Dave Huntsman

Time To Go Long Electricity

Two non-traditional plays on who utilities may be buying from:

- BCON - small, not profitable, and unloved, it has the most advanced flywheel technology around. It is hoping that in the demo units it is selling to a couple of utilities that it's big break will be into the market of managing the frequency hic-cups of the grid using the energy stored in the flywheels.

- AMSC: I bought this some time ago as my long-term play on grid upgrade and energy efficiency. Currently only one of their three divisions - the non-superconducting division, which sells grid-interconnect power converters for large wind turbines - is profitable. The other two Divisions are not - yet. But the Wires division is where the core high-temperature superconducting wires are made; the Supermachines Division is where AMSC then makes big, rotating machines out of those self-same wires.
They have high hopes - the key word here is 'hope' - for big marine motor business. It is clear, to me, the Navy wants to put some of these motors in some of their new ships (like later versions of the new Zumwalt-class destroyers). Since isn't totally wishful thinking; the Navy has given them $100m already to produce a 5 megawatt demo test motor; a full-size (but non-seaworthy) 37.5 MW motor (ie., destroyer size) currently being assembled by Northrup Grumman at the Philadelphia Naval Shipyard; and a similar size Generator. (The latter not from the research arm of the Navy, but from the operational end, which is significant). BUT....those Navy programs are under severe- as in huge- budget dilemmas as we speak; not sure that they will be able to buy what they want to.
But that brings us to utilities........becau... it turns out one of these big supermachines can also be plugged into the grid, and step in as a sort of 'grid shock absorber' whenever huge loads are suddenly dumped on a local grid. TVA has had problems with local grids in that regard; they paid AMSC several years ago to finalize the design of one of these - and then put one in the grid right outside a steel blast furnace in Tennessee. It worked apparently better than expected - or at least, harder than expected, as it went in just as steel demand zoomed. Based on that successful 2-year (?) demo, TVA ordered 2 operational units - each 50% larger than the demo unit - and both are being assembled now; the second one will be installed in a grid in March.
So while two commercial orders for real, HTS-grid upgrade hardware does not an industry make, this company - in existence since 1989 or thereabouts - has clearly been on an upward product trajectory; and in fact is farther along in its wire performance than it predicted it would be just a few years ago.
TVA has also committed to buy 2 more units; though their sizes are TBD.

Note also the above doesn't even include potential HTS main bus electrical cable sales. Currently a 2000-ft cable is being installed along Long Island Power's main 'spine'; to be operating in 2007, it's performance will be a key determiner, I think, of how sales of primary cable wire go for utility upgrades in urban areas.

AMSC just had its conference call the other day; it's here:
www.amsuper.com/invest...

And it will be making a presentation Wednesday this week, accessible here:

www.fulldisclosure.com...;coid=86422&cl...