Can Power-Generating Kites Disrupt Traditional Technology?

According to Bloomberg, energy giants Royal Dutch Shell (LON:RDSa) plc RDS.A, Schlumberger Limited (NYSE:SLB) and E.ON SE (DE:EONGn) are likely to start testing power-generating kites in the U.K. this summer. This disruptive technology – namely Kite Power Systems ("KPS") – has the potential to replace the traditional offshore wind turbines.

In Dec 2016, KPS raised $6.4 million from the three energy service providers. KPS will start testing the machinery in July or August in Scotland.

About the Technology

KPS is designing a 17-meters long device that can float on air currents, high above the sea level. The device will be able to produce renewable power by moving in a circular looping path and pulling a cable attached to a generator. The technology will be able to reduce the cost of offshore wind as the materials and maintenance tools for KPS are much cheaper than the conventional offshore wind turbines.

The system is expected to generate electricity 55–58% of the time, which is much higher than the existing wind turbines. KPS has developed a 500-kilowatt producing kite in the past and now working on its 3-megawatt version.

The technology is expected to generate 6 megawatts from each kite machine. With 3-gigawatts of existing offshore wind power generating systems set to be rendered obsolete in 2020, the grids and infrastructure are likely to be used by installing kites to generate power.

About the Companies

Headquartered in The Hague, Netherlands Shell is an integrated energy company. Shell had resulted from the 1907 alliance between U.K.-based Shell Transport and Trading Company and the Netherlands-based Royal Dutch Petroleum Company. The company divides its operations into four major segments, namely Upstream, Downstream, Corporate and Integrated Gas. Shell currently carries a Zacks Rank #5 (Strong Sell).

Houston, TX-based Schlumberger is a leading oilfield services company that provides technology, project management and information services to the global oil and gas industry. The company’s reporting segments can be categorized under four segments: Reservoir Characterization, Drilling, Production and Cameron. The company presently carries a Zacks Rank #3 (Hold).

E.ON SE is the world's largest investor-owned international energy service provider with operations in energy, chemicals, real estate, oil, telecommunications, distribution, logistics, aluminum and silicon wafers. The Zacks Rank #3 company is headquartered in Essen, Germany.

Stocks to Consider

Some better-ranked stocks in the energy sector are Delek US Holdings, Inc. (NYSE:DK) and Enbridge Energy, L.P. (NYSE:EEP) . Both of these stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Delek US Holdings’ sales for 2017 are expected to increase 74.02% year over year. The company had a positive average earnings surprise of 60.68% in the last four quarters.

Enbridge Energy’s sales for the second quarter of 2017 are expected to increase 13.17% year over year. The partnership recorded a positive earnings surprise of 38.22% in the last four quarters.

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