Ocean Power

Ocean Power Technologies Inc (Nasdaq:OPTT, OPTT message board, AIM:OPT) is a 100+ employee company founded to harness the energy of the world's oceans. Wave power is one of the most promising sources of renewable, clean energy.

Let's review the basics of waves. The Sun heats the Earth's atmosphere, which creates wind, which creates water ripples, which have air pressure differentials, which causes the wind to enlarge the ripples into waves. Wave energy is thus concentrated solar energy in disguise (as is the case with many other forms of energy we use.) And therefore, wave energy is renewable energy.

The energy is there in the waves. But how do we run a hairdryer with it? That's where Ocean Power Technologies has a solution: PowerBuoy®. The waves' physical action bobs a piston-like structure, which drives a generator, which produces electricity, which is fed along an underwater cable to shore.

There is virtually no known adverse environmental impact with this company's product. In fact, the net effect of PowerBuoy® may be positive, as the buoys make something of an artificial reef, attracting fish. This is in sharp contrast to many other approaches to renewable energy, which often come at some cost to the environment. Recently, there has been a backlash against certain renewable energy sources that could result in damage to the environment. For example, Roland Clift, professor of environmental technology at Surrey University in the U.K., stated: “Biodiesel is a complete scam because in the tropics the growing demand is causing forests to be burnt to make way for palm oil and similar crops." There are no such scathing claims leveled against wave energy. Wave energy has retained favor by governments and the press, and its popularity is rising as some other renewable energy approaches fall into controversy.

And Ocean Power Technologies has customers lining up. One of the most promising interested parties is the U.S. Navy. Ocean Power Technologies has deployed their technology in demonstrations at the Marine Corps Base at Oahu, Hawaii. The potential upside is huge. As you can imagine, the U.S. Navy would love to have reliable wave power for use at bases worldwide, allowing the bases to be able to function even if oil supplies are cut off. The U.S. Navy is the ace up the sleeve of Ocean Power Technologies, because it means the company does not need to go head-to-head against the low cost per kilowatt of conventional power plants.

That's not all. Ocean Power Technologies has begun the initial phase of installing a 1.39 MW wave farm off the coast of Spain.

Just yesterday, the European Union released aggressive new policies designed to encourage renewable, clean energy and reduce global warming. By 2020, 20 percent of the EU's energy is to be sourced from renewable, clean energies, such as solar, wind, wave, hydro and biomass, compared to just 8.5 percent today. Environment Secretary Hilary Benn stated: "The increase in renewables is going to be a big step up from where we are now, but we are confident we can do it - we're going to have to work very hard on it."

Wave energy, tide energy, and wind energy, will be emphasized by the UK. Said John Hutton, UK's Business Secretary, "The UK is already exploring a vast expansion of wind energy offshore, and tidal power on the Severn." Ocean Power technologies is positioned to get a piece of the UK pie, with plans to install a 5MW capacity demonstration plan off the coast of the UK.

On the other hand, like most other renewable energy stocks, Ocean Power Tech's OPTT has taken a beating in the last year. Fears of recession have driven the price down from almost $18 per share to $11.81 at the moment. And they still have a negative Earnings Per Share: -$1.28 per share for the last 12 months.

Long term, this is one of the few renewable energy companies whose future seems bright. With offices in New Jersey and the UK, and with a product that can be delivered by ship to any coast in the world, they have the potential for a worldwide customer base. And they are well-positioned to catch the crest of the renewable energy "wave" now hitting Europe. Truly, few renewable energy companies have the combination of assets that Ocean Power Technology possesses: a good idea, a product ready for market, a working business model that does not depend on subsidies, customers lining up at the door, and a substantial staff. Profit will follow.