By Doug Widney
Wind sector consultants foresee this year’s ten-plus gigawatts of new U.S. installations dropping to perhaps three gigawatts in 2013 and not rising above five or six gigawatts for the foreseeable future, leaving wind developers face-to-face with severe consolidation.
West Coast-based turbine operations and maintenance (O&M) provider UpWind Solutions’ recent establishment of a new Canadian subsidiary, UpWind Solutions Canada, demonstrates that O&M, while perhaps not as glamorous as design and deployment, can be a sheltered harbor in a stormy market.
Though below the radar of many venture capitalists, O&M has often proven to be a reliable money-maker over time. Depot electronics maintenance and logistics player Data Exchange Corporation, which recently entered wind turbine maintenance through a European subsidiary, has used O&M for 30 years as a cash engine. The company never required equity funding, even as its disk and printer customers devoured each other’s profits (and each other) through the '80s and '90s, because the maintenance revenue continued to roll in.
The O&M business has two particular benefits. As a service industry, much of it on-site, it is immune to the kind of overseas competition and price-cutting that is currently hampering U.S. turbine tower makers. And installed wind turbines last long enough to confer immunity to short- and medium-term policy fluctuations like the current Production Tax Credit (NASDAQ:PTC) expiration cliff.
UpWind Solutions, founded in 2007 in Medford, Oregon by wind industry veteran Bo Thisted and headed up more recently by Marty Crotty and Peter Wells, has received over $60 million from backers including Kleiner Perkins, Mission Capital, and Chrysalix. In May 2012, the company was listed in the Red Herring Top 100. In July 2012, the company closed a $29 million round, at a time when venture investing in wind companies is restrained.
Aside from the two gigawatts of wind the company maintains and repairs across North America, UpWind offers monitoring services for blades and drivetrain performance (UpWind Sentinel), for statistical analysis (UpWind Analytics), and for assessment reports (UpWind Reports).
The war room in Medford is lined with monitors displaying continent-wide lightning and turbulence warnings. “We feel a real mission,” VP of Sales and Marketing Robert Bergqvist said, “to keep making wind more competitive with fossil fuels, every quarter of every year.”
In 2010, UpWind entered the blade repair business by acquiring the Blade Services business of the Knight & Carver Wind Group, of San Diego California. It augmented that business in June 2012 through a partnership with Germany’s Smart Blade. Corporate headquarters were relocated to San Diego, although Medford continues to be the engineering center.
UpWind expects 35 percent year-on-year growth with the steep ramp of turbines, installed in the headiest days of wind’s 2006 through 2010 expansion, coming off five-year factory warranty over the next half-decade. Head count has grown from 40 in 2008 to 310 presently. Managing this growth has meant rapid learning curves. Human Relations director Heather Dennison was hired from Harry and David, a local Oregon boutique foods company. “One of the first things I did,” she said, “was to climb a turbine tower. If I was going to hire people to do this, I had to know. And it was so much fun.”
Privately held Upwind Solutions does not comment on gross revenues or profitability.
With the industry downturn, turbine makers such as General Electric (NYSE:GE), Vestas (OTCPK:VWDRY), and Gamesa (OTCPK:GCTAF) are moving into the O&M business to cover their own warranties and inherit the post-warranty opportunity. However, Bergqvist noted, “Customer satisfaction is better during the warranty period than afterwards.”