By Lois Hutchinson, from the Winter 2009 TED GreenRoom Supplement.
Step into the wind energy market by providing contractors with ancillary support services.
The U.S. wind energy industry installed 1,389MW in the third quarter of 2008, bringing to 4,204MW the total of wind power projects completed in what is expected to be another record year, according to the American Wind Energy Association (awea.org). Because this powerful momentum will likely prove resistant to economic uncertainty and the current roller coaster of energy and commodity prices, electrical distributors exploring the wind market as a way to boost lagging sales can take heart. Success, however, will take careful planning and thorough investigation of local resources, competition, and product lines.
Fred Paris of Paris Consulting Associates in Plymouth, Mass., sees the small wind market as a wonderful opportunity for many electrical distributors serving windy regions.
“But in order to capitalize on this market, distributors also need structural changes in their business,” he noted. “They cannot look at this opportunity as just another item on their line cards. They need to recognize that this is a complex system sale and be willing to support contractors with an array of new professional services. By providing the ancillary support services, distributors can lock contractors to them.”
Among these ancillary services, Paris lists proposals, interconnection applications, rebate applications, and other administration-intensive jobs. Because many renewables projects come with an energy-efficiency upgrade, Paris recommends that distributors venture into the audit market as well. With a separate division for renewables, a distributor can focus on the system-sell bundled with services.
Some distributors are already investing in the wind market. Border States Electric in Fargo, N.D.; Gexpro Services; and Hamby Young, an Aurora, Ohio, division of WESCO all exhibited at the Windpower 2008 Conference & Exhibition in Houston. Familiar manufacturers such as Thomas & Betts, FCI-Burndy Products, Cooper Power Systems, Hubbell Power Systems, and Eaton were also there.
Selling the big stuff
Framingham Winsupply in Framingham, Mass., is a new member of the giant Win Group of Companies, focusing on the residential and commercial renewable energy market. The distributor is selling wind turbines and towers, leaving balance-of-system components to others.
Kevin Price, president, sees that much of the renewables business is conducted through manufacturer-to-integrator direct relationships. “So what we’re trying to focus on is the licensed professional electrician who wants to get into the renewables market, but doesn’t want to deal with manufacturers directly. They’re comfortable with and see the value in going through three-step distribution.
“We’re taking a very proactive approach,” he continued. “Rather than waiting for the market to evolve, we’re trying to push the market in a certain direction.”
Price looks at wind as part of the overall renewables market. “If we’re seriously going to grow this into a market sector from what is essentially a cottage industry today, then, like any other sector in the building trades, you need three-step distribution. That’s the model that works [and] I think we will see that happen over the next three-to-five years. It’s happening now, but we’re at the front end of the cycle.”
Framingham Winsupply installed a 2kW Skystream turbine from Southwest Windpower outside its warehouse. Southwest Windpower, a wind turbine manufacturer, is already running business through distributors that specialize in renewables.
“I think we’re moving more and more toward integrator sales,” said Miriam Robbins, marketing manager for the Flagstaff, Arizona-based company. “It’s really based on this product; it is a plug-and-play system. The people who are installing the system do have to have an understanding of small wind, so we like to educate directly.”
Needs to succeed
The fundamental requirement for any wind venture is, as one may guess, good wind. An average wind speed above about 12 mph is required for viability. This limits the geography, at least in the United States, to the Northeast, mountain and coastal areas, the Great Plains, and parts of the Midwest.
Should energy prices spike again—and they almost certainly will—wind power will be closer to price parity compared to constructing new generation or buying power from a coal- or gas-fired power plant.
“Natural gas and coal have indexed fuel prices, meaning the generator passes its fuel price risk on to the customer. When you sign a contract with a wind generator, you know what your price is going to be for the next 20 years. In most regions across the country, wind prices look pretty competitive now,” said Mark Bolinger, a research scientist at Lawrence Berkeley National Laboratory, Berkeley, Calif.
Currently, ROI calculations for wind are dependent on incentives. And while it takes some effort to sort through the incentives available in a given market area, the Internet offers a wealth of information.
DSIRE (dsireusa.org), for example, is a detailed, comprehensive database of incentives available across the United States that includes utility programs, state programs (some using public benefit funds, important for small wind), state income tax incentives, property tax incentives, state and municipal loan programs, renewable energy certificates (green tags), interest rate buy-downs, net metering, and interconnection issues.
Aiding in the affordability of wind is the extension—through 2009—of the Production Tax Credit (PTC), which provides a 1.9 cent per kWh benefit for the first 10 years of a renewable energy facility’s operation. In addition, the Emergency Economic Stabilization Act of 2008 extended the Investment Tax Credit by eight years, adding up to $4,000 in credit for home, farm, and business wind.
However, the wind business is not immune to increasingly grim economic realities. The credit crunch has reportedly dried up financing for wind farms. Florida Power & Light, the biggest player, cut its projected 2009 capital expenditures by 25%, dropping its wind power generation addition from 1.5GW to 1.1GW—less than was added in 2007.
On the bright side, a slight break in the wind market frenzy could decrease demand, bringing turbine prices down and freeing up some heavy equipment, which may make projects cheaper to build.
Hutchinson is a freelance writer based in Los Angeles with 20 years of industry experience. She can be reached at lihutchinson@att.net.