Blowing Hot

Green sentiment and tax incentives have lifted sales. But costs remain high, and manufacturers need more help from Washington

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Turbines

Chances are you missed global wind Day on June 15, a contrivance of the industry to promote breeze-based power. But makers of small wind turbines were satisfied with a sideways shout-out from President Obama. In his Oval Office speech assailing BP over the Gulf of Mexico spill, Obama made a pitch for alternative-energy sources, including wind, declaring that “the time to embrace a clean-energy future is now.”

The small-wind-turbine industry is ready for its hug. It grew 15% to $82.4 million in 2009, when nearly 10,000 small systems were sold, raising the U.S. total to more than 85,000. But to hear the industry’s boosters tell it, that is a mere puff. “We see a time when there are 6 million to 8 million small turbines at work in a world where people want to do something about the environment they live in,” says Alexander Ellis III, a partner at RockPort Capital, a Boston-based venture-capital fund that’s backing Southwest Windpower, a major producer of wind-powered generators in Flagstaff, Ariz. “We believe there’s a huge opportunity out there.”

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Others offer a more cautious assessment. “Small wind is, in many ways, a brand-new industry in the U.S.,” says alternative-energy analyst Pavel Molchanov of Raymond James Equity Research in St. Petersburg, Fla. “[Is] there a business here? Absolutely. But wind today is a lot like solar was 20 years ago — in the experimental stage.”

The case for turbines that power individual homes and small businesses is easily made. Small systems — defined as turbines that produce less than 100 kilowatts — run cleaner than coal- and oil-fired power. They flatten utility-rate volatility, which can help users budget better. And they can be built almost anyplace — in backyards, behind strip malls, on farms and military bases and in the desert.

Experts agree that over time, these systems save users money. But getting started with a small turbine can be daunting. If you’re looking to power a 2,500-sq.-ft. home with a full array of appliances and gizmos, you’ll want a 3-kilowatt system with a 60-ft.-plus tower. Expect to shell out $15,000 or more before the 30% federal tax credit and any state and local incentives kick in. Larger systems closer to 100 kilowatts — which can power a small waste-treatment plant, for instance — start at $450,000. Then there are zoning issues to contend with, as well as short- and long-term maintenance and amortization considerations.

Despite the high costs for buyers, manufacturers say they’re not yet making money. Sales volumes haven’t reached critical mass, mainly because consumers don’t know a lot about wind power. “We’re a very small industry that has had very little exposure,” says Mike Bergey, the president of family-owned Bergey Windpower in Norman, Okla. (To generate more buzz and buyers, Bergey will soon begin selling systems in 21 California stores of home-renovation giant Lowe’s. Southwest Windpower has a similar deal with Home Depot.) Manufacturers also face a range of other difficulties, some familiar to most businesses and others specific to the power sector: funding issues, tough competition, entrenched and intransigent utilities, foot-dragging regulators, public-policy mushiness and political considerations.

Some of these problems would go away, manufacturers say, if they could persuade Congress to pass a national renewable-electricity standard, forcing utilities to generate a portion of their electricity from renewable sources. The industry would also like to see expanded federal, state and local tax incentives; develop cheaper, more efficient technology; and set standards for equipment and service to weed out scammers.

Still, Bergey, who started his company with his dad in 1977, says the business outlook has never been better. “This is the best business environment we’ve ever seen, so I’d have to say that these are exciting times.”

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