Hawaiian Cutting-Edge Renewable Technology One for Smart Investors to Watch

Hey, investor thinking outside the box?

How about a renewable energy technology that’s been around for more than seven decades and is now again attracting attention from the world’s largest defense contractor?

And, as an added bonus, should you invest, you can knock off travel to America’s 50th state as a business expense?

Hawaiian efforts to move towards renewable energy have a powerful ally in the form of Mark Glick, chief administrator of the State Energy Office, part of the Department of Business, Economic Development and Tourism.

By 2030 Glick’s office hope to implement policies allowing Hawaii to achieve 70 percent reliance on clean energy.

There are a number of projects already under development that could assist the archipelago to reach its goals.

But, Glick is under no illusions about the problems Hawaii faces in accomplishing these goals. During an interview last month with Honolulu Civic Beat, when asked about the biggest challenges facing Hawaii in switching to renewable energy Glick replied, “Our remoteness and market/population size limit our options. We don’t have the ability to stabilize the grid for higher concentrations of RE through interstate transmission of electricity as is the case on the mainland. And the lack of other conventional fuels means that we’re stuck with expensive diesel and fuel for power generation for whatever we don’t produce from renewable means.”

The more well known renewable energy sources – solar, wind and biomass, all have their pluses and minuses for development in Hawaii.

But there is a renewable technology being developed in America’s 50th state which savvy investors should keep a weather eye on.

Ocean Thermal Energy Conversion (OTEC) utilizes temperature differentials between deep, cold ocean water and warm, tropical surface waters to run a heat engine to produce electricity.

It is in deep tropic waters that OTEC offers the greatest possibilities, as it is there that the temperature differentials are highest, with surface waters often reaching up to 80 degrees Fahrenheit, while deep water can be as low as several degrees above water’s freezing temperature of 32 degrees Fahrenheit. Heat from the warm surface water is used to vaporize ammonia, which turns a turbine to drive a generator to produce electricity.

OTEC has the potential to offer global amounts of energy that are 10 to 100 times greater than other ocean energy options such as wave power and unlike solar and wind power, OTEC plants can operate continuously providing a base load supply for an electrical power generation system. Energy specialists estimated that that 10 OTEC plants producing 100 megawatts of electricity could power all of Oahu.

But if that’s the good news the downside is that OTEC facilities have a typical conversion rate of 3-4 percent, as opposed to controversial coal or oil steam fired plants, whose temperature variants of up to 500 degrees can produce thermal conversion efficiency rates of 35-40 percent.

The idea has a long genesis, with the theory first being proven in the 1930s by Frenchman Georges Claude, who deployed a small OTEC plant in Cuba. In the 1970s during the post 1973 Arab-Israeli War, which caused oil prices to triple, the federal government poured $260 million into OTEC research, which saw Lockheed Martin begin to cooperate with Oahu-based Makai Ocean Engineering. After Ronald Reagan won the 1980 presidential election, federal OTEC funding essentially ceased.

Makai Ocean Engineering has soldiered on however, and over the past three years, surging hydrocarbon energy prices, rising environmental concerns and new U.S. Department of the Navy energy policy have led to government and commercial support to improve key OTEC technologies, which among other things caused Makai Ocean Engineering and Lockheed Martin to rekindled their earlier OTEC collaboration of nearly forty years previously.

That partnership in July led to the opening by the Natural Energy Laboratory of Hawaii Authority (NELHA) of a new testing facility at Keahole Point on The Big Island, to be overseen by – Makai Ocean Engineering. NELHA CEO Jan War said, “It certainly falls within our initial goals to provide a support facility for research on the OTEC process.”

Hawaii currently has no OTEC commercial scale facilities, but that is Makai Ocean Engineering’s ultimate goal. The new Keahole facility will test different coatings or alloys for increasing heat exchange efficiency. Makai Ocean Engineering is investing $2.3 million in the project while Lockheed Martin provided some of the structural parts for the test facility’s 40-foot tower.

But the issue is still investment money, which hinges upon the project’s success in improving the heat exchange ratios.

The Hawaii Natural Energy Institute, a research group and part of the University of Hawaii Manoa director Richard Rocheleau stated bluntly, “People are not going to invest in this if the heat exchangers aren’t tried and tested to the fullest degree” even as Makai Ocean Engineering Vice President Reb Bellinger complained, “The whole effort hinges upon how much money we can get in certain periods of time. We can’t just stop part of the project because we don’t have enough money.”

And Makai Ocean Engineering has a mainland competitor, Baltimore-based OTEC International, which last month NELHA selected for lease negotiation to build a one megawatt ocean thermal energy conversion demonstration plant on six acres of its 870-acre ocean, science and technology park on the Big Island. While negotiations of a lease agreement and terms have yet to be finalized, NELHA executive director Greg Barbour estimated the cost of the project at $30 million.

What is puzzling about the NELHA- OTEC International arrangement is that the one megawatt ocean thermal energy conversion demonstration plant is to be onshore, rather than in the deep ocean. On its website OTEC International states that the onshore plant will “demonstrate the OTEC power cycle before it undertakes the capital intensive offshore, deep-ocean floating platform.  This one megawatt pilot plant will demonstrate the OTEC power cycle and the scalability of the technology in the near term, enabling OTI to proceed to commercial scale projects more quickly.”

So, OTEC is proceeding, and you have two engineering companies racing to develop a scalable OTEC deep ocean platform, one partnered with the world’s largest defense contractor, the other largely underwritten for the last 11 years by the Baltimore-based nonprofit Abell Foundation.

Investors, place your bets.

By John C.K. Daly of http://oilprice.com