Competition at High Altitude

The last post “It’s A Bird, It’s A Plane” mentioned possible problems that may be preventing Makani Power from successfully deploying its airborne wind turbine that is tethered like a kite to a ground station. The ‘wind power kite’ is intended to get past the conundrum faced by wind power developers of needed ever larger towers and rotors needed to boost output.  Unfortunately, Makani has struggled to deploy its kite and may get beat by another developer to the claim of being the first airborne wind system. 

Ampyx Power, Inc. (private) is also trying to capitalize on faster and more consistent wind speeds at higher altitudes.   The Ampyx describes its Airborne Wind Energy System as a tethered aircraft.  Called AWES for short, it is designed with less material than a conventional wind turbine that stands on a tower.  This is the same concept as in the Makani ‘kite’ design.  However, the Ampyx craft captures wind energy by moving in a figure eight, ascending and descending from about 200 meters above ground up to 450 meters.  The movement up and down alternately extends and reels in a tether attached to a ground-based generator.  The tether drives the generator and captures the energy in the wind.

Several prototypes have been constructed and tested.  The last prototype labeled the AP3 will be scaled up to at least a 2.0 megawatt size for commercial use.  The most recent collaboration with Germany’s E.ON SE is slated to put the AWES system in a demonstration project in County Mayo in northwestern Ireland.   

Utility companies think in megawatt increments and Ampyx’s management has indicated that grid-connected wind farms will be their first sales calls.  That said, it is apparently expected that the offshore wind farms would be the best market entry point.  The company expects to be able to sell the 2.0 megawatt version to existing wind farm operators as the service lives expire of the first conventional wind turbines.  AWES may also become the first choice of developers of new wind farms, if Ampyx can deliver a 3.0 megawatt version.   The cost of this size wind borne system is expected to be on par with conventional systems.

Ampyx is looking for capital to support its effort.  The company is hosting a crowdfunding campaign directly on its website and has already raised Euro 406,166 in the first part of 2017.  Ampyx had previously raised Euro 1.4 million from private investors.   The company is still apparently looking for another Euro 800,000 to top off its bank account.

Ampyx may be working with E.ON, but the German energy giant has also invested in the Scotland-based airborne wind energy system built by Kite Power Systems.  This design looks more like the apparatus of a hang glider.  Rather than Ampyx’s ‘figure eight’ movement, the KPS moves in a circular path.  Power is generated as a tether is spooled out from a drum connected to a generator.  At the top of the circle, the tether is retracted pulling the kite back to the bottom of the circle.  There are actually two KPS deployed in the same system with one retracting as the other is spooling out.  The alternating action keeps energy production constant.

Kite Power is currently demonstrating a 40 kilowatt version of its system and has plans for another that could be 500 kilowatts.  Then the next step will be a 3.0 megawatt system for both onshore and offshore demonstration.  A plus for a small, privately held company attempting airborne wind power systems is that the capital requirement is far less than conventional wind turbines atop steel towers.  Kite Power management claims its KPS has a capital requirement at least 50% less than a conventional system of the same size.   The company cites data from the International Renewable Energy Agency that states the levelized cost of energy for conventional off-shore wind turbines is US$170 per megawatt hour.  Kite estimates its levelized cost per megawatt hour is near $62.50.

Kite Power expects to target power developers that want power production in locations where conventional wind energy cannot be deployed or its considered too expensive.  This may be the quality that attracts E.ON to airborne wind power.  The electric utility has to deliver service to some interesting places, some of which may be remote enough to make a distributed power source a viable alternative.  Investors with a taste for early stage companies can be well advised by strategic investors like E.ON that are guided by inside knowledge of market trends.

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.