Growth In Geothermal Industry In 2011 Predicted By Sector Expert Meghan Moreland Of Ardour Capital Investments: Ormat Technologies (ORA) Is Market Leader
December 31, 2010 - The Wall Street Transcript has just published 2011 Best Green Investments: Alternative Energy And Socially Responsible Stocks offering a timely review of the Energy sector. This Special Report contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. Please find an excerpt below.
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Meghan Moreland is a Senior Analyst at Ardour Capital Investments, LLC, where she focuses on the fuel cell, superconductor and geothermal sectors. She was formerly an Analyst covering the renewable energy industry for First Berlin Equity Research, in Germany. Ms. Moreland was a Fulbright Fellow in Berlin in 2005-2006. She holds a B.A. in economics and German from Wellesley College.
TWST: Please begin with a brief overview of your coverage, including the specific names you follow within alternative energy.
Ms. Moreland: I cover the fuel cell, superconductor and geothermal sectors. Within the superconductor sector, I cover American Superconductor (AMSC) and Zenergy Power (ZEN.L). In the geothermal, I cover Ormat Technologies (ORA), Magma (MXY.TO) and U.S. Geothermal (HTM).
And then in the fuel cell, I cover FuelCell Energy (FCEL), Ballard Power (BLDP) and Smart Fuel Cell (F3C.F). In addition, I cover Capstone Turbine (CPST), a microturbine company, and Quantum (QTWW), which is focused on the alternative automobile technologies.
TWST: Starting with the fuel cell companies, what do you think the rest of 2010 is going to look like for them, and what are the biggest growth drivers in that space?
Ms. Moreland: Obviously, the fuel cell players are pretty negatively impacted by the turn in the market. They couldn't get the financing that they were used to getting, and they really had to cut back and focus on what kind of products had a demand right now or in the near future. So we saw a lot of changes for those companies in the last year or two.
Going forward, I expect them to just continue to focus on the markets and applications that already have a pretty strong following. So for the larger-temperature fuel cell companies, like FuelCell Energy, there is already a market there for on- and off-the-grid, dependable sources of power, so they have pretty significant sales. FuelCell Energy and another company called Bloom Energy entered the market, so there is a lot of interest there, because you can take these fuel cells that are the larger, higher temp that do not need to be fueled by pure hydrogen. Because of such a high temperature, you can put in natural gas, diesel and other hydrocarbon-rich fuels. So that's definitely been attractive for those companies in the markets they are trying to go into, because there is always a big hurdle in the fuel cell sector to figure out the issues of, "How do we get hydrogen? How do we store it? How do we distribute it?"
So the market has responded favorably to fuel cells that circumnavigate the pure hydrogen issue. For the smaller players, they are having a lot of successes now with the backup power in place of a battery, or to supplement battery, or diesel generators, such as a cell phone tower, which are required to have a certain amount of backup power in case of power outage. So there has been demand there. To get back to your question for 2010, I expect companies in the fuel cell sector just to keep focusing on the markets that they are having success in. They can't spread themselves too thin at this point.
TWST: What are the catalysts for growth in the geothermal space?
Ms. Moreland: There are a lot of shovel-ready projects waiting to be implemented in the U.S. and abroad, but the problem for the smaller players is that they can't get the financing that they need. And then, either because they are small or they are waiting to hear if they get DOE loan guarantee - there are a lot of companies that have obviously put in applications for those - build-out has kind of been put on hold. Again, that's just for the smaller players.
The gold standard in geothermal, Ormat Technologies, is in a class of its own. They're not having those issues. But it's actually affecting Ormat because they sell geothermal turbines. So their customers are the smaller downstream players, and they are not able to put in these orders. So things are kind of on a standstill for 2010 in terms of build-out. I think by the end of the year, the financing will fall more into place, we will see construction beginning or construction gearing up for 2011. But for 2010, it appears that we're going to see a dip in build-out in comparison with 2009.
TWST: What are these geothermal companies going to be doing for the rest of 2010, and what would you like to see them doing?
Ms. Moreland: Many of them are in conservation mode, just waiting for the financing to come in and continuing to cut costs. Some of them have been awarded certain funding from the ARRA. But a lot of that is matched, and payout appears to be slow. So that's also been a problem. It's hard to say.
TWST: In which of the subsectors of alternative energy do you see the greatest opportunity for long-term growth?
Ms. Moreland: Long term, I would say superconductors, and that would be companies like American Superconductor and Zenergy. Commercialization-wise, they're still a few years out. There is a lot of work that has to be done in bringing the cost down. Bringing the cost down will depend on ramping up sales. So we're seeing some interesting projects going on right now, some field tests and some collaborations with utilities.
So things are definitely in the works to really commercialize high-temperature superconductors, and I think that in the long term, we're going to see that superconductors are going to replace traditional cables in certain areas, for instance, densely populated cities or areas where efficiency losses are pretty significant, because that's really what superconductors do. They negate the efficiency loss and electrical loss in transmission.
TWST: What is the long-term outlook for the superconductor companies? Over what time period do you expect commercialization to occur?
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