[Editor’s note: This story is part of a five-article series about small wind. Click here, here, here and here to read the rest.]
It was while Robert Webb was running XCO2, an engineering and building-design consulting firm he founded in 2001, that he had the epiphany that would lead to his next venture.
It was partly brought on by the Merton Rule, which requires new building developments in more than 150 participating communities to source between 10 and 20 percent of energy from on-site renewables.
A second regulatory factor, an initiative to make new homes carbon-free by 2016, also is in the works. A study by the U.K. Renewables Advisory Board forecasts that the so-called Zero Carbon initiative would create a market of about £204 million ($406 million) per year for 5- to 20-kilowatt small-wind-power systems, if the government follows through.
Webb realized that increased regulatory pressure to use renewable energy would drive demand for distributed-generation systems, in which energy is generated where it’s used. And he believed that all this could add some velocity to a segment of the wind-power market that has traditionally only been successful in locations with no access to the electrical grid.
Webb became convinced of a large market opportunity for small wind, which he defines as 6 kilowatts to 50 kilowatts. He turned his conviction into a company, founding Quiet Revolution, a London-based small-wind company that has developed a stylish 6-kilowatt turbine that spins vertically, instead of horizontally.
Quiet Revolution’s system can generate 20 to 40 percent more energy in the same space compared to conventional turbines, claims Webb, the company’s CEO.
Today, the startup has several pilot installations, an order book that is filled until November for 60 units and a staff of 30 -- made up mainly of engineers. Two turbines per week roll off its recently opened factory in Wales, and Quiet Revolution expects that figure will grow to five a week by end of January.
In March, Quiet Revolution announced it had raised £1.2 million ($2.3 million), most of which from Finance Wales, the Welsh Assembly Government and HSBC, for its 300-unit-per-year factory in Wales.
And Quiet Revolution has had little difficulty attracting early adopters, all the more remarkable since its units are not cheap. Its first product currently sells at a price of £25,000 ($50,000), plus installation and control electronics.
At average wind speeds, the payback period for the whole package is about 18 years for a U.K.-based installation, including subsidies such as carbon offsets, as well as the energy-bill savings, Webb said.
That’s not a small amount of time, especially considering the turbines’ design lifespan is 25 years. But Webb counters criticism by saying that photovoltaic installations have a similar payback period.
In any case, he said, Quiet Revolution is targeting markets where economics aren’t the main selling points. "Price sensitivity is not a feature of our market at present," Webb said.
He attributed that to regulatory pressure as well.
For customers unaffected by regulations, such as city councils and retail chains, he said that buying decisions are as much about marketing as they are about lowering emissions and saving money.
"Quiet Revolution’s products send a message that there are solutions for reducing carbon emissions, and they want to be associated with the innovation of the design," Webb said.
Still, Webb acknowledged that longer-term growth will hinge on better economics. He expects Quiet Revolution will one day be able to cut costs to the point where energy from its turbines will be cheaper than that from the grid.
One tactic to reduce costs is to use glass fiber instead of carbon fiber for the blades. The company also is working with The ABB Group (NYSE: ABB), a large engineering company with experience in large-wind turbine components and generators, to help design control-system components that will make its small-wind turbines more efficient, Webb said.
Quiet Revolution is now looking to raise £6 million in a first round of venture capital to grow its manufacturing, develop new products and expand into international markets.
But it is not alone. Older rivals, such as Windsave, Iskra Wind Turbines and Proven Energy, also are bulking up with new capital.
Proven Energy, a 16-year-old small-wind manufacturer, raised £4.5 million in venture capital last year, while Scottish rival Windsave has been talking up a flotation on London’s AIM market in the local press, and Iskra Wind Turbines raised £2M in March last year.
About a dozen small-wind companies already are active in the U.K., according to the BWEA, and if the market takes off as expected, foreign competitors will no doubt enter the fray as well.
A new set of small-wind industry standards just launched by the British Wind Energy Association that aims to make it easier for buyers to compare wind products could reveal the leaders.
But besides competition, there is still a more basic question about small wind’s ability to produce an adequate amount of power. It’s a deal-breaker for at least one investor.
"It is senseless to pay a high price for something that delivers a fraction of what a household requires. It is a solution that does not actually solve the problem," said Koen van Engelen, a director of Rabo Ventures in the Netherlands that recently invested in Emergya, which makes large-sized wind turbines.
Another industry observer questioned the market potential for small wind.
"I am skeptical about widespread small-scale wind power," said Thomas Boeckmann, a cleantech-industry analyst at StrategyEye in London, who added he expects the market for small wind -- which he calls anything less than 50 kilowatts -- to stay small. "It works O.K. in certain installations, for some low-power off-grid installations, for example, or where we have continuous updrafts."
The commentary suggests that the size of the small-wind opportunity is unclear, as is Quiet Revolution’s ultimate place in the market. What Quiet Revolution does have is early sales momentum and a demonstrated understanding of the needs of its customers who seem willing to pay a robust price for its innovation.