Can This MIT Start-Up Challenge Google's High-Flying Plans for Wind Energy?

Google isn't alone in its plans to displace tower-based wind power systems, but investors need not worry about this startup stealing utility-scale customers such as NextEra Energy.

May 25, 2014 at 3:43PM

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The Makani Airborne Wind Turbine may power your home for less than a coal-fired power plant as soon as 2015. Source: Makani Power.

Step aside, Google (NASDAQ:GOOGL) (NASDAQ:GOOG), an MIT start-up has its own plans for the future of tethered wind power. Altaeros Energies has developed the Buoyant Air Turbine, or BAT, to compete with the fixed-wing Airborne Wind Turbine, or AWT, from Google-owned Makani Power. The rationale for designing such systems is quite simple: higher-altitude winds are faster and more consistent than those in lower altitudes, the costs associated with installment and production are greatly reduced, and the number of economical sites for wind energy increases substantially.

The opportunity is enormous. Knowing that, can a start-up really compete with Google in the quest to expand the world's wind capacity beyond tower-based wind turbines operated by producers such as NextEra Energy (NYSE:NEE)?

Not so fast
While both the BAT and AWT will take to the skies to access more reliable winds to produce cheaper energy, Altaeros and Google are pursuing radically different commercialization strategies. The 30-kilowatt BAT is not designed to compete with or replace conventional tower turbines. Instead, Altaeros will commercialize its technology platform in pursuit of rapidly deployable applications in remote regions. The market opportunity is actually quite enormous, encompassing rural communities, agricultural operations, disaster relief, military efforts, offshore power applications, and more. Furthermore, the BAT could enable electricity costs of just $0.18 per kilowatt-hour.

Google, on the other hand, aims to disrupt tower-based turbines and steal power-generating customers such as NextEra Energy from traditional turbine manufacturers. After successfully demonstrating a small 30-kilowatt AWT, the company is pursuing a utility-scale product with a capacity of 600 kilowatts, or enough to power 300 homes, called Wing7. At just 10 metric tons, Wing7 will be designed with 90% fewer materials than the average onshore turbine, which weighs 100 metric tons and sports a capacity of 1,000 kilowatts. In other words, Google's design will be six times more efficient at producing power on a per-mass basis.

The varying strategies are also exemplified by the differing operating altitudes between BAT and AWT.

Design

Capacity

Altitude Range

BAT

30 kW

1,000 ft to 2,000 ft

AWT

30 kW

130 ft to 360 ft

AWT (Wing7)

600 kW

460 ft-1,020 ft

Source: Altaeros Energies, Makani Power.

Despite each having a 30-kilowatt design, there doesn't appear to be much crossover in approach. Google seems focused on the larger utility-scale market, while Altaeros Energies will focus on niche markets. That doesn't mean traditional manufacturers won't take notice, however.

Disrupting land turbines
Google could become a big headache for manufacturers of traditional tower-based wind turbines and a favorite partner for wind-energy leader NextEra Energy for three reasons: installation costs, production costs, and geographic reach. Installation costs would be reduced by 50% by eliminating 90% of the materials required. Similarly, a smaller footprint would result in faster deployment and construction. Production costs would be lower thanks to reduced installation costs and higher capacity factors, or how often the unit produces at its rated capacity. It all comes down to reaching higher altitude winds and a larger cross section of winds than even the largest tower-based turbines.

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Source: Makani Power.

That allows the AWT to generate more power at more wind speeds, which significantly outdoes the reach of tower-based turbines. Imagine how much further NextEra Energy could expand its 10,200 megawatts of wind capacity with AWTs.

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Geographic feasibility of tower-based turbines (blue) at 100 meters and AWT (yellow) at 250 meters. Source: Makani Power.

You'll notice that the reach of Google's design extends farther offshore than traditional designs, too. That's because 75% of the estimated 4,000 gigawatts of wind capacity offshore the United States resides in waters at least 30 meters deep -- depths that are unserviceable by tower-based systems. By contrast, the AWT could operate in waters hundreds of meters deep.

Foolish takeaway
Altaeros Energies and Google's Makani Power will probably not cross paths based on their initial commercialization strategies. One will focus on power generation in remote regions for specific applications, while the other will push to develop utility-scale projects and products. In any case, the energy market has plenty of room for both, even if they were directly competing. At any rate, the biggest winners of successful deployment of both technologies will be industrial project managers and power producers, who can pass savings to taxpayers and consumers while capturing higher profits for investors. I'll certainly be keeping an eye on both disruptive technologies.

Get blown away by these dividend stocks
NextEra Energy sports a healthy dividend and a growing business, but it may be too reliant on government tax credits to smooth out the installment costs of its tower-based wind farms, which account for 56% of its generation portfolio. Still, knowing how valuable a dividend portfolio might be, you may want to know how to build one of your own. Our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.

Maxx Chatsko has no position in any stocks mentioned. Check out his personal portfolioCAPS pageprevious writing for The Motley Fool, or his work for SynBioBeta to keep up with developments in the synthetic biology industry.

The Motley Fool recommends Google (A shares) and Google (C shares). The Motley Fool owns shares of Google (A shares) and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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