When Southwest Windpower launched its grid-connected wind turbine two years ago, it thought it was about to catch a windfall.
The then-19-year-old company already had been selling small-wind turbines for "off-grid” customers too isolated to be connected to the electric grid, such as homes, sailboats, offshore oil platforms and remote telecommunications sites. But Southwest Windpower, also known as SWWP, only had sold some 95,000 turbines over seven years (see An Ipod for Wind Power?).
Flagstaff, Ariz.-based SWWP hoped its new turbine, the Skystream, would blow its revenues in a new direction. The Skystream is aimed at grid-connected buildings on at least half an acre in wind-rich locations, which it called a much larger potential market than the off-grid market. The company estimated then that 13 million homes could use the technology in the United States alone and put its potential market size at $1 billion.
At the time, CEO Frank Greco said he expected SWWP to grow revenues 70 percent in 2006 from just less than $10 million in 2005. He also predicted the company would be “extremely profitable” that year.
Investors thought the company was ready to grow too. After raising $2.3 million from the Altira Technology Fund in 2004, SWWP closed $8 million in a round led by Rockport Capital Partners in 2006 and raised an additional $6.5 million in a round led by NGP Energy Technology Partners in 2007.
But things didn’t work out exactly as SWWP planned.
The holdup? Permitting and zoning.
In some cases, it has taken as long as a year to get the approvals needed for an installation, said Miriam Robbins, marketing manager at SWWP.
“That’s really been the challenge, and it’s still going to be a struggle for us,” she said. “There are some areas where people seem to have no issues and others where it’s hard to get the general mindset of some people to accept wind.”
Still, she said, once a neighborhood has one turbine installed, the neighbors tend to want one too – and permitting becomes easier.
“We are seeing a domino effect,” Robbins said. “One installation can equal three in the same area.”
Now the company is experiencing a second wind as the domino effect also hits its revenues.
While the Skystream took “a little bit longer” to take off than originally anticipated, sales are now growing exponentially, Robbins said, and SWWP projects profitability by the fourth quarter of this year.
It’s not only that the permitting processes in residential neighborhoods are running their course. The company also is seeing increasing interest in the commercial market, where people might buy multiple turbines for a single site, both for the energy and for the marketing statement.
“It’s very exciting because we had an expectation of market growth in certain areas, and we’re seeing growth in new areas that we didn’t really expect,” Robbins said.
SWWP also wants to install turbines on city government property, she said. For example, SWWP is donating a turbine for the Boston City Hall roof and has met with San Francisco Mayor Gavin Newsom to discuss installations there, she said.
The company designed its 1.9-kilowatt Skystream with the aim of making it easier – and therefore cheaper – to install grid-connected small-wind power. The turbine includes the inverter, controls and other parts needed to connect to the grid in the body of the generator, which has the added benefit of lowering production costs, the company says.
In a company data sheet, SWWP claims the turbine also produces electricity at lower wind speeds, reaching full power in 20-mph winds and topping out at a mere 325 rotations per minute, making the turbine “nearly sound free.”
The Skystream is priced at $5,400, but ends up costing a total of between $12,000 and $15,000 once the price of the tower and installation is thrown in.
In 2006, Greco said that spreading the costs over the expected 20-year life span of the turbine delivers power for between 8 and 9 cents per kilowatt-hour, potentially beating the retail price of regular electricity. Other small-wind technologies, as well as many solar-power technologies, come to between 15 and 20 cents per kilowatt-hour in the United States, he said then.
According to the data sheet, the turbine can pay for itself in as quickly as five years, depending on the tower and installation costs, wind-speed average, rebates and local electricity costs.
Still, the company has plenty of challenges ahead, not least of which is the upfront cost of the system (see Winds of Change). While the cost makes sense on paper, spread out over 20 years, some homeowners might have difficulty coming up with the capital.
In the solar sector, financing models have sprung up to help pay those upfront costs, which customers then pay back by buying the resulting energy over time, but the model hasn’t yet extended to small wind.
“We would definitely support people being able to get financing; that would be a wonderful opportunity,” Robbins said. She didn’t say whether SWWP was working on a financing partnership, but added, “All I can say is you may see some things very soon.”
After missing its initial projection of profitability two years ago, SWWP certainly has something to prove. But with two years of experience in the grid-connected market and a growing list of customers, the winds of change could finally be blowing its way.