First published in Cleantech magazine, July 2008. Copyright Cleantech Investor Ltd. 2008
by Tim Chapman
As a more mature technology, wind power hasn't seen the same levels of venture capital investment as other alternative energy sources. But, as Tim Chapman reports, the VCs have been backing some innovative companies in the sector.
Like solar power, wind power has been around for several decades. Unlike solar, however, the technology hasn't changed very much in that time. There's no equivalent of the race to thin-film and next-generation photovoltaic materials that we've seen in solar, and no corresponding flood of venture capital into new groundbreaking technologies.Billions of pounds of investment, including private equity, has gone into wind power, but primarily as asset financing for new windfarms rather than as venture funding. It's basically a mature sector, with economies of scale in production and infrastructure-style investment. There's less opportunity for the huge gains in efficiency or market size which are promised by the new solar technologies, and which are the holy grail for VCs.
New technology in the wind sector generally offers benefits which are incremental rather than revolutionary. A relatively small number of wind technology developers have nonetheless secured venture capital and growth funding over the past year.
Growth capital can help an established company achieve greater scale, as is the aim with Goldman Sachs' investment in turbine manufacturer Nordic Windpower. In October 2007, the bank made an undisclosed but 'significant' equity investment in the Swedish company, as it prepared to expand its manufacturing activities into the US.
Nordic has been producing utility-scale turbines since the mid-90s. Its two-blade 1MW turbines are based on Swedish state-backed research going back to the 1970s, and promise cost and performance benefits over the more familiar three-blade turbines. The firm is now developing a new manufacturing facility in Idaho.
Taking wind power into relatively under-developed markets can also be attractive for VCs. US turbine developer Mariah Power is targeting the domestic and small business market with a plug-and-play turbine retailing for $5,000. After a $500,000 post-seed investment in April 2008, Mariah is in the process of raising a $10 million first round.
Mariah's Windspire is a 1.2kW vertical-axis turbine based on a design developed at Sandia National Laboratories in the 1980s. Vertical-axis turbines typically have lower efficiencies than the more familiar propellor-style turbines, but Mariah claims to have cracked the problem by integrating its turbine with an extremely efficient generator optimised for low rotation speeds. The system has achieved 98% conversion efficiency in third party tests.
Vertical-axis turbines may be better suited for domestic and urban use, as they can be less aesthetically intrusive, quieter and require less space than traditional turbines, and can produce electricity from a wider range of wind speeds. Other companies, such as Sussex-based Vertical Wind Energy, are also working on vertical-axis turbines with outputs of up to 100kW, or more. There's little activity as yet in utility-scale vertical turbines, however.
VCs have also targeted companies providing components and supporting technologies for the wind industry.
Turbine blade manufacturer TPI Composites raised a $22 million growth round from a syndicate led by NGP Energy Technology Partners in October 2007. The Arizona-based company produces large composite components using a patented vacuum infusion technique with minimal emissions of volatile organic compounds (VOCs). TPI serves a range of markets, but is looking to the wind industry to drive growth in North America and China. The firm already produces blades for GE Energy's popular 1.5MW turbines, and is currently building a dedicated new production facility in Iowa.
Turbine efficiency can also be improved through innovation in the less visible components. Products which can potentially be integrated into a range of turbine designs and scales could provide the kind of scalability that VCs look for and can provide a promising early-stage investment.
California-based Viryd Technologies raised $2.1 million from private investors in December 2007. The company is commercialising a variable-speed transmission that can improve a turbine's ability to automatically capture the energy of gusting wind, and optimise rotation speed for all wind speeds.
Viryd is a spin-off from Fallbrook Technologies, which originally developed the transmission for use on bicycles and other vehicles. The patented system, called NuVinci, uses tilting ball axles instead of gears to provide a continuously variable transmission with no loss of power during changes. Viryd is currently seeking development partners from the wind industry.
Norwegian university spin-out ChapDrive is also developing an improved transmission system. The Trondheim firm is commercialising a hydraulic technology developed at the Norwegian University of Science and Technology, which could improve the cost effectiveness of turbines and reduce weight in the nacelle. This could offer particular advantages for offshore turbines, the area likely to see the most growth.
ChapDrive raised NKr14.3 million (€2.25 million) last year from local technology VCs and energy group Statoil, and is field testing a 300kW prototype with support from Shell and Norsk Hydro.
The electrical aspects of wind power have also attracted attention. UK semiconductor firm Evince Technology is developing non-silicon high-voltage devices for renewable power applications, and recently raised £500,000 seed funding. Technical details are currently scarce, but the company says it is developing a device which can dramatically improve the efficiency of wind turbines and other sustainable energy sources by allowing their power electronic systems to be connected directly to the main electricity grid. Evince expects to demonstrate its devices and raise a full first round next year.
Second Wind, a provider of electronics and software for utility-scale wind energy operators, raised a $4 million second round late last year from leading cleantech investor Good Energies. The Massachusetts firm produces off-the-shelf systems for remotely monitoring turbine performance, power output and wind conditions, as well as the hardware and software to assess the potential of sites for wind installations. All the systems aim to make wind power more profitable.
Another specialist software developer, WindSim, raised €500,000 in November. The Norwegian firm's software uses computational fluid dynamics to model the effects of terrain on wind, helping users select optimum locations and layouts for their wind farms. WindSim already counts major wind players including Gamesa, Siemens and Vestas among its clients, and says it is seeing strong demand from around the world.
The wind power market may be a mature one in cleantech terms, but its size and continuing growth means that companies which can provide better technologies and supporting services can find themselves a very lucrative niche.
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