Buffett’s Renewables Bet Emboldens Companies to Pursue Wind and Solar

Vaisala Oyj, a Finnish maker of meteorological equipment, plans to make the most of growing interest in renewables as investors including Warren Buffett put billions of dollars into the area.

The company is harnessing its weather-forecasting expertise to boost growth by helping renewable energy producers prepare for calm and storms alike.

“Energy is a natural fit for us, especially renewable energy,” Chief Executive Officer Kjell Forsen said in an interview. “What we sell is risk mitigation.”

Vaisala is betting increasing demand for wind and solar power will provide opportunities to expand beyond its traditional strong points in meteorology, land and air traffic weather systems. The company wants to grow its energy business more than 10 percent annually through 2018, compared with a 5 percent total growth target.

The solar industry is recovering from a two-year slump, with manufacturers predicting a shortfall of photovoltaic panels as demand revives. Buffett, the billionaire investor, said in June his Berkshire Hathaway Inc. is ready to double a $15 billion commitment to wind and solar. China, struggling with air pollution and dependence on imported oil, invested $56.3 billion in renewable energy last year, more than all of Europe, according to a report by the Renewable Energy Policy Network for the 21st Century.

Service Chain

Vaisala wants to grow its wind-forecasting business in the next five years in China, Brazil and India, according to Kai Konola, head of the company’s weather unit.

“We’ve sought to build a whole service chain covering everyone from the renewable energy planner to the operator and trader,” Konola said in an interview.

Last year, Vaisala bought two U.S.-based energy technology companies, 3TIER Inc. and Second Wind Systems Inc., to upgrade its capabilities. Vantaa-based Vaisala currently provides forecasts to 130 gigawatts of wind capacity worldwide and has helped developers secure more than $5.5 billion in solar-project investments, according to the company.

Vaisala shares rose 1 percent to 21.75 euros at 11:36 a.m. in Helsinki trading today, the first day of gains in eight. The stock has declined 6 percent this year, bringing market value to 397 million euros ($522 million.)

Renewables account for 22 percent of all energy output, on par with gas and predicted to gain by almost half by 2020, the International Energy Agency said on Aug. 28.

Sunshine Data

Vaisala can help wind or solar operators get cheaper financing, according to Forsen. Its long-term sunshine, wind and lighting data will help financiers better assess overall risk levels and guide operators to place their parks at the best available spot and make renewable energy projects viable without subsidies, he said.

“You have to find the right site, that’s the first step in the process,” Forsen said. “We can basically tell you what the risk level will be at the site you have in mind and whether you should look for another place.”

The company was hired by the Indian government in July to develop a national solar atlas of the country, illustrating hourly solar variations to better understand the impact of cloud movements as well as cyclical monsoons.

Energy operators will benefit from an early warning of a change in the energy output of a wind or a solar farm, helping them adjust coal or gas plants accordingly or prepare to import from another region, according to Forsen.

Variable Supplies

Gas-fired generators are used as back-up because of their ability to scale up or down output hour by hour, giving utilities flexibility to integrate more variable supplies from wind and solar farms into the electric grid. Vaisala seeks to reduce the need for such systems.

“There’s a lot less need for compensating if you know what is coming,” Forsen said. “As a side-product, we’ll get things like smarter energy trading.”

The company currently offers some services to energy traders and expanding there offers interesting opportunities in the next five to 10 years, according to Konola.

“Over time, it may become the biggest market for precise forecasts,” he said. “The challenge with especially wind is that no one can predict short-term changes with enough confidence yet. That’s where we’ve set our aim, to get that window narrowed to one hour, half an hour.”

Copyright 2014 Bloomberg

Lead image: Wind turbines via Shutterstock

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