Hydrokinetic Power is the Next Wave in Cheap Energy

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In an era of cheap capital, emerging technology companies could provide investors the biggest bang for the buck we've seen in years.

The key is finding a market that already has billions of dollars in pent up demand – like cheap energy.

Of all the cheap alternatives available to us today, I'm most excited by hydrokinetic power systems for the simple reason that the oceans contain enough energy to potentially support more than 50% of US demand alone, according to the US Department of Energy.

In case you are not familiar with the term, hydrokinetic systems produce power from the water's kinetic energy. It's quite literally power from the motion in the ocean.

Critics charge there are limits involved because the technology we need to make, transmit and store wave-based energy is primitive and prohibitively expensive.

And they're right… it is, or at least has been to date.

That's why despite years of effort and billions of dollars in government-sponsored financing, there are a mere 5 megawatts of wave-generated energy being created worldwide.

According to Forbes Magazine, that's only enough to light 4,000 U.S. homes.

Yet studies estimate that two-thirds of the world's economically feasible hydropower has yet to be exploited. Perhaps not surprisingly, much of this untapped energy is concentrated in South America, Asia and Africa.

That's my kind of opportunity – but it will require a sea change in our thinking (pun absolutely intended).

The Rising Tide in Hydrokinetic Power

That's because traditional "alternative" power choices tend to evolve in terms of how applications like solar, hydro, thermal and gas production ties into the grid. As such, they're dependent on environmental variables that come and go.

On the other hand, hydrokinetic systems really are the grid. By placing turbines, bobbers and impellers into large bodies of water, they become part of the very system they're tapping into.

And it's a whopper of a system.

The Electric Power Research Institute estimates that the total energy potential for hydrokinetic power may be 100 Gigawatts by 2050 or enough to power 67 million homes while reducing carbon dioxide emissions by more than 80 million metric tons. That's, incidentally, the amount of power produced by 20-30 coal fired power plants. So we're not talking chump change here.

There are many benefits, not the least of which is continuity.

For example, despite the fact that Katrina wiped out an area the size of Great Britain and devastated many of the power plants in the area, the area's rivers kept flowing and the ocean kept producing waves.

In Japan, the situation is much the same. As recently as December 2011 only six of the nation's 54 reactors remained in operation, according to Marketwatch.

This is making fuel costs skyrocket and negatively impacting Japanese profit margins despite all the cash and effort being poured into that nation's recovery.

As an island nation that's heavily dependent on nuclear power with now extremely apparent risks, the potential for harvesting water is significant, considering that the entire nation is a series of islands quite literally surrounded by boundless energy.

Closer to home, we've got the Hudson, the Missouri and the Colorado Rivers to contend with in addition to strong tidal currents and waves along both coasts – all of which could be exploited for power production.

Environmentalists charge that the systems will disrupt natural habitats effectively creating gigantic blenders or cuisinarts that aren't fish friendly, create underwater acoustic pollution or otherwise disrupt maritime habitats.

Not to dismiss any of these concerns, but I think the demands outweigh the bureaucratic red tape in an age where energy demand is rising and rapidly becoming an issue of national security rather than luxury.

Two Hydrokinetic Power Companies to Keep an Eye On

Here are two companies worth watching. One is public and "investable" today. The other is still private but getting ready to commercialize a full-scale version of its core product.

Ocean Power Technologies (Nasdaq: OPTT) – Based in New Jersey, the company is tiny with a market cap of a mere $36.39 million and change. It's running at a loss and according to Yahoofinance.com sports negative earnings of $1.71 per share. That is entirely understandable when you recognize $120 million they've spent developing their proprietary PowerBuoy wave generators.

PowerBuoys look like gigantic thumbtacks comprised of a movable float, a base plate and a long spar that holds everything together. Each one is capable of producing 150 kilowatts using nothing more than the piston like action of waves.

Defense contractor Lockheed Martin Corp. (NYSE: LMT) recently partnered with the company to help with development and logistics. Presumably Lockheed Martin will help with costs as well.

Earnings are scheduled for March 9 and I can hardly wait.

Columbia Power Technologies (still private) – Columbia is based in my backyard in nearby Corvallis, Oregon. Although it's still private, the Company is worth watching because it has already deployed a version of its SeaRay generator in Puget Sound and is set to commercialize its technology within the next two years.

Unlike the PowerBuoys, SeaRay generators look like a big oil barrel with floating wings. Essentially the core barrel, for lack of a better term, is a magnetic coil that produces energy when the wings move up and down on the waves. The intent is to use as few moving parts as possible – in this case two.

The company has partnered with angel investors and received some $8.5 million in grants from both the Department of Energy and U.S. Navy.

This month, they'll be retrieving the SeaRay from the water and beginning work on the full-scale version called a "Manta" with the intent to deploy it in 2013.

There is no word on commercialization yet but with more than 63% of anticipated wave-based energy capacity yet to be developed, there is undoubtedly time.

Not to mention "alternative" alternatives we haven't yet begun to envision but which are undoubtedly being developed in a garage somewhere.

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About the Author

Keith Fitz-Gerald has been the Chief Investment Strategist for the Money Morning team since 2007. He's a seasoned market analyst with decades of experience, and a highly accurate track record. Keith regularly travels the world in search of investment opportunities others don't yet see or understand. In addition to heading The Money Map Report, Keith runs The Geiger Index, a reliable, emotion-free guide to making big money and avoiding losses, and High Velocity Profits, which aims to get in, target gains, and get out clean. In his weekly Total Wealth, Keith has broken down his 30-plus years of success into three parts: Trends, Risk Assessment, and Tactics – meaning the exact techniques for making money. Sign up is free at totalwealthresearch.com.

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  1. Benton H Marder | February 29, 2012

    One of the more promising possibilities in this area has been, since the 1930s, has been the Bay of Fundy in Canada, which promises, if ever seriously undertaken, could dwarf many of the great hydro-electric projects in existence. For some reason, it has languished for generations. It might well be contemplated anew, using these developments in technology.

  2. DaveR | February 29, 2012

    Please issue a follow-up article with some cost estimates for the ocean-based systems you contemplate. There presently seems to be many major and costly problems to address: designs and materials (to resist ocean conditions including salt corrosion and storms), anchoring, danger to navigable vessels, collection of power generated offshore. Of course, some of these aren't much different than those needed to be addressed if windmills are to be placed in large bodies of water, e.g. in Lake Erie.

    Mr. Marder's comment about harnessing tidal movements makes much sense as they are a certainty, and we already know of areas that have exceptional tidal movements.

  3. David R (Canada) | February 29, 2012

    How many times has this been tried? Wether it's off the Oregon coast or Portugese coast it's allways the same problem; corrosion.
    Until that problem is solved it'll never work.

    Perhaps the new graphite composites can be used.

  4. Jeff Pluim | February 29, 2012

    Sooner or later someone is going to take notice of the developments at the CERN facility in Geneva, and realize that the implications to our energy needs is huge. The physicists are re-doing their experiments that previously clocked neutrinos travelling faster than light. Last year at this time I wrote a paper with the equations and explanations for such an event. Everyone ignored it because of the dogma of Einstein's E=MC^2. After the CERN facility clocked a faster than light (FTL) neutrino, physicists pooh poohed the whole thing as a mistake. CERN did find some potential flaws, such as a loose fibre-optics cable, but they are doing the experiment again in May, 2012. I predict that the results will be the same, and here is why: E\=MC^2(AeV). Einstein should have come up with E=MC^2(AeR). And soon the CERN facility will prove it, again.
    Here are some of the implications of these equations: We should be able to neutralize radio-activity.
    That means, no more worrying about nuclear contamination. All of a sudden nuclear plants will be the cheapest, cleanest, safe source of power on the planet.
    We will be able to travel faster than light, and so will be able to explore the galaxy. But nobody seems to get it, especially the formally educated, mainline physicists. This is a HUGE, HUGE game changer. But until mainline physicists and media figure it out, we will continue to pursue the Aunt Matilda philosophy of "what worked for Aunt Matilda is good enough for me". If anyone is interested in receiving a copy of my paper, email me at jeffpluim at hotmail.com

  5. Bobburnitt | March 3, 2012

    Yeah, but wait until the "environmentalists" get hold of this one. The fish, and birds and so on will be impacted. you put turbines in Rivers the river "life" have to deal with it. They will find every thing in the world wrong with it just like they do everything else. You never play without PAYING. Yeah, the currents and the tide, lotsa energy there, but lotsa sea life too.

    The REAL problem is there are TOO MANY PEOPLE!!! And you CANNOT grow population infinitely in a FINITE WORLD. "People" will have to face this fact one day, whether they want to or not. Bob Burnitt

  6. Wm. P. VanderWerff | March 4, 2012

    Like Jeff we have to fight through the current "Flatt Earth" thinking,the crowd of, pseudo-scientists – near-do-wells, that struggled to get a degree and then comfortably settled down to a mundane job of teaching the safe theorems of the past. It has always been and will always be so. It will take the intellectually curious and often times courageous too pursue the truth.

    AS it should be, the herd will only change direction when the mountain of evidence is to large to run over.

  7. Marie Holmes | March 4, 2012

    Eastport, Maine with an average tide of 18 feet is on the way. Ocean Renewable Power Company (ORPC) announced last week that it will begin the installation of its first grid-connected, commercial TidGen Power System at a 60-acre site in Cobscook Bay. They have received Federal Energy Regulatory Commission and Coast Guard approval. Once the single-device TidGen Power System is in operation (likely June) ORP will conduct performance testing and in mid 2013 plans to install four additional TidGen devices, creating a five-device power system with enough to power approximately 75 to 100 homes. Bangor Hydro Electric company will also be upgrading the adjacent service line to facilitate electricity distribution to Maine customers.

  8. Jean Damond | March 4, 2012

    Look at the EDF test (national electricity company) in the Channel, north of Mont Saint Michel.

  9. JQ | May 9, 2012

    Corrosion for MHK is mythology of naysayers. Carbon Kevlar or other composites (plastic even) with ceramic coatings have been used for decades in offshore platforms and nuclear industry. Welcome to 2012

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