Introduction to Investing in Wave Power Stocks

Investment opportunities are relatively few for investors interested in wave power. It sometimes seems to have none of the glamour or potential of other forms of renewable energy like solar power, wind power or fuel cells. Yet, if technology leader Ocean Power Technologies is correct, by around 2010 wave power could be cost-competitive with other forms of energy.

In its 2007 annual report, Ocean Power presented details of wave power and its benefits:

Ocean waves are created when wind moves across the ocean surface. The interaction between the wind and the ocean surface causes energy to be exchanged. At first, small waves occur on the ocean surface. As this process continues, the waves become larger and the distance between the tops of the waves becomes longer.

The size of the waves, and the amount of energy contained in the waves, depends on the wind speed, the time the wind blows over the waves and the distance covered. The rising and falling of the waves moves our PowerBuoy system creating mechanical energy that our proprietary technologies convert into usable electricity.

There are a variety of benefits to using wave energy for electricity generation.

• Scalability within a small site area. Due to the tremendous energy in ocean waves, wave power stations with high capacity — 50MW and above — can be installed in a relatively small area. We estimate that, upon completion of the development of our 500kW PowerBuoy system, we would be able to construct a wave power station that would occupy less than one-tenth of the ocean surface occupied by an offshore wind power station of equivalent capacity.

• Predictability. The supply of electricity from wave energy can be forecasted in advance. The amount of energy a wave thousands of miles away will have when it arrives at a wave power station days later can be calculated based on satellite images and meteorological data with a high degree of accuracy. Customers can use this information to develop sourcing plans to meet their short-term electricity needs.

• Constant Source of Energy. The annual flow of waves at specific sites can be relatively constant. Based on our studies and analysis of our target sites, we believe our wave power stations will be able to produce usable electricity for approximately 90% of all hours during a year.

The company is involved in trials with potential customers and partners in several countries.

Canada's Finavera Renewables is also active in wave power trials in several countries. It has said:

Ocean wave energy has the potential to become commercially viable quicker than other renewable technologies, achieving the fastest growth rate of all energy sources and generating significant wealth.

An independent market assessment estimated the potential world-wide wave energy economic contribution in the electricity market to be on the order of 2,000 TWh/year. That is an amazing 10% of world electricity consumption, comparable to the amount of electricity currently produced world-wide by large scale hydroelectric projects.

In Australia, Carnegie Corporation is testing wave power technology, dubbed CETO. According to the company:

Unlike other wave energy systems currently under development around the world, the CETO wave power converter is the first unit to be fully-submerged and to produce high pressure seawater from the power of waves.

By delivering high pressure seawater ashore, the technology allows either zero-emission electricity to be produced (similar to hydroelectricity) or zero-emission freshwater (utilizing standard reverse osmosis desalination technology). It also means that there is no need for undersea grids or high voltage transmission nor costly marine qualified plants.

CETO units are fully submerged and permanently anchored to the sea floor meaning that there is no visual impact as the units are out of sight. This also assists in making them safe from the extreme forces that can be present during storms. They are self-tuning to tide, sea state and wave pattern, making them able to perform in a wide variety of wave heights and in any direction. CETO units are manufactured from steel, rubber and hypalon materials, all proven for over 20 years in a marine-environment.

Carnegie is working with the British company Renewable Energy Holdings on commercialization of the technology.

April 25th, 2008

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