- The Company: Ocean Power Technologies, a renewable energy company specializing in offshore wave power technology
- The Filing: Form 10-K filed with the SEC on July 14
- The Finding: Ocean Power is struggling to gain commercial acceptance for its proprietary PowerBuoy wave generation system, which extracts the natural energy in ocean waves, converting it into usable electrical power for utility-scale grid-connected applications. Revenues increased by 89 percent to $4.8 million for fiscal 2008 ended April 30, driven by continued dependence on U.S. Navy research contracts.
Chief Executive George Taylor said the company continued to make visible progress during fiscal 2008, increasing its global footprint by partnering with world-class companies. Where Taylor likes to talk about signed agreements -- implying commercial adoption of its wave power equipment -- the reality is nothing more than feasibility studies to field test the endurance and reliability of its prototype PowerBuoy system.
In July 2006, Ocean Power signed an agreement with the Spanish utility Iberdrola to construct an initial 1.39 megawatt offshore wave park near SantoÃ±a, on the northern coast of Spain. Two years later, the project is still delayed, mired in a funding quagmire.
Ocean Power's business strategy depends on demonstrating the commercial viability of its wave power generation station. So it is understandable that the company finally said "uncle" earlier this year, agreeing to limit its first-stage billings to cost, without any markup, and to absorb the first $771,000 of any cost overruns.
Rising cost of fossil fuels, dependence on energy from the Middle East, and global warming -- any number of opportunities exist for Ocean Power to sell its wave power stations to utilities. Then again, the company is competing for funding and politicians' short attention spans against wind, solar, ethanol-and other alternatives to fossil fuels.
In fiscal 2009, the company expects to construct and test the PowerBuoy in projects currently under development in Spain, Southwest England, France, the USA and Australia.
The Question: Can anyone get the chief executive to admit that demonstrating proof-of-concept differs from commercial acceptance?