Marine Energy - Green Chip Stocks

Offshore Marine Energy

A week after Obama's offshore drilling announcement, debate is running at full steam — even if new exploration and production haven't started.

One positive result of the back-and-forth on offshore energy activity is that wave and tidal power may draw increased attention in the United States.

As it stands, though, the Department of Energy doesn't give these ocean-based energy resources much more attention than a kids' energy education page on the Energy Information Administration's website.

If you want to see where the real action is, you've got to look across the pond to see what the British are doing with marine energy.

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Scotland: Leading in Ocean Energy

In 2010, the wind-whipped Orkney Islands north of Great Britain will become a key global testing ground for marine energy.

Ocean-based power systems are already being tested there in Scotland's northern reaches, at the European Marine Energy Center (EMEC) testing facility. Ireland's OpenHydro and the UK's Tidal Generation, Ltd. both have tidal energy conversion tests in the works. But Atlantis Resources Corp. hopes to take the lead in advancing tidal power to commercial scale.

Atlantis Resources, founded in Australia but based in London, is installing its 1-megawatt AK-1000 model turbine underwater at EMEC with a $25 million commitment to see the project through and show it to potential large customers.

With 18-meter rotors, Ak-1000 is as big across as a 5-story building is tall. Yet that doesn't mean Atlantis will treat it with extra care.

CEO Tim Cornelius says that up at Orkney, the AK-1000 will be tested in "one of the harshest environments in the world." That could be a boon to Atlantis and to marine energy in general.

You see, as with wind power and even solar energy, conditions that are intolerable for most humans generally point to abundant natural resources that can be used for large-scale energy production.

Due to a decades-long process of devolution — which means granting more and more administrative powers to the capitals of Wales, Scotland, and Northern Ireland — Scotland's national clean energy targets are separate from London's UK-wide guidelines.

The headline difference is a goal of generating a full quarter of its household energy from renewable sources by 2020, instead of London's 20% target.

With marine energy alone, the Edinburgh-based Scottish Executive hopes to power half a million homes a decade from now. Test projects like Atlantis Resources' AK-1000 in the unforgiving Orkney offshore waves could drive Britain to a far greater share of green energy than was previously thought possible.

But the pounds have barely begun to flow into marine energy...

Gunning for 50 GW of Marine Power per Year

In March, the Scottish Government fired the starter's pistol in the race for what it says is the largest government-administered innovation prize in the world.

Engineers and business types from all around the globe will compete for a 10 million pound award called the Saltire Prize. Their task: to develop a commercially viable wave or tidal energy solution that will turn Scotland into an offshore hydro powerhouse.

As in the U.S., the UK government holds rights to its own offshore areas; this means the Crown Estate that administers rich ocean energy resources has to green-light research regions.

In a reprise of processes I've already witnessed in Brazil and Peru, this summer the Crown Estate will hold its first leasing round for marine energy R&D. If you feel like I do, you'd much rather see national governments opening up land for groundbreaking renewable energy research than watch offshore oil drilling get a hand-up.

Between 2012 and 2017, participants in the Saltire Prize contest will test their technology off the coast of Britain, primarily in Scotland's turbulent waters. Whoever takes the 10 million GBP prize home — or, more likely, reinvests it in the successful technology — will have proven that it is possible to generate 100 gigawatts over two years with marine energy.

Another Step in the North Sea's Energy Transition

The North Sea oil rigs within sight of the Scottish coast are seen as remnants of a dwindling fossil fuel industry.

When I visited a wind turbine manufacturing facility in Fife (about an hour outside of Edinburgh) back in 2006, I learned how thousands of jobs had been saved by Scottish investment in a transitional energy economy. Companies like Denmark's Vestas Wind Energy swept into places like Argyll and made use of facilities and local know-how to bring utility-scale clean energy to market.

From wind to waves, we're seeing Scotland's plan develop over the course of several years.

Now ask yourself, with only three years of U.S. oil supply estimated to come out of new offshore leases in U.S. waters, what will the Saltire Prize competitors have done in that time to increase the UK's energy independence, not to mention global competitiveness?

And how much of an opportunity is Washington missing?

I'll be back in the UK later this month as part of a trek from North Africa up to northern Europe, logging the various green energy attitudes and developments I see every step of the way.

I'd like you to get the first multimedia and stock recommendation reports every time I file them. To stay up to date, check out Alternative Energy Speculator today and learn why superior returns in international clean energy companies have become the norm for AES subscribers.

Regards,

Sam Hopkins

The Green Technology Sector

Welcome to the Green Chip Review Weekend Edition — our insights from the week in everything alternative and cleantech, as well as links to our most-read Green Chip Review and sister publication articles.

Lots of good news emerged and investor sentiment brightened during this shortened holiday week.

Before the turkey was even stuffed, cleantech industry reports were out claiming increasing initial public offerings, reduced costs, and general expansion across the board.

Reuters put it like this:

Purse strings are loosening, new bets are being placed, and cautious optimism has caught on in the green technology sector.

With oil prices up sharply and the U.S. economy steady, the emerging green technology industry is seen moving back to a growth path from a sheer survival track, with factories being built, funds moving to research and some high-profile young firms mulling initial public offerings of shares.

Indeed, there are IPOs aplenty. A123 Systems (NASDAQ: AONE) was probably the most high profile this year, in cleantech or any other sector.

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Early November saw the introduction of STRI Holdings (NASDAQ: STRI), a Connecticut-based solar encapsulant company. And this week we learned that Chinese thin film company Trony Solar Holdings raised its IPO target to $241 million from $200 million. Last but not least, China Longyuan Power Group — the largest wind generator in Asia — says it'll raise $2.2 billion in an IPO later this year.

That last one should draw some excitement. According to the preliminary prospectus on that deal, Wilbur Ross is already in for a purported $100 million.

With respect to solar industry fundamentals, things are looking up as well. A slew of analyst reports were out this week touting the following positives:

Strong global incentives
Less-than-expected incentive cuts in Germany and Italy
More normalized price declines for panels, expect another 10%-15% next year
Better margins on slower price declines

What's more, Germany, which already boasts the world's largest solar market, will post a large unexpected jump in capacity this year. Late demand will take 2009 installations in Germany to 3 gigawatts. And insiders say strong demand will continue there into 2010.

But even though German installations are ramping up... the products are most likely coming from China. Nearly every Chinese solar company I can think of — JA Solar, Yingli, Chinese Sunergy, Canadian Solar, Trina Solar, Suntech — all beat quarter earnings estimates while stalwart German firms reported billion-dollar losses.

Finally, the carbon sector — despite fading hopes for Copenhagen — received a trifecta of good news this week.

California announced draft rules for its in-state cap-and-trade plan. Obama announced he will show up in Copenhagen, pledging to cut U.S. emissions to 17% below 2005 levels by 2020, which is 3% below the 1990 levels used for U.N. Treaties. And institutional investors holding more than $1 trillion in assets — including the largest U.S. public pension fund, renewed their call to the SEC to require companies to disclose climate-related risks.

According to Mindy Lubber, president of CERES, the group that organized the petition, "This is calling for real transparency on material risks that have a profound impact on share value of companies. These are now real on-balance sheet risks. They are material. They ought to be disclosed."

Be thankful for Mindy Lubber, and for everyone else working to make the green economy a reality.

Hope you had a great Thanksgiving,

Nick

P.S. In case you missed the week's top-read articles from Green Chip Review and our sister-publications, you can catch up now.

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Marine Energy Investments

Has the tide gone out on marine energy?

The Pelamis wave energy converter project in Portugal was scuttled in March due to technical setbacks. . .

But even with that 21 MW project coming offline, the learning curve for offshore hydropower is getting shorter and shorter. So, we're getting closer and closer to harnessing the 2-3 million MW of coastal wave energy resources around the world.

Even when they're located near seaside cities, ocean energy facilities face many of the same challenges as offshore wind power. Both resources must, of course, be tied back to land with efficient and robust transmission systems.

And as the stiff maritime breezes can generate millions of megawatts, they can also destroy millions of dollars in engineering if extreme weather hits.

For disaster repairs and regular maintenance alike, marine energy devices have to be readily accessible from the ocean surface.

Pelamis aimed too high by shooting for a "hands-free" operation with no maintenance at the offshore site and "no offshore intervention."

Would we expect a coal-fired power plant to run without maintenance? How about a hydroelectric dam, for water-to-water comparison?

The answer is no. . . This was clean-fuel folly, plain and simple.

Of course, there are other companies besides Pelamis in many other resource-rich coastal regions besides western Europe. . .

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Beyond Pelamis

In Japan, which imports nearly all of its energy, they've tried a different wave energy conversion technique, channeling tidal water into narrow aqua-corrals along the coastline. Known as Tapchan, this technology has the benefit of being based onshore.

Tropical regions may be able to make use of Ocean Thermal Energy Conversion (OTEC), which operates on many of the same heat vapor conversion principles as geothermal energy.

Here in the U.S., Rhode Island's Ocean Wave Energy Company is developing a system of movable floats anchored to a base plate below. That contrasts with Pelamis, whose floats were more or less strung together end to end with hinged joints.

Pelamis's machines may also be an example of overreaching size for wave energy devices—each cylinder is 180 meters, or nearly two football fields in length. Maybe less is more when it comes to marine energy?

Above all the trial and error we're seeing when it comes to ocean energy modules, if the electricity can't get to shore, then it ain't worth a thing.

That's why the best play on offshore renewable energy, bar none, is European engineering giant ABB (NYSE:ABB).

ABB: the Missing Link for Marine Energy

ABB pioneered high-voltage direct current (HVDC) technology specific to the maritime fossil fuel industry, and those same applications can be used for renewables.

ABB has already delivered undersea grid linkups like the one between Finland's Nordpool grid and Estonia's Baltic grid to the south, running under the Baltic Sea.

HVDC Light, developed by ABB in the 1990s to link oil rig platforms to electricity grids, other platforms, and even nearby wind turbines, is the best bet for bringing marine energy to market. HVDC Light has an economical transmission range extending from just over 30 MW all the way up to 1,200 MW.

Pelamis, with mammoth machines intended to power 15,000 coastal homes with 21 MW output, didn't even hit the lower bound of ABB's HVDC Light capacity.

That's the state of marine energy today in a nutshell: too much and too little at the same time.

Without a doubt, we'll keep you up to date as marine energy changes to meet its challenges.

Regards,

Sam Hopkins

International Editor

P.S. — Once wave energy companies get their prototypes together and operational, there's still the matter of securing financing in today's lock-box credit environment. I'm heading to the Renewable Energy Finance Forum in Rio April 27-28, to find out which clean energy technologies are making the grade and getting funding, and which companies are in the forefront and bringing it all back to shore, so to speak. Green Chip International subscribers just closed a double-digit global energy gain yesterday, and they'll also have exclusive multimedia access to my reports from Brazil in just a couple weeks. To learn more about GCI, click here.

These Profits Come in Waves

According to the Atlantic Oceanographic and Meteorological Laboratory, a fully developed hurricane can release heat energy at a rate of 5 to 20x1013 watts and converts less than 10% of the heat into the mechanical energy of the wind. The heat release is equivalent to a 10-megaton nuclear bomb exploding every 20 minutes!

Can you imagine how quickly we'd be able to solve the world's energy problems if there was a safe, economical and efficient way to harness this energy?

Don't get me wrong. I'm not trying to trivialize the devastation that the good people of Louisiana, Alabama and Mississippi have endured.

In fact, I only recently started to entertain this thought after reading about how many people affected by the hurricane were still without power. And really, I'm sure those people without power right now are more concerned about harnessing electricity than sympathy.

So that being said...

Imagine if we were able to harness all that heat energy produced by Hurricane Katrina and convert it into electricity; if anything, just so that people who are lucky enough to still have homes in that part of the country, could turn on their lights and run their refrigerators.

It would be nothing short of spectacular. (At least to an energy-geek like me, anyway)

Well, despite my good intentions, there's probably not going to be an influx of hurricane thermal energy power conversion systems any time soon.

However, there is currently a less-extreme, but very efficient alternative energy technology called Ocean Thermal Energy Conversion (OTEC), which does allow for the conversion of thermal energy from the ocean to electricity - often while producing desalinated water.

You see, an immense amount of thermal energy (heat) is stored in the world's oceans. Each day, the oceans absorb enough heat from the sun to equal the thermal energy contained in 250 billion barrels of oil.

Harnessing Heat

Currently, there are three OTEC systems that can be used to generate electricity:

Closed-Cycle - whereby a working fluid is circulated in a closed system, heated with warm seawater and flashed into vapor. The vapor is then routed through a turbine and condensed with cold seawater.

Open-Cycle - whereby warm seawater is flashed to steam, at which point the steam is routed through a turbine.

Hybrid - whereby warm seawater is flashed to steam, and that steam is used to vaporize a working fluid in a closed system.

Although OTEC has been around since the 1800's... only in the last twenty years or so have we seen any real attempts at the commercialization of the technology.

And now that the demand for clean, economical alternative energy is at an all-time high, new markets for OTEC development are rapidly being identified by local and state governments, research groups and private and publicly-traded companies.

In fact, some analysts have estimated that because of high oil costs, the demand for desalinated water and the social benefits of clean energy technology, over the next five to ten years, OTEC plants could become highly-competitive in four specific markets:

Small island nations in the South Pacific
1 MWe (megawatt electric), land-based open-cycle OTEC plants coupled with second-stage desalinated water production
American territories, Guam and American Samoa
10 MWe, land-based open-cycle OTEC plants coupled with second-stage desalinated water production.
Hawaii
50 MWe land-based, closed-cycle OTEC plants producing electricity with second-stage desalinated water production.
Puerto Rico, the Gulf of Mexico and the Pacific, Atlantic and Indian Oceans
40 MWe or larger, floating, closed-cycle OTEC plants that house a factory or transmit electricity to shore via a submarine power cable.

While OTEC commercial development is still in its infant stages, the potential for rapid growth in this sector has never looked more promising. Especially in the island states and territories of the South Pacific.

And that's one of the reasons I'm telling you about it today.

The other reason is that OTEC is actually one of three sources of renewable energy that is produced on a massive scale from the world's oceans and rivers.

There's no question that there's real potential, both financially and environmentally, in OTEC.

But these other two renewable energy sectors are providing profitable, publicly-traded companies that are ripe for the picking - right NOW.

They are:

Tidal Energy
Wave Energy

Tidal Energy

Harnessing tidal energy generally involves erecting a dam across the opening to a tidal basin. The dam includes a sluice (An artificial channel for water, with a gate to regulate the flow) that is opened to allow the tide to flow into the basin. The sluice is then closed, and as the sea level drops, traditional hydropower technologies can be used to generate electricity from the elevated water in the basin.

Back in 1966, the world's first industrial-sized tidal power station went on-line. It produces 240 MW of power; enough to supply 90 percent of the electricity for the French town of Brittany.

Wave Energy

Waves get their energy from the wind. Wind comes from solar energy. Waves gather, store and transmit this energy for thousands of miles with little loss. Essentially, as long as the sun in shining, wave energy will never be depleted. And while it does vary in intensity, it's available 24 hours a day.

Now the total power of waves breaking on the world's coastlines is estimated at 2 to 3 million megawatts. And in some locations, wave energy density can average 65 megawatts per mile of coastline.

Harnessing wave energy generally involves one of three processes:

Floats - devices that generate electricity from the bobbing action of a floating object. These objects can be mounted to a floating raft or to a device fixed on the ocean floor.
Oscillating Water Columns (OWC) - devices that generate electricity from the wave-driven rise and fall of water in a cylindrical shaft. The rising and falling water column drives air into and out of the top of the shaft, powering an air-driven turbine.
Wave Surge Devices - shoreline devices (also known as tapered channel systems) rely on a shore-mounted structure to channel and concentrate the waves, driving them into an elevated reservoir. Water flow of this reservoir is used to generate electricity, using standard hydropower technology.

Tidal and Wave Energy systems have been utilized all over the world for years. But only recently have we seen a demand significant enough to validate any real profit potential for Green Chip investors.

So join me next week when I'll tell you about the two biggest markets for tidal and wave energy - and the companies that are in line for the most lucrative contracts this particular industry has ever seen.

Until then,

Jeff Siegel
Editor, Green Chip Stocks