Wind Power... Blowing Again (AMSC, ED, GE)

The wind power industry has taken something of a back seat to the solar PV makers in the last few months. News of bankruptcies, missed earnings targets, and collapsing prices will always supplant coverage of another wind farm, no matter how big. There are some developments in wind energy, however, that deserve some attention.

From an investor’s point of view, the most interesting is a lawsuit filed in China by American Superconductor Corp. (NASDAQ: AMSC) seeking civil and criminal penalties against what was once the company’s largest customer, Sinovel Wind Group Co. Ltd. Sinovel’s refusal to take contracted shipments and to pay for shipments delivered in 2010 have put a serious dent in American Superconductor’s business. Now the US company is suing, complaining that Sinovel illegally obtained and used American Superconductor’s intellectual property. A form employee of the US company has been arrested in Austria for passing the Sinovel source code that allowed the Chinese company to upgrade their 1.5-megawatt turbines.

For its part, Sinovel has denied the charges, claiming that American Superconductor didn’t meet Sinovel’s contract or grid connection requirements. Sinovel claims that American Superconductor has failed to adapt to the fast-changing demands of the Chinese wind power market since 2006. That’s an odd defense given that Sinovel has been paying for this shoddy stuff.

On a different note, New York utility Consolidated Edison (NYSE: ED) and two local utilities have have filed a lease application with the federal government for a proposed 700-megawatt wind farm offshore of Long Island’s Rockaway Peninsula. Costs for such a project could easily reach $4 billion. But this is just the first step in a lengthy approval process.

Complications to new wind generation may come from recent studies that indicate wind generation may not reduce carbon dioxide emissions. In fact, due to the need for load balancing, which causes coal- and gas-fired plants to start and stop more often, this cycle generates more CO2 than would be emitted if the gas and coal plants were just left running and the wind power generation were shut off.

One answer to this problem could be the new gas-fired design from General Electric Co. (NYSE: GE). The so-called FlexEfficiency 50 is specifically designed to operate efficiently through many start-stop cycles. Conventional power plants are designed to operate efficiently at a pre-determined point, and any ups or downs make the plant less efficient and more polluting.

American Superconductor’s shares are up about 1.5% this morning, on a very down day for the overall market. Shares are trading at $5.41, in a 52-week range of $5.10-$38.88.

Paul Ausick