Tuesday, November 08, 2016

Trident Winds Floats a Plan for Morro Bay

The U.S. Bureau of Ocean Energy Management, called BOEM for short, is sending out an appeal to parties interested in developing off-shore wind projects near Morro Bay in California.  The overture is made through the Federal Register, a fine-print publication that government agencies use to communicate officially with the public.  It comes in the wake of an unsolicited request from a small wind energy developer, Trident Winds, LLC., based in California, to lease water area near Morro Bay for a wind energy project.

The community Morro Bay has been called the Gibraltar of the Pacific.  It is a waterfront town in San Luis Obispo County, California with a population around 11,000 people.  It is a family friendly town that attracts tourists to its picturesque beaches, ocean front shops and park settings.  For the outdoor-oriented there is fishing, hiking, biking, diving and kayaking among other pastimes.
This is not just any off-shore wind project.  The plan is to forego wind turbines anchored to the ocean floor.  Instead the turbines will float on specially designed foundations, which in turn will be connected to cabling on the ocean floor that will transmit electricity generated by the turbines to a grid connection point on-shore. 
Trident would like to locate one hundred ‘floating’ wind turbines out in Pacific Ocean about 33 nautical miles northwest of Morro Bay.  Based on data gathered from an Ocean Data Acquisition buoy that has been located in the area for an extended period of time, this area in the Pacific offers a consistent wind source.  Average wind speed has been measured at 8.5 meters per second.  The turbines require plenty of room to operate  -  as much as a half nautical mile distance from the next turbine  -  to avoid creating adverse wind effects.  The project will require about 68,000 acres in what is considered federal waters  -  hence the application to the BOEM.
The lease application is unusual in another respect.  It is the first project in federal waters off the California coast.  West Coast U.S.  has not participated in off-shore wind energy development because ocean depths have been too great for anchored turbines.  The water depth in the targeted area off Morro Bay ranges between 2,600 and 3,300 feet.  Trident Wind has completed considerable development and testing of mechanisms to ‘float’ turbines on the ocean surface.  Each FOWS  -  Floating Offshore Wind System -  has a floating support structure and a wind turbine generator.  The FOWS is tethered to the ocean floor with a ‘torpedo’ anchor that requires no piling in the ocean floor.  Trident claims it has done enough testing to determine that FOWS is suited for use in areas with a deep seabed.
The price tag for Trident’s Morro Bay project is around $3.2 billion  -  a capital requirement that seems excessive given the anticipated 650 megawatt capacity.  Each of the 100 turbines would have capacity between 6 to 8 megawatts, suggesting an initial project size of as much as 765 megawatts.  It also seems beyond the grasp of a small, developmental stage company with only a two year history of operations.  An optimistic timetable suggests the project could begin generating electricity as early as 2025, adding the stress of a length construction and commission timetable to the risk mix.
Nonetheless, investors interested in renewable energy projects should keep Trident Winds on their list of companies to watch.  Pacific Gas and Electric (PCG:  NYSE) is the electric utility with a grid connection to Morro Bay.  It would be an interesting turning point if PG&E expressed an interest in the project and provided even a preliminary letter of interest if not a formal electricity off-take agreement.  Likewise the addition of companies with commercial experience to Trident’s consortium of developers could be a plus if and when Trident approaches the capital markets for financing.  Discussion of strategic partnerships may be getting the cart before the horse in as much as Trident might very well have competition for its favored patch of ocean waters.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

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