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Fan Blades - The Wind Energy Industry's Budding Niche
By James Brumley
MicroCapPress.com
james.brumley@gmail.com
Monday - 3/02/2009
As the technology of windmills has advanced over the last 20 years, so too has the realization of windmills' shortcomings. That's not to say electricity-producing windmills are a lost cause though. In fact, wind power is going to be a necessity if the world is ever going to break free of its dependence on environmentally-destructive forms of energy. In the meantime, the race for a better windmill may also offer up some amazing investment opportunities.
Some of these opportunities are obvious, and quite actionable right now. Others are indirect opportunities that may take some time to materialize as investments. The trends - and solved problems - however, are the key to it all.
The Bulk of the Bottleneck
One of the industry's recently-realized roadblocks is the giant blades used to catch the wind that spins the electricity-generating turbine.
A couple of decades ago, efficiency wasn't as important as proving the concept's viability. So, fan blades that resembled airplane propeller blades were used to spin a woefully ineffective gearbox. Now, however, better gearboxes have made it clear that one of the energy bottlenecks is in the fan blades' design. In short, they're not quite the right shape or size, and don't adapt to different wind speeds.
While there are dozens if not hundreds of companies working on building a better, more effective, and cheaper fan blade, a few of them stand out. Unfortunately, not many of them are publicly-traded. That's ok though - the technology could eventually be picked up by a public company. Investors need to do their homework in the meantime anyway.
Solving the Historical Problems
Toronto-based WhalePower has made an interesting discovery that lives up to their name. The organization's researchers observed that the 'bumps' (called tubercles) on the leading edges of a whale's flippers may be a big part of the reason why whales are so agile, and move with little effort.
So, WhalePower added similar bumps to the leading edge of a windmill's fan blades. Lo and behold, these blades can generate produce as much power as conventional blades while spinning at about half the speed of conventional blades.
Though the company itself isn't publicly-traded, the concept and tubercles technology could catch on at a company that is publicly traded.
Sandia National Laboratories is working on a couple of different fan blade technologies that could make the use of wind energy a little more feasible where wind flow is ether low or inconsistent (if not both).
Through a partnership forged with San Diego-based Knight and Carver, Sandia has designed and built 'STAR', which is an acronym for Sweep Twist Adaptive Rotor. These fan blades work in geographies once thought to be impossible to power by wind by extending and curving backwards as the tip is approached. Normally this would add a considerable amount of stress to the blade which would eventually cause it to break. But, the material allows for a great deal of twist, thus relieving that pressure.
Those certainly aren't the only novel ideas being tested right now, but the intent isn't to highlight a specific technology. Our goal with these examples is simply to acknowledge that building a big, fat fan blade may not be enough to remain competitive any longer.
Advances in materials, durability, and effectiveness should force manufacturers to step up R&D efforts. The companies leading that charge may make for prime investments when the time is right.
Fiscal Metrics
All told, the fan blades used by wind farms accounts only for about 20% of the total cost involved in getting sai d farm up and running. However, that's still a big piece of pie. Blade manufacturers alone shipped nearly $6 billion worth of product in 2008, and the number is expected to grow to $34 billion by 2017.
Point being, the market is big enough for more than one player. In fact, it's big enough to allow for multiple leaders and laggards. That's ultimately advantageous for wind energy investors, as it means a stock will trade based on its own merits rather than merely because it's an industry component.
Ancillary Demand
Not only is there a huge investment opportunity in fan blades, the potential trickle-down effect to suppliers is tremendous.
As of the end of 2007, glass fiber was the mainstay material used in fan blade production ...about half of the total materials used by the industry (by weight). Needless to say, a greater number of manufactured blades means more fiberglass supplies will be needed. Fiberglass and thermoset resin usage combined has already started to escalate as a result (up 31% in 2008 alone, and the rate is expected to increase).
However, carbon fiber usage in fan blades nearly doubled in 2008... a necessity, as carbon fiber is the effectively only material strong enough to handle ever-increasing demands. As blades continue to get bigger, and production of them increases, look for carbon fiber needs to grow significantly.
Point being, there are also literally hundreds of ancillary opportunities related to wind energy's proliferation, even if the industry's growth is slowed for the time being.
Bottom Line
Some would say this analysis and forecast is a bit premature, as the fan blade industry is so new that it's not yet been solidified or recognized as a niche - no companies are clear icons in the field. We fully agree with the rationale, but completely disagree with the sentiment. The fact that fan blade manufacturing has yet to solidify as a unique aspect within the wind energy world is precisely why an investor needs to understand it now - it's coming.
That said, it's also worth mentioning that fan blade companies are more than just a little gelled overseas. Germany boasts three organizations completely dedicated to fan blade production, and there are at least six dedicated fan blade manufacturers worldwide. So, the lack of foundation for the industry is mostly a North American precept.
Will the industry need one year to lay a foundation in the United States, or five? Probably somewhere in between. The public companies will pop up in the meantime. However, the mainstream media isn't likely to pick up on it until the optimal entry point is well in the past.
Indeed, we may be right in front of or at the ideal entry point. The opportunities should really start to surface when the economy stabilizes and the U.S. government's 'green' initiatives become priorities again, which could be mid to late 2009. The ideas touched on above only scratch the surface. Be ready.
Do you want to stay in touch with the macro trends (like this one) that the mainstream media just can't or won't cover? You should, as these paradigm shifts are far more profitable than the glancing coverage offered by most news sources. Sign up for the MicroCapPress.com newsletter today, and remain informed about about the investment trends that really matter.
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