Generation RENEW:  NIMBY, A Problem Solved By A Formula  

 

NIMBY. Not In My Back Yard. Along the coasts you’ll find a majority supports renewable energy, though those same people are vehemently opposed to development in their own neighborhoods. It’s understandable. A component of real estate valuations are views and scenery, which construction of enormous wind turbines detract from. But can this problem be simply solved with a formula? It’s simple math … d ≈ 1.22 x √h … where h is “height above sea level in feet” and d is “miles”. In other words, on a clear day a six foot person can see 3 miles offshore, while the same person looking out from a 15th floor roofdeck (150 feet) can see 15 miles offshore. So we solve NIMBY by building offshore wind turbines more than 15 miles offshore. Not so fast, the further offshore you are the deeper the water, and the more challenging it is to install a tower into the seabed to house the windmill. But what if you could float the tower instead of embed it?

 

 

There are few floating offshore wind farms operating around the world today, making up less than 1% of current offshore wind capacity. Earth Science 101 says water covers 71% of the planet’s surface, while Earth Science 102 says the further offshore you get the stronger and more consistent the wind patterns are. It makes sense. There are no buildings or mountains in the way to hinder wind flows. In fact, the capacity factor (how much a power plant is generating electricity over a set period of time) of offshore wind is at least 10% higher than onshore wind, again because wind is more consistently spinning the turbine. We see upside to these statistics, as the further offshore you get the more reliable the wind resource. After all, it was the consistency of the “trade winds” that helped bring the Old World and New World together.

 

Source:  National Oceanic and Atmospheric Administration (NOAA) 

 

For thousands of years humanity has progressed on the back of wind power. Only over the last roughly 150 years have we used fossil fuels to overpower nature, so it’s ironic that a key driver of tomorrow’s progress is once again wind. What’s old is new! The major engineering firms know it too, as evidenced by the footrace by powerhouses (e.g., General Electric, Vestas) to deliver the next advancement in technology. The winner will have a front seat at trillions of dollars of investment capital over the next several decades. The IEA estimates wind capacity will grow 20% annually through 2030, and those that can deliver the most advanced technology in the areas of the greatest wind resource will secure the best returns. This formula (tech + wind = returns) means investment in floating windmills will increase exponentially over the next decade.

 

Source:  International Energy Agency (IEA)

 

So, what do these floating windmills look like? Keep in mind the first floating windmill (“Hywind Scotland”) only commenced operation in 2017 with five floating turbines and a total capacity of 30MW (6 MW/windmill). We’ve copied a few of today’s designs below, which as you can see depend on an anchor system to keep them in position. This is similar to the early designs of offshore oil drilling platforms from decades ago when society’s goal was to exploit oil reserves in deeper water. The oil sector eventually progressed to drillships that use thrusters to dynamically position themselves above their drill site, no anchors necessary. Is this where we’re going with floating windmills?

 

Source:  Windpower Engineering & Development

 

The engineering challenges are very different for windmills than for oil drilling. It was written somewhere the challenge for floating wind is equivalent to balancing a bus on top of a flagpole that is secured to a boat. What fun (and nerve wracking) it must be as an engineer in the 21st Century!

 

RENEW Performance Tracker 

Source:  Bloomberg.  *Please review disclosure information at the end of this post.

 

Renewables Roundup

 

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Michael Cerasoli, CFA

Michael leads the Renewables effort at Eagle Global Advisors, including the development of active and passive strategies, and portfolio management. He is also the Co-Head of the Energy Infrastructure team and Co-Chair of the Energy Infrastructure Investment Committee.  He shares Portfolio Manager responsibilities for the firm’s four separate Energy Infrastructure strategies. Prior to joining Eagle in May 2014 Michael was employed by Goldman, Sachs & Co. for ten years where he covered Midstream for seven years and small/mid cap Oil Services for three.  Prior to Goldman, Michael worked for three years as a sell-side equity trader at various Wall Street firms. He earned bachelor’s degrees in Economics and History from Union College, and an MBA from the Hagan School of Business at Iona College. Michael holds the Chartered Financial Analyst designation.

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Curt Pabst

Curt is a Managing Director in the Energy Infrastructure Business, a member of the Energy Infrastructure Investment Committee, and co-head of the Renewable Energy Business at Eagle Global. Prior to joining Eagle, Curt held a similar position at an Midstream Energy-dedicated asset management firm in Dallas, Texas. He has 39 years of investment experience. He has served as a partner/principal in both a hedge fund of funds and a venture capital fund. Curt earned his BA in Economics from Grinnell College and a professional certification in Energy Innovation and Emerging Technologies from Stanford University.

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