The alternative energy and cannabis industries are perhaps two of the fastest growing industries in the United States. After the drug was legalized for adult recreational consumption in two U.S. states, many growing and dispensing operations sprung up to meet the increasing demand for the product. This has set the stage for a number of ancillary public companies like GrowLife Inc. (OTC: PHOT) and Creative Edge Nutrition Inc. (OTC: FITX) to capitalize on the multi-billion dollar marijuana industry.
The NOW Corporation (OTC: NWPN) is taking a similar ancillary approach to the industry by providing efficient energy solutions. With the enormous power needs of growing operations, the company is leveraging its unique exoPOWER wind turbine technology to reduce costs for cannabis growers.
In this article, we’ll take a look at the unique wind power technology, how it applies to the growing cannabis industry, and some other potential catalysts that investors might want to consider when looking at the stock.
New Approach to Wind Power
With a marginal cost of less than $0.01 per kWh, wind power has become an extremely economic source of energy after the upfront investment. These initial capital costs have also fallen over time as wind turbine technology has improved with longer and lighter blades, increased power generation efficiency, and higher quality craftsmanship that reduces the need for ongoing maintenance costs.
The problem is that the current three blade horizontal axis wind turbines (“HAWT”), primarily manufactured by General Electric (NYSE: GE), have become ubiquitous within the industry having an enormous footprint at more than 300 tons and >400 feet tall. In addition to the large footprint, HAWTs generate significant levels of low frequency noise, have blades that can harm wildlife, and involve many moving parts that increase maintenance costs.
NOW Corp.’s exoPOWER wind turbine systems are engineered to efficiently convert wind power to electrical power using a turbine wheel system that has its air foils (or wind sails) positioned along the circumference of an outer ring distributing stress and torque equally instead of concentrating them on a center axle. Since the entire system is fully enclosed there are far fewer noise and environmental issues. Having fewer moving parts leads to reduced maintenance costs, savings on expensive lubricants, and reduces the operations and maintenance demands that are commonplace with traditional wind turbines.
According to a recent interview with management, the company is close to developing a functional commercial demonstration model after engineering modeling has shown the system to be very effective. The company estimates that it’s about eight months away from finishing a 250 kW unit that measures about 15 feet in height by 60 feet in diameter, which it will use to test in real life scenarios to measure its overall efficiency.
Significant Industry Demand
NOW Corp. plans to commercialize its unique wind technology by providing power to the rapidly growing cannabis industry, which is facing a growing demand for increasingly more expensive power (especially in urban centers) that can cut into profit margins.
Through an agreement with a former company executive, The NOW Corporation has entered into a joint venture agreement to acquire a 50% working interest in a 10,000-acre farm that plans on growing hemp and medical cannabis into Colorado’s burgeoning marketplace. The farm will also be the testing ground for the 250kW unit that the company plans on building in the near future.
As a relatively close proxy, the U.S. Department of Agriculture found that one quadrillion BTU of direct energy was used in the agricultural industry in 2008 generating nearly 76 million tons of carbon dioxide into the atmosphere. Broken down by source, 43% of that power came from diesel fuel, 33% electricity, 13% gasoline, 7% petroleum, and 4% natural gas. With such an emphasis on fossil fuels, and the associated rising costs, these dynamics have led to an increased focus on alternative energy solutions for farms across the country.
The agricultural industry could benefit from wind power over solar power for a number of different reasons. First, the horizontal profile of solar energy renders a large footprint of land unusable for agricultural purposes, while wind power generates electricity using a smaller vertical footprint. Secondly, wind power is significantly cheaper than solar power after the initial costs are recouped.
In the end, wind turbine technology enables agricultural customers to maximize their cultivatable square footage, while reducing their energy costs every time the wind starts to blow. To boot, the excess power generated using the turbines can also be resold to the energy grid in order to generate revenue rather than simply being a cost center for the end users.
Opportunity for Investors
The NOW Corporation aims to capitalize on these dynamics by introducing its unique wind turbines as an alternative to more expensive solar power and traditional wind turbine installations. With a large-scale initial project in its pipeline, the company is well positioned to prove its technology in a commercial setting and generate real data that should enable it to more easily attract future customers.
At the same time, management is also working towards becoming a fully reporting company, according to a recent interview with management. The company believes that it’s about three months away from becoming fully reporting, pending an audit that will remove the OTC Markets “stop sign” when completed. The increased transparency could help investors more accurately value the stock.
Investors in both the alternative energy and cannabis space may want to take a closer look at the stock given the unique technology, initial customer, and move to increase transparency. While the stock continues to trade with a micro-cap market capitalization, investors willing to assume the risks associated with a small company may want to take the time to investigate further with the resources that we’ve provided in the following section.
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