Investing in the Power of the Sea

Wave power - the harnessing of the movements of the oceans as a source of renewable energy - is not on the radar screens of most investors. Even those investors who take a particular interest in green technology will generally know vastly more about solar, wind and geothermal than about wave or tidal power.

So this month's announcement from Spanish company Iberdrola Renovables that it has deployed the first buoy of its pilot wave power plant might go a little way to drawing some investor attention to the great potential of this technology.

Iberdrola Renovables, the renewable energy subsidiary of Spanish utility giant Iberdrola (IBDRY.PK), is a world leader in wind power, and is also active in solar, hydro and biomass energy.

The new 40kW buoy is the first of a planned 10 at the plant, four kilometers (nearly two miles) from the coast of Santona in northern Spain. Once the 1.4MW plant is fully operational it will become the world's first commercial, utility-scale wave power generation venture, providing sufficient electricity to power 2,500 homes.

The buoys are being supplied by Ocean Power Technologies (OPTT), a global leader in this technology and the key stock in the sector. Founded in 1994, it has been engaged in trials since 1997 of its PowerBuoy technology. The Spanish plant is its biggest project.

In its financial year to April 2008 Ocean Power saw revenues up 89 per cent to $4.8 million, thanks especially to its work for Iberdrola. However, the company remained deeply in the red. One bright spot in the current environment: at April 2008 it had cash and equivalents of $88.8 million, against debt of just $0.2 million.

It is making progress on other fronts. It has received third-party certification of its compliance with international standards for its grid connection system. It has developed a new 150kW PowerBuoy system, and expects to start ocean testing in 2009.

The company itself presents a table at its website comparing its technology with several alternatives. It claims that a 500kW PowerBuoy commercial plant could supply utility power at a cost of just five cents per kilowatt hour, compared to four cents for fossil fuels, four to five cents for onshore wind, seven to nine cents for offshore wind and 10 to 25 cents for solar.

But costs for these other sources of renewable energy are falling, with great technological progress continuing. More years of trials are needed to determine whether wave power will play a starring role or just a bit part in the renewable energy picture of the future.

So this is certainly exciting technology, and Ocean Power Technologies is a company to watch. But, though the shares have come off substantially in the recent market sell-off, they remain just a speculative buy.

Disclosure: No positions.

Comments

[longtermstocks:]

Sounds promising!

2008 Oct 15 09:26 AM

[Pradeep:]

Here is a VC take on ocean power from the cleaninvesting blog on greentech.

2008 Oct 16 12:51 AM

[Pradeep:]

Sorry the html link did not work last time
cleantechinvesting.gre...
A VC take on ocean power from the cleaninvesting blog on greentech.

2008 Oct 16 12:52 AM