Axion Power* (OTC: AXPW; http://www.axionpower.com) and Tyngsboro MA-based Beacon Power (Nasdaq: BCON; http://www.beaconpower.com/).  The similarities and contrasts between the two are worth noting.  In the first  place, AXPW is a battery company with a singular technology that no one else can pursue (PbC batteries) and BCON is a flywheel company with lots of IP.  Their market caps are very similar (today BCON is $63 million and AXPW is $60 million).  Both are lightly traded.  Both companies are the only “pure plays” in their technology niches.  Both companies tend to be treated as footnotes to the lithium-ion industry, which has taken off like a striped-assed ape while AXPW works on a singularly thorny manufacturing issue and BCON labors for acceptance of an old-but-new physics approach to energy storage.  Both companies have had issues with federal support — in AXPW’s case the grant money was given to their partner, Exide Technologies instead of being split with AXPW.  In BCON’s case, the feds, having underwritten earlier BCON work, elected to back out for a second round (http://phx.corporate-ir.net/phoenix.zhtml?c=123367&p=irol-newsArticle&ID=1480786&highlight=). 

Nonetheless, both technologies are potential winners, though both look like dark horses at the moment.  Petersen has some sensible things to say about both companies, as well as numerous other energy storage companies. 

Nothing’s ever as easy as it looks.  You look at Old Faithful and you think, well, that would be relatively easy to harness and make it turn a turbine wheel.  But it just ain’t that simple.

*client of Allen & Caron, publisher of this blog

If Cape Wind Flies, Small Caps Could Follow

Late Breaking Comment

Andrew Tarsy and Mitch Tyson wrote an interesting cost-benefit analysis commentary on the Cape Wind project. http://www.boston.com/bostonglobe/editorial_opinion/letters/articles/2010/05/12/our_energy_use_calls_for_a_transformation/

After nine years of regulatory review, the nation’s first offshore wind farm, known as Cape Wind, won approval from the federal government (http://www.nytimes.com/2010/04/27/business/energyenvironment/27wind.html?ref=earth). While challenges remain to be heard, there’s little doubt that the announcement that Cape Wind will fly will be a tremendous boon to the burgeoning wind power industry. Indeed, Interior Secretary Ken Salazar told the media throng at a news conference that “this will be the first of many projects up and down the Atlantic Coast.”

Cape Wind CEO Jim Gordon told CNN that his company has spent more than $45 million–most of it from his own pockets–to get this far since 2001 when he first sought a permit (http://www.cnn.com/2010/TECH/04/29/cape.wind.ceo.profile/index/html). Gordon has refused to disclose potential earnings for his company; critics say Cape Wind stands to gain hundreds of millions in tax credits and subsidies. Among the hurdles still to clear is a final purchase power agreement with a utility. However, Tom King, the president of National Grid, the utility company that covers the area, said in a statement that negotiations with Cape Wind were “going very well…”

Some of the Cape Wind statistics are intriguing:

–Developers claim the wind farm will produce about 75 percent of the power for Cape Cod, Nantucket and Martha’s Vineyard.

–Cape Wind will stretch across 25 square miles of Nantucket Sound, like about 5 miles from the nearest shore on the mainland and about 14 miles from Nantucket.

–The tip of the highest blade of each of the 130 turbines would reach 440 feet above the water.

–Carbon dioxide emissions will be reduced by the equivalent of taking 175,000 cars off the road.

–1,000 construction jobs will be provided.

–Outside the U.S. there are more than 800 giant wind turbines off the coasts of Denmark, Great Britain and seven other European countries. China’s first offshore wind farm goes online this month with more in the pipeline.

Several large household names have jumped into the windpower business including Siemens, General Electric and Vestas, a Danish company that has the largest installed base. But there are small caps involved, too, and privately held companies that should benefit from the progress in Cape Cod.

Kaydon (NYSE:KDN, http://www.kaydon.com) is a fair sized ($1.3 billion market cap) Ann Arbor, MI-based company that makes parts such as custom bearings for windmills. In 2008 they built a manufacturing facility in Monterrey, Mexico devoted to servicing the wind energy industry. Investors seem to be connecting them to the Cape Cod news. The stock is now trading at more than $45, well over its 52-week high of $42.56.

Otter Tail Corp. (Nasdaq: OTTR, http://www.ottertail.com) is a Fergus Falls, Minn.-based electric utility ($807 million market cap) that manufactures and markets wind towers and also distributes electricity in Minnesota, North Dakota and South Dakota. Nearly a week after the Cape Wind announcement their stock was trading at $22.50. Its 52-week range is $18.63–$25.40.

Western Wind Energy (TSX:WND, http://www.westernwindenergy.com) is a Canadian company ($75 million market cap) with more than 500 wind turbines in California. Shortly following the announcement shares were trading at $1.52, up $.06, and headed toward their 52-week high of $1.99.

Two other non-U.S. companies might deserve a look. In Japan, an interesting windmill company is Loopwing (www.loopwing.co.jp). It’s unusal design is said to greatly reduce vibration an noise as compared to more traditional designs. And across the pond, privately-held, Suffolk-based Wind Power Ltd. (www.windpower.ltd.uk) develops large scale vertical axis wind turbine technology. The company began as a small research group but now offers a range of products and services.

CleanEquityMonaco: A Must-Do for the Greentech Aficionado or Investor March 4-5

One of the high points of the greentech year is coming up March 4-5: CleanEquityMonaco (http://www.cleanequitymonaco.com) in the picturebook-lovely city of Monte Carlo.  Interestingly enough it is not a costly conference to attend, probably because it has very distinguished sponsors, and probably worthwhile even for Americans to fly to.  The conference has arranged very attractive hotel rates, a fraction of what one would expect on the Riviera, and quite reasonable flights can be found from the Northeast to Nice (which is the airport for Monaco as well).

Monaco Harbor from the Old City

CEM is a meetingplace for people with new and significant green technologies of all types, and from all over the globe.  There are several plenary meetings set, and some very distinguished guest speakers as well.  Awards for the best technologies and best commercializations will be made by Sir Stelios Haji-Ioannou and HSH Prince Albert II.  The conference coincides with an annual meeting of the United Nations Environmental Programme (UNEP) and green technocrats from all over the world will be in town at the same time.

But the real show are the new technologies themselves.  The publisher of this blog, Allen & Caron (http://www.allencaron.com) is working with the conference organizers on a pro bono basis, and we have admired the arrangements as they have been made over the last 6-8 months. 

Loopwing Wind Turbine from Japan -- meet them at CEM March 4-5

For obvious reasons, the largest category of new technologies will be in the field of alternative energy: solar, wind, new fuels, etc.  But there will also be environmental technologies that run the gamut.  The sponsor and organizer is London-based Innovator Capital (http://www.innovator-capital.com), a boutique investment bank and financial advisor with a devotion to environmental causes, and there will be investment bankers prowling around looking for clients, as well as technocrats from big multinationals looking for acquisitions and partnerships.  Many of the companies that are showing new technologies are not listed or publicly traded, and quite a few are really post-academic, though all have demonstrated proof of what they claim to be able to accomplish.  All are scrappy, feisty, fearless and have new mind-bending ideas.

Some “hot” publicly listed companies will also be presenting, including Shanghai-based China Energy Recovery, Oak Park MI-based Azure Dynamics, Torrance CA-based Enova Systems, Oxford UK-based Oxford Catalysts, Southboro MA-based Protonex, Cuxhaven Germany-based PNE Wind, Perth Australia-based Enerji Ltd,  and Griesheim Germany-based BGI EcoTech.

Jigar Shah, CEO of The Carbon War Room

The keynote speaker will be Jigar Shah, CEO of The Carbon War Room(http://www.carbonwarroom.com) , a noted authority on renewable energy, and the founder of SunEdison, which has more megawatts of solar energy under management than any other company in the world.  Mr Shah is an alumnus of BP Solar, a DOE contractor on fuel cells and alternative energy, and a member of several boards, including Greenpeace USA and the Prometheus Institute. 

Sir Stelios Haji-Ioannou

Sir Stelios will introduce the Next Wave segment of new technologies on the second day of the conference.  He is best known for having founded EasyJet, a leading lowcost airline that has revolutionized European travel, but he is also the founder of several other companies.  His Stelios Philanthropic Foundation is devoted to environmental sustainability, education and entrepreneurship. 

We highly recommend that you consider attending.  The cost is reasonable and the technology rewards potentially earth-changing.  Some of these concepts will completely reorder the way you see the world.