Kite Power: Investors, including Google, may want to catch some more air

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Have you ever been told to go fly a kite? Well, even if you haven’t, maybe you should consider it since the next generation energy concept may actually be another way to wean ourselves off of fossil fuels. In fact, you may soon be able to use kites to power your house, maybe even your whole neighborhood by harnessing stronger, more reliable wind currents high above land and sea at more effective rates than wind turbines. That’s good news for a planet using more electricity with each passing New Year’s Eve celebration.

How does kite power work? Keeping it simple: Energy is extracted from the wind using small turbines which drive generators that ultimately transmit electricity to the ground by way of a tether with electrical conductors inside (think power cord that is stronger than Spiderman’s web) that is connected to the power grid. Considering traditional wind turbines can only capture wind at a maximum height of 200 meters, the outlook for floating wind farms is bright. Why? These airborne kites (picture large toy plane-like wings in appearance versus actual cloth kites flown by children) can reach an altitude of 500 meters and thus they are able to capture energy from wind currents that are dramatically stronger (up to 30X more) than surface wind. There shouldn’t be any real concerns about kite power interfering with air traffic since the kites soar less than 2,000 feet from ground level (most commercial planes fly at 30,000 feet). However, to the best of my knowledge, the Federal Aviation Administration (FAA) hasn’t made any official comments regarding endorsing kite power as of yet (keep in mind FAA regulations do prohibit the use of any kite/parasail weighing over five pounds. Also, kites are not permitted to fly on line longer than 500 feet in length). 

While my enthusiasm for kite power taking investors’ profits to new heights is strong, the government does need to take a stronger stance to support a more favorable wind production tax credit (this will be discussed more in coming days by Energy Secretary Steven Chu since the tax credit expires Dec. 31st). With that said, I’m greatly encouraged the backing of wind power is coming. In fact, the Department of Energy (DOE) recently selected seven offshore wind projects with the goal of expanding the country’s presence in the sector. This has me thinking the commitment to advance wind will not only simply  supported by the U.S. government, it will be deeply pushed as a means to generate large, clean energy resources that has the potential to create up to 200,000 jobs by 2030. Considering kite power may really be the next big thing for the wind industry, coupled with the fact the DOE is moving towards a larger adoption of wind energy only makes me all the more confident the FAA will not look to impede progress being made to develop kite power.

Most first movers in the space are private but the potential for takeovers by larger players is real. California based Makani Power, which is trying to recover from the very recent unexpected death of CEO Corwin Hardham, believes it can reduce power at half the cost of traditional wind turbines. The company is financially backed by $3mln from ARPA-E, the DOE venture entity as well as Google (NASDAQ: GOOG) with $15mln.

Some readers may be surprised to see Google investing in alternative energy but the truth is the company is actually a massive supporter of clean energy through investments topping $1bln into various projects within the renewable energy space (mostly wind and solar). So is it crazy to consider Google as a wind play? Maybe not considering the company has invested more money into wind than many wind start-ups combined. Yet, buying shares of Google may actually be a less risky way to play the advancement of wind, kite power and clean energy while also getting maximum exposure to software and the evolution of the Android operating system. Why? Google gets 96% of its revenues from advertising as per the latest 10Q statement (10/30/12). The company needs to find growth in other ways, including quietly seeking alpha through wind/kite power investments. Of course Google’s name is synonymous with internet search. However, as the company continues to try and change the world (previous acquisitions/investments in YouTube, Blogger, Nexus, Google+, etc), their growing stake in alternative energy companies (namely wind) could become an even bigger story for the company going forward.

Investing in wind doesn’t look like reckless speculation on Google’s part considering legendary investor Warren Buffett recently bought two California wind farms in October. Therefore Google allocating money to kite power through Makani shouldn’t be seen as simply throwing money to the wind for the lack of better words. Thus, the advancement of wind as a clean source of domestic power and the maturing of Makani’s kite power technology could potentially reap a nice unexpected return for Google shareholders in coming years as more institutional investors look to allocate an increased amount of capital towards clean energy and energy efficiency.

Another California based company, JOBY Energy, is looking to take advantage of winds along coastlines. JOBY is moving its technology forward onshore and hopes to create a 1-megawatt model by the end of 2013. Sky WindPower rounds out the trifecta of private flying wind companies headquartered in California.

Overseas, Italian semi-startup Kite Gen Research hopes to raise $62 million to perfect its technologies. The company has already raised $12 million from investors such as a group with ties to the European Union, Serra, and SOTER (Society for the Transition to Renewable Energy). Considering Italy derives over 83% of its energy from outside its borders, Kite Gen appears to be in the right place at the right time using kite power, a domestic source of clean energy. That could lead some potential suitors to come knocking on Kite Gen’s doors. One name that I think could be an interested party is Enel Green Power, the dedicated clean energy arm of Italy’s largest power company Enel Group (NASDAQ: ENLAY) which is already working on wind projects in Mexico, Chile and Brazil. Considering the dire economic picture in Italy (i.e. the potential for Italy to leave the Euro and return to the Lira), Enel Green Power would be served well to leverage its great tradition of innovation and development in its own backyard to either forge an alliance with or consider an outright acquisition of Kite Gen.

Considering the pressing need to quickly and more cheaply deploy remote power sources post disasters such as Superstorm Sandy or Hurricane Irene, kite power, which doesn’t need cost intensive wind towers and turbines, may ultimately present more powerful and compelling air that investors may want to catch. That’s good news for New Yorkers since according to California State University, New York City has enough wind energy potential in a square meter to provide for the average American’s energy needs. I bet somewhere (up there) Benjamin Franklin, the original kite power founder, is looking down from the heavens and smiling.

Merry Christmas and an early Happy New Year everyone! 

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