In late 2006, Nick Blitterswyk, an actuary for JPMorgan Chase in New York, felt unfulfilled calculating the risks on clients' pension plans.
After a year of existential angst, he launched Urban Green Energy along with his wife and her mother to manufacture small wind turbines to power homes and businesses. "It sounds so cliché, but … I wanted to do something that meant something. Something to try to help the world dig out of the environmental quagmire we're in," he says.
Blitterswyk, who grew up exploring old-growth forests with his park warden parents on Vancouver Island, British Columbia, chose a tough market. His 125-employee New York company is battling more than 200 manufacturers worldwide that build modern-day windmills for customers looking for cleaner, cheaper alternatives to diesel-powered generators in areas off the grid.
In 2009 the global market for small wind turbines, defined as those that produce 100 kilowatts or less of electricity, increased 10 percent yet accounted for less than 1 percent of the total amount of wind-generated electricity, according to the latest report from the American Wind Energy Assn., an industry trade group. Nevertheless, UGE, which launched its first product a year ago, expects to be profitable this year with $12 million in sales, up fivefold from $2.4 million in 2010, says Blitterswyk. Next year, he expects revenue to reach $30 million.
While the majority of sales last year came from the U.S. and Europe, UGE is banking on emerging economies — particularly China — for future growth. Developing countries added more wind power capacity in 2010 than traditional markets, according to the Global Wind Energy Council.
China surpassed the U.S. last year in total amount of wind-generated electricity and is expected to increase output fivefold by 2020, the council says. Emerging markets are turning to wind power to diversify their energy sources and reduce imports of expensive fossil fuels.
Khurram Malik, research analyst for green technology at Jacob Securities, a Toronto investment bank focused on the energy sector, says there's little difference in technology among small turbine manufacturers, so UGE's success hinges on execution. "It's not about the technology," he says. "It's about packaging it up to meet the need."
FACTORY NEAR BEIJING
Blitterswyk believes he has an advantage over competitors trying to crack the Chinese market: Unlike its U.S. rivals, UGE owns its Chinese factory, a 40,000-square-foot facility in Chengde, outside Beijing. The company is leasing the 25-acre factory site from the government at no charge for the next 50 years, Blitterswyk says. The arrangement is possible because Blitterswyk's wife, Yun Liu, and her mother, Xiangrong Xie, are co-founders of the business.
As Chinese citizens, they could more easily navigate the country's bureaucracy to open a foreign-owned factory. Most companies hire contract manufacturers to avoid the expense and uncertainty of China's complex legal system. Having a Chinese factory lowers manufacturing costs, cuts the time it takes to develop new products, and gives the company easier access to the Chinese market, Blitterswyk says. He expects the factory, along with a local sales office, will make China UGE's strongest market and push overseas revenue to more than half the company's total sales this year.
UGE's turbines cost from $4,000 to $19,000, depending on the amount of electricity produced. The average installation, including the price of the product, ranges from $15,000 to $35,000.
The company says its turbines can produce up to 6,000 kilowatt hours of electricity a year, roughly the amount used by a three-person U.S. household. Outside China, the products have not been independently tested.
Experts are skeptical, given how makers of small wind turbines are notorious for exaggeration. "You can never believe what a manufacturer says unless there's someone who's independent to verify it," says James Manwell, director of the Wind Energy Center at the University of Massachusetts Amherst.
To address the skepticism, the wind power industry formed an independent certification body called the Small Wind Certification Council, which is expected to start issuing certifications this year. UGE expects to be one of the first to receive the organization's blessing.
Blitterswyk, 31, and his two co-founders started the company in late 2007, spending "several million dollars" of their own money to build the factory and develop the company's vertical-axis turbine, which sits upright and catches wind through blades attached to a vertical shaft that turns the generator.
Despite the number of companies rushing into the business, Blitterswyk says the potential market for small wind turbines has been underserved, as the industry has focused over the past 20 years on building large megawatt turbines.
Malik disagrees. He believes small wind turbines will remain a niche market, with solar power becoming the mainstream source of renewable energy for homes and businesses. "It's a sector in general that we haven't liked, and we're not overly bullish on it right now," he says.
That doesn't mean UGE can't become a strong business serving emerging economies. Such regions are expected to account for more than 40 percent of the world's wind power capacity by 2020, with China hosting more than half that production, according to the Global Wind Energy Council. Blitterswyk is targeting large government and business customers.
The company expects the Chinese government to install a million streetlights with hybrid wind and solar power generators in areas off the electric grid this year. UGE also plans to couple its larger wind turbines with solar technology to power the millions of drying rooms found on tea, mushroom, and chili farms in China and India. Similar hybrid products will be available to telecommunication companies to power cellular towers.
Focusing on such markets, particularly in China, improves UGE's chances of success. "In China, if you know the right people," Malik says, "you'll do great."
