The Rude Awakening
Laguna Beach, California
Wednesday, August 23, 2006

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• Heading to the beach for the next generation of
  alternative energy,
  
  
• How to beat OPEC, align your chakra and cash in on a
  tiny tech company,
  
  
• Chinese intellectual property for sale, this week's
  markets and a couple of volleyball players...

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Eric Fry, reporting from the People's Republic of Laguna...

After spending their first few weeks in Laguna Beach, your
formerly New York editor and his family are acclimating
themselves to the indigenous lifestyle. Laguna's quirky co-
mingling of ostentatious wealth and earnest eco-posturing
now seems somewhat less quirky.

Actually...it seems just as quirky, but we are getting used
to it.

We no longer find it so surprising, for example, to observe
a shimmering Lincoln Navigator rolling its 24" Lexanis
along Ocean Ave. into a parking space near "Zinc Café," the
uber-hip purveyor of organic foodstuffs...then to observe a
surgically refined female step down from the Navigator to
cross the street and stroll into the Chakra Shack.

The Lexanis are flawlessly aligned, we have no doubt. Why
not align one's chakras as well?

Down by the volleyball courts at Main Beach, the locals
seem a bit more "chill" than their Navigator-driving
counterparts. 20-somethings casually interact with 40-, 50-
and even 70-somethings. The generational divide seems to
vanish on the ocean breezes, both on and off the volleyball
court.

On the court, 50 years sometimes separates teammates; 25
years often separates them. Off the court, the
intergenerational banter rarely strays far from timeless
topics like the previous game's lowlights and the prior
evening's highlights. These courtside exchanges will never
produce a cure for cancer, but they seem to produce an
inoculation against stress.

Your editor's two oldest children, Gaby and Noah, are both
playing volleyball in local clubs, while his youngest son,
Ethan, is decorating his bedroom walls with geographically
appropriate posters.

But Ethan has yet to embrace Laguna's earthy ethos
entirely. "Hey Daddy," he asked yesterday, "can we go to
the market today to buy some food for our new house?"

"Sure," his father replied.

"But I don't want to go that organic market again." Ethan
protested. "I want to buy some REAL food."

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Sun, Wind and Surf
By Justice Litle

Sun, wind and surf...These essential elements of a beach-
dweller's lifestyle are quickly becoming essential elements
of energy independence.

We'll start with wind. On June 28, at the 2006 Wind Power
Asia exhibition in Beijing, a Chinese company unveiled a
major technological breakthrough: the first ever "Maglev
generator," or permanent magnetic levitation wind power
generator.

The Maglev generator sounds like something 007 would have
attempted to steal from Dr. No. But it is actually a
revolutionary wind turbine that produces 20% more output
than previous wind turbine designs, while cutting operating
expenses in half — generating power in the range of 5 cents
per kilowatt hour. The Maglev generator can also make use
of significantly lower wind speeds than previous designs,
likely due to the same frictionless operating principle
that Maglev trains use to travel at more than 300 miles per
hour. Lower wind speed requirements mean the new turbine
can be deployed effectively in far-flung rural areas, and
the vastly improved economics make it a competitive
alternative to fossil fuels. As a side benefit, the
breakthrough gives China new incentive for respecting
intellectual property rights, as it now has some highly
valuable IP of its own to export.

Back in the United States, General Electric has partnered
with the U.S. Department of Energy to develop a crop of
giant new wind turbines over the next three years. At up to
7 megawatts, the new turbines will be almost twice as
powerful as existing ones, each one capable of powering a
thousand homes. At 95 meters, these monsters are as tall as
a football field, and destined to get larger over time. As
the turbines grow in size, however, the problem of "visual
pollution" becomes more acute. East Coasters don't like
having their ocean views ruined by ugly structures too
close to shore. The solution? Tow the suckers out to sea,
where the wind is better anyway.

The MIT Technology Review reports:

"MIT researchers recently demonstrated the feasibility of
'tension-leg' platforms, a technology that oil companies
have recently adopted for deep-water rigs. The wind
turbines and towers would be assembled at a shipyard and
placed on top of large floating cylinders. The canisters
would be ballasted on the bottom with high-density concrete
to keep the structure from tipping over, and the whole
turbine assembly would be tugged out to sea.

"There, four steel cables would be attached to the
platform, anchoring it to the sea floor. First, though,
some water would be allowed into the cylinder, causing the
structure to sink more into the water. Once the cables are
attached, the water is pumped back out again, allowing the
turbine to rise, tightening the cables and preventing the
turbine from bobbing up and down, yet allowing some lateral
movement that would help cushion the impact of storm waves
on the tower. (The blades themselves would be high enough
to avoid even waves from hurricanes.)"

Two of the biggest challenges for this out-to-sea approach
will be maintenance and durability. The turbines will have
to be incredibly durable to endure the regular batterings
they will take from wind and waves. Sending out a repairman
will be no small task. But Jim Lyons, the leader of
Advanced Technology for GE's Wind Energy Division, believes
wind could handle 20% of U.S. energy needs — as much as
nuclear power handles today.

Other alternative energy companies are less focused on the
wind and more interested in the waves. Ocean Power
Technologies (OPT), the first ever wave-power company to
list on the London Stock Exchange, has focused on
perfecting a remarkably straightforward concept. OPT's
"PowerBuoy" system utilizes a piston that moves up and down
with the waves, as if the sea itself were turning a hand
crank. The piston is connected to a generator, which,
turned by the movement of the piston, generates electricity
and stores it in a battery.

The buoy concept carries great advantage in its simplicity.
More complex wave-energy devices have typically proven to
be not durable enough, or vulnerable to storms; making them
"sea-proof" was cost-prohibitive. OPT claims its low-impact
PowerBuoy devices can last in the open sea for decades,
thanks to simplicity of design and special sensors that
constantly monitor the ocean environment for changing
conditions. In the event of rough waters, the PowerBuoy can
suspend operations and "disconnect" itself, resuming
operations when wave conditions return to normal. OPT has
wave-power stations off the coasts of Spain, France and
Hawaii, and will soon be embarking on its first project for
the United Kingdom, a 5MW (5 megawatt) installation off the
north coast of Cornwall. For this project, 30 separate
PowerBuoys ranging in capacity from 150–250 kilowatts each
will be deployed in 2007 and 2008.

Last but not least, alternative energy life is stirring in
the sun-baked deserts of Southern California, with the help
of an ingenious 19th-century concept. Two major utility
companies, Southern California Edison and San Diego Gas and
Electric, are working with a Phoenix company, Stirling
Energy Systems, to harness the power of the California
sunshine. It is said to be the biggest solar effort in the
world so far — bigger than all other solar projects in the
U.S. combined. After a period of testing and scaling,
production is slated to begin on the larger of the two
planned sites in 2008. Upon completion, the new Mojave
Desert facility should produce a whopping 500 megawatts of
electricity per day by 2012, enough juice for 250,000
homes. And it will be done without solar panels.

The nearly 190-year-old technology being employed for the
project is the Stirling engine (for which Stirling Energy
Systems is named). Invented in 1816 as an alternative to
the dangerous steam engines of the day — which had the
annoying tendency of exploding every now and then — the
Stirling engine contains a sealed gas — in this case,
hydrogen. Piston movement is generated by heating the
hydrogen and forcing it to expand through hot and cold heat
exchangers. For the 500MW site, the sun will be precision-
tracked by 20,000 swiveling mirrored dishes spread over
4,500 acres, each of them 38 feet in diameter and
reflecting their intensely concentrated rays into a
powerful heat source for thousands upon thousands of
Stirling engines. The setup is expected to convert 30% of
the sun's available energy into electricity, an efficiency
rate double or triple that of present-day solar panels.

These examples only scratch the surface; there are too many
initiatives and innovations under way to mention even a
fraction of them all. Common themes are cost of
manufacturing, ease of maintenance, durability and
efficiency. All these elements are improving as our
knowledge increases and technology marches forward.

The transition from traditional fossil fuels to alternative
energies will not be seamless and trouble-free, but it
could be very profitable for investors who monitor the
exciting world of emerging energy technologies.

It's time to enjoy the sun, wind and surf.

[Joel's Note: Already billions and billions of dollars are
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And the Markets...