Pink Sheet NGK Turns a Profit on Wind Power

My primary weather experience was in a windswept place, where even calm days had an intermittent 30 mph "breeze."

And maybe that's why I can't get excited about storage for wind-turbine energy. The idea that the wind might stop blowing for an extended period of time and you may need to rely on stored power, while evident to me on a daily (or at least weekly) basis out here on the East Coast, is antithetical to deep-seated instinct.

Despite my insistent, if illogical, argument against the idea, I am assured by those in the business that, yes, wind turbines do sometimes stop moving. And when they do, batteries to store and release back excess energy from earlier, more blustery, hours is a necessity, which is where NGK Insulators (NGKIF.PK) comes in.

Alternative Energy Stocks: Sodium and sulfur

NGK, a Japanese industrial ceramics manufacturer, just began selling nontoxic sodium-sulfur batteries with 4.3 times the capacity of their highly toxic lead-acid counterparts.

Japan Wind Development Company, which helped NDK create the batteries specifically for the wind-farm industry, is trying them out at its Rokkasho wind farm, and analysts think the batteries could generate 13 times the profit for the farm during peak hours if they work as expected.

The NAS batteries, named for the elemental symbols of their two main components (Na for sodium, S for sulfur), offer wind farmers the chance to store energy generated during non-peak hours, meaning much higher profits when they sell it at peak-hour prices.

And in case you hadn't noticed, the alternative energy industry has moved from a guilt-assuaging and good-deed sector into one that actually wants to, and can turn a profit for its companies and its investors.

It's a good thing the batteries generate such higher profits for their owners. They cost $2.9 million per megawatt of storage capacity. But that could be worth it if wind farms can efficiently save the power they build up at night to sell to electric companies during the day, when energy goes for a much higher price.

The NAS batteries are the most "dense" on the market, meaning they store the most amount of energy in the least amount of space. And they require uniform, high-grade ceramic that, NGK says, it, alone, has been successful in producing. In other words, they're the most efficient batteries in the industry, and only NGK makes them.

Alternative Energy Stocks: Trial runs

Xcel Energy (XEL), the largest wind-power company in the U.S., is testing out NAS batteries. And the country's largest coal-electricity producer American Electric Power Company (AEP) just ordered 7 megawatts of storage from NGK in hopes that the batteries will smooth out its current power production. Success in these companies could mean energy storage may soon have a new leader.

NGK trades on the Tokyo Stock Exchange, and it has a pink sheet listing in the States. But I'm not willing to recommend the company just yet.

Alternative Energy Stocks: 1% is not enough

NGK is still primarily an industrial ceramics company. And its battery division, although profitable for the first time in 2007, currently makes up less than 1% of the company's total earnings.

Estimates for the fiscal year ended March 31 put the company's NAS battery division at a profit of 500 million yen (about $4.96 million), while the company's total profit will probably be around 67 billion yen ($664 million). If NGK's new batteries do catch on, the division will have to ramp up sales quite a bit before it makes a sizeable impact on the company's bottomline.

And NGK has other technologies to battle for the top spot in wind-power storage. Vanadium redox batteries are much less tempermental than their sodium-sulfur counterparts, but they require a complex system and are less efficient. And Kawasaki Heavy Industries' nickel-hydride batteries charge and recharge more quickly than the NAS battery, although they're much less energy-dense and lose more power to self-discharge.

Last year, NGK's stock gained 68%, peaking around $35 in early November. But it's back down around $18 right now, and I don't think it's done falling.

It's too soon to tell whether the NAS batteries will be an industry-changing innovation or just a new option for wind-energy companies. But keep NGK on your radar for the next couple of years, and check back with us. If the company does look good in the future, I'll be sure to let you know.

Disclosure: None