In my last three updates, I’ve been turning around one specific topic, namely the technology of wind turbines with vertical axis. Like three updates ago, in Ma petite turbine éolienne à l’axe vertical, I opened up on to the topic by studying the case of a particular invention, filed for patenting, with the European Patent Office, by a group of Slovakian inventors. Just in order to place this one in a broader context, I did some semantic rummaging, with the help of https://patents.google.com. I basically wanted to count how many such inventions had been filed for patenting in different regions of the world. In my research I have been using, for years, the number of patent applications as a metric of aggregate effort in invention, and so I did regarding those wind turbines with vertical axis.
This is when it started to turn weird. Apparently, invention in this specific field follows a stunningly regular trend, and is just as stunningly correlated with the metrics of renewable energies: the share of renewables in the overall output of energy (see Time to come to the ad rem) and the aggregate output of said renewables, in metric tons of oil equivalent (see Je corrèle). When I say ‘stunningly correlated’, I really mean it. In social sciences, coefficients of correlation around r = 0,95happen in truly rare cases, and when they happen, the first reflex of a serious social scientist is to assume that something is messed up in the source data. This is one of those cases. I am still trying to wrap my mind around the fact that the semantic incidence of some logical constructs in patent applications can coincide so strongly with the fundamental metrics of energy consumption.
In this update, I want to return to that business concept of mine, the EneFinproject. I am preparing a business plan for this one. Actually I have been preparing it for weeks, which you can find the track of in the past posts on this blog. Long story short, EneFinis the concept of a FinTech utility, which would allow the creators of new projects in the field of renewable energies to acquire capital, via a scheme combining the sales of futures contracts, on the future output of the business, with the issuance of equity. You can find more explanation in Traps and loopholes, for example.
I want to study this particular case, that wind turbine described in the patent application no. EP 3 214 303 A1, under the EneFinangle. How can a FinTech scheme like the one I am coming up with work for a business based on this particular invention? I start with figuring out the kind of business structure to build around this invention. Wind turbines with vertical axis are generally small stuff, distinctive from their bulky cousins with horizontal axis by the fact they can work in close proximity to human habitat. A wind turbine with vertical axis is something you can essentially install in your yard, and it you will be just fine together, provided there is enough wind in your yard. As for this particular aspect, the quick technological research that I documented in Ma petite turbine éolienne à l’axe vertical, showed that the really interesting places for using wind turbines with vertical axis are, for example, the coastal regions of Europe, with the average wind speed like 12 to 13 metres per second. With that amount of Aeol, this particular turbine starts being serious, at more than 1 MW of electrical capacity. Mind you, it doesn’t have to be coastal, that place where you install it. The upper storeys of a skyscraper, hilltops – in general all the places where you cannot expect your straw hat to hold on your head without a ribbon tied under your chin – are the right place to use that device shaped like a DNA helix.
This particular technology is unlikely to breed power plants in the traditional sense of the term. The whole idea of wind turbines with vertical axis is to make it more apt to being installed in the immediate vicinity of human habitat. You can install them completely scattered or a bit clustered, for example on the roof of a building. I am wrapping my mind around the practical idea, and I start the wrapping by doing two things: maths and pictures. As for maths, PW = ½ * Cp* p * A * v3is the general name of the game. ‘PW’ stands for electric power of a wind turbine with vertical axis, and said power stands on air, which has a density p = 1,225 kg/m3divided by half, so basically that air is dense, in the equation, at sort of p = 0,6125 kg/m3. Whatever speed of wind ‘v’ that air blows at, in this particular equation it blows at the third power of that speed, or v3. That half the density of air, multiplied by the cubic expression of wind speed, is the exogenous force that Mother Nature supplies here and now.
What Mother Nature supplies is being taken on the blades on the turbine, with a working surface of ‘A’, and that surface works with an average efficiency of Cp. That efficiency is technically comprised between 0 and 1, and actually, for this specific type of machine, between 59% and 72% (consult Bhutta et al.2012), which I average at 65,5%. All in all, with that density of air cut by half and efficiency being what it is, my average wind turbine with vertical axis can take like 40,1% of the arithmetical product ‘working surface of the blades times wind speed power three’. Reminder, from school: power first, multiplication next. I mean, don’t raise to cubic power the product of wind speed and blade surface. Wind speed cubic power first, then multiply by the blades.
I pass to pictures, now. A picture is mostly a picture of something, even if that something is just in my mind. My first something is a place I like very much: Lisbon, Portugal, and more specifically the district of Belem, a good kick westwards from the Praca de Comercio. It is beautiful, and really windy. Here below, I am giving a graphical idea of how those small wind turbines with vertical axis could be located. Reminder: each of them, according to the prototype in the patent application no. EP 3 214 303 A1, needs like 5 m2of space to work. Let’s make it 20 m2, just to allow the wind to pass between those wind turbines.
In Lisbon, the average speed of wind is 10 mph, or 4,47 m/s, and that gives an exogenous energy of the wind like 54,72 kilowatts, to take whoever can take it. That prototype has real working surface of its blades like A = 1,334 m2, which gives, at the end of the day, an electric power of PW = 47,81 kW. In Portugal, the average consumption of energy at the level of households (so transport and industry excluded) seems to be like 4 214,55 kWh a year per person. I divide it by 8760 in your basic year (the odd ones make 8784 hours), which yields 0,48 kW required per person. My wind turbine could power 99 people in their household needs. If they start using that juice for transport, like charging their electric cars, or the batteries of their electric bicycles, that 99 could drop to 50 – 60, probably not less.
Hence, what my mind is wrapping around, right now, is a business that would manage the installation and exploitation of wind turbines with vertical axis, in groups of a few dozens of people, so like 20 – 50 households. Good, let’s try to move on: Lyon, France. Not very coastal, as the nearest sea is more than 300 km away, but: a) it is quite windy, due to the specific circulation of air along the valleys of two rivers, Rhône and Saône b) they are reconstructing a whole district, namely the Confluenceone, as a smart city c) I f*****g love the place. Average wind speed over the year: 4,6 m/s, which allows Mother Nature to supply around 52,25 kWto my prototype. The prototype is supposed to serve a population, where the average person needs 7 291,18 kWh for household use, whence 63 people being servedby my prototype, which could drop like to 20 – 30 people, if said people power their transportation devices with their household juice.
Good, last shot: Amsterdam. Never been there, mind you, but they are coastal, statistically speaking quite energy consuming, and apparently keen on innovation. The average wind speed there is 5,14 m/s, which makes my prototype generate a power of 72,72 kilowatts. With the average Dutch consuming around 8 369,15 kWh for household use, 76 such average Dutch could use one such turbine.
Maths and pictures made me clarify a business concept, or rather two business concepts. Concept #1is simple manufacturing of those wind turbines. Here, EneFin(see Traps and loopholesand the subsequent ones) does not really fit. I remind you that the EneFin concept is based on the observable discrepancy between two categories of final prices for electricity: those for big institutional users (low), and those for households and small businesses (high). Long story short, EneFin takes its appeal from the coincidence of very different prices for the same good (i.e. electricity), and from the juicy margin of value added hidden behind that coincidence. That Concept #1 is essentially industrial, and the value added to expect does not really blow one’s hat off. Neither should we expect any significant price discrepancy between categories of customers. Besides, whilst futures contracts on electricity are already widely practiced in the wholesale market, and the EneFin concept just attempts to transfer the idea to the retail market, I haven’t seen much use of futures contracts in the market of typical industrial products.
Concept #2, for exploiting this particular invention, would be complex, combining the engineering of those turbines so as to make the best version for the given location, their installation, then maintenance and management. The business entity in question would combine manufacturing, management of a value chain, site management, design and engineering, and maintenance. Here, that essentially cooperative version of the EneFinconcept would have more space to breathe. We can imagine a site, made of 200 households, who commission an independent company to engineer a local power system, based on wind turbines with vertical axis, to install, manage, and maintain that facility. In the price paid for particular components of that complex business scheme, those customers could progressively buy into that business entity.
Now, I am following another one of my research routines: I am deconstructing the business model. As truly enlightened a social thinker, I am searching online for the phrase ‘wind turbine investor relations’. To the mildly initiated: publicly listed companies have to maintain a special type of website, called, precisely ‘Investor Relations’, where they publish information about their business cuisine. This is where you can find annual reports, for example. The advantage of following this specific track is the easy access to information I am looking for, like the basic financials. The caveat is that I am browsing through relatively big businesses, big enough to be listed publicly, at least. Hence, I am skipping all the stories of small businesses.
Thus, the data my internal curious ape can find by peeling those ‘investor relations’ bananas is representative for relatively big, somehow established business structures. It can serve to build something like a target vision of what is likely to be created, in a particular field of business, after the early childhood of a project is over. And so I asked dr Google, and, just to make sure, I cross-asked dr Yandex, what they can tell me if I ask around for ‘wind turbine investor relations’. Both yielded more or less the same list of top hits: Nordex,Vestas, Siemens Gamesa, Senvion,LM Wind Power, SkyWolf, and Arise. I collected their annual reports, with the exception of SkyWolf, which, for some reason, does not publish any on their ‘investor relations’ page. I followed this particular suspect home, I asked around who are they hanging with, and so I came to visiting their page at Nasdaq, and I finally got it. They are at the stage of their IPO (Initial Public Offering), so they are still sort of timid in annual reporting. Still, I could download their preliminary prospectus for that IPO, dated April 20th2018.
There is that thing about annual reports and prospectuses: they are both disclosure and public relations. Technically, an annual report should, essentially, be reporting about the things material to the business in question. Still, this type of document is also used for, well… for the show. Reading an annual report is good training at reading between the lines, and, more generally, at figuring out how to figure out when people are lying.
Truth has patterns, and lies have patterns as well, although the patterns of truth are somehow more salient. The truth that I look for in annual reports is mostly in the financials. Here is a first glimpse of these:
|Revenues||Net profit (loss)||Assets||Equity||Ratio assets to revenue|
|Nordex 2017 EUR mlns||3 127,40||0,30||2 807,60||919,00||0,90|
|Vestas 2017 EUR mlns||9 953,00||894,00||10 871,00||3 112,00||1,09|
|Siemens Gamesa 2017 EUR mlns||6 538,20||(135,00)||16 467,13||6 449,87||2,52|
|Senvion 2017 EUR mlns||1 889,90||(121,10)||1 808,10||230,10||0,96|
|LM Group 2016 EUR mlns||1 059,00||52,00||1 198,00||445,00||1,13|
|SkyWolf 2017 USD (!)||49 000||(592 600)||139 730||(673 500)||2,85|
As I see it, the business of doing business on installing and managing local power installations can go in truly divergent directions. You can start as SkyWolf is starting, with a ‘debt to assets’ ratio akin to the best (worst?) years of General Motors, or you can have that comfy financial cushion supplied by a big mother ship, as it is the case for Siemens Gamesa. One pattern seems to emerge: the ‘assets to revenue’ ratio seems to oscillate around 1,00. In other words, each dollar invoiced on our customers needs to be backed up by one dollar in our balance sheet. Something to exploit subsequently.
I am consistently delivering good, almost new science to my readers, and love doing it, and I am working on crowdfunding this activity of mine. As we talk business plans, I remind you that you can download, from the library of my blog, the business plan I prepared for my semi-scientific project Befund (and you can access the French versionas well). You can also get a free e-copy of my book ‘Capitalism and Political Power’ You can support my research by donating directly, any amount you consider appropriate, to my PayPal account. You can also consider going to my Patreon pageand become my patron. If you decide so, I will be grateful for suggesting me two things that Patreon suggests me to suggest you. Firstly, what kind of reward would you expect in exchange of supporting me? Secondly, what kind of phases would you like to see in the development of my research, and of the corresponding educational tools?
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Muhammad Mahmood Aslam Bhutta, Nasir Hayat, Ahmed Uzair Farooq, Zain Ali, Sh. Rehan Jamil, Zahid Hussain (2012) Vertical axis wind turbine – A review of various configurations and design techniques, Renewable and Sustainable Energy Reviews 16 (2012) 1926–1939