Wind Power When the Wind Ain’t Blowin’
No one would spend hundreds of millions of dollars to build a coal, gas, or nuclear power plant and then leave it idle two-thirds of the time. Yet that’s the prospect faced by wind-farm operators, who consider themselves lucky if there’s enough wind to keep the turbines spinning eight hours a day. Wind is one of the cleanest and cheapest of clean-energy sources, but it’s also one of the least reliable. And that means wind-farm operators often can’t sell power at the times of day when demand—and prices—are highest.
When David Marcus learned about this limitation from separate articles in Forbes and Scientific American about five years ago, he got interested. Marcus had founded and led the successful Apex Property Exchange—an ingenious service leveraging federal tax regulations that allow investors to sell obsolete assets and acquire replacement ones without incurring capital gains taxes—and had sold it to JP Morgan Chase in 2002 for an undisclosed (but undoubtedly handsome) sum. He was looking for his next big investment, and wind farm operators desperately needed capital. But there was that pesky problem of waiting for the wind to blow.
Marcus wondered if there was a way to lick the reliability problem. But most of the money going into the wind industry was being used to build conventional wind farms, not to experiment with new technologies. “Most venture capitalists at that time, and it’s still the case today, consider wind to be a mature technology,” Marcus says. “They think there’s nothing fundamentally new to do—that the business is owned by big companies like GE, Mitsubishi, and Siemens, and that there are subtle refinements to do but no big technology breakthroughs waiting in the wings.”
Then Marcus met Eric Ingersoll, CEO of a company called Mechanology that had an innovative design for a high-pressure, high-flow air compressor. The two hatched the idea of using air compression instead of electricity to bridge the gap between the windmill and the grid. In their scheme, the conventional electric turbine in a windmill’s gearbox would be replaced with a compressor that sent compressed air down to the ground, where it would be stored and used in conjunction with a traditional power source, such as gas combustion, to generate electric power on demand. Thus was born General Compression.
The Attleboro startup was co-founded last year by Marcus, his brother Michael, Mechanology, and power-project consultants Summit Power Group. The company aims to test the air-compression idea in a pilot plant as soon as 2009. But electrical generation at the plant won’t be entirely driven by stored wind power. Yes, Ingersoll’s four-stage compressor will squeeze air down to a pressure of 100 atmospheres and store it in large underground tanks, caverns, or pipelines. But then the compressed air will then be released via a Mechanology-designed expander into a conventional gas-fired turbine, where it will enhance combustion and triple the generator’s power output (turning a 100 megawatt generator, for example, into a 300 megawatt machine).
Planting a wind farm around a conventional gas-fired generator “reduces the cost of running a gas turbine by roughly 75 percent, which is enough to pay for the entire wind farm and all of the [compressed air] storage,” says Marcus. It also allows the wind energy to be dispatched when needed—meaning the plant owners can charge the higher prices per kilowatt-hour in effect at times of peak demand. According to General Compression’s models, a compressed-air plant will have twice the financial return of a conventional wind farm, and the same return as a gas plant (but using one-third as much fuel).
Since its May 2006 incorporation the company has raised $8 million from institutional and angel investors and hopes to raise another $30 million in a second funding round beginning this September. Marcus says the venture-capital partners he’s approaching for the second round are experienced energy investors, but usually don’t have much experience with the wind industry. “These firms have been telling their limited-partner investors that they want to invest in solar, geothermal, biofuels, efficiency, and wind, and they’re able to find companies in the other sectors, but they have more trouble finding something in wind that’s not just a [wind farm] project,” says Marcus. General Compression’s technology—which could firm up existing wind farms, or bring new transmission to power-poor areas–could win VCs the higher returns they’re looking for, Marcus says.
General Compression’s first pilot plant may or may not be in New England—that depends on where the company can find the best partners or hosts for the prototype. But Marcus says the Boston area is a good place for the company’s headquarters, for three reasons. “The first is, I live here and it’s a great place to live. The second is, with the universities and the technology companies that have grown up around here, there are really smart people here who care about the sectors they’re in. And third, the money is here. VCs are like the rest of us—they don’t want to travel too far to visit their deals. If you want them to attend your board meetings, you’d better be near them.”