Northern Power Systems Tapping Michigan Partners for Utility-Scale Wind Business

12/21/10

Northern Power System, the Barre, VT-based wind energy firm, has made some progress in its years-long pursuit of the lucrative market for utility-grade wind turbines. The company has made much of this progress here in Michigan.

Last month the company shipped its first prototype of a utility-scale, 2.2-megawatt wind turbine to Traverse City, MI-based Heritage Sustainable Energy. Northern Power produced the prototype with the aid of Merrill Technologies Group and a network of suppliers throughout the Great Lake State, company CEO John Danner said. His company has leased manufacturing facilities from Merrill in Saginaw, MI, for future turbine production as well.

The company, which a group of investors purchased out of Chapter 11 in June 2008 after its previous owner went broke, has been working for years to translate the design advantages of its smaller, 100-kilowatt turbines into the large turbines that are typically used on wind farms that supply energy to the grid. Within a few weeks, Danner said, the firm’s partner, Heritage, is expected to complete installation of the 2.2-megawatt prototype turbine at is Stoney Corners project in southern Missaukee County.

Northern Power, which got its start in the mid-1970s, was in the news earlier this month for its role in Michigan’s first large-scale wind turbine manufacturing effort. The company’s turbine production in the state was held out as an example of Michigan’s progress in building up its wind energy sector, which Governor Jennifer Granholm said was key to diversifying the state’s economy and creating clean technology jobs. For its part, Northern Power could employ as many as 137 works in Michigan by 2014, according to the state.

While Danner declined to offer specifics on when his company plans to begin full-scale production of its turbines in Michigan, he did offer some insights on why his company has chosen the state as a hub for its utility-scale wind energy business. One plus he touched on was the state’s standard that 10 percent of its energy must come from renewable sources such as wind turbines by 2015.

“Michigan’s a great market for us,” Danner said. “There’s great labor. There’s great industrial capacity. It’s also a state with a very ambitious renewable [energy] portfolio standard that will certainly require a lot of wind energy deployment over the coming years.”

Still, it sounds like Northern Power has some prototype testing and validating to do before it declares success in the utility-scale wind market. Danner said that the company is not actively publicizing its efforts in this market right now, but he is absolutely clear that its large wind turbines will be designed with the same technology that helps set apart of medium-sized turbines. (The company said it set up offices and research operations in Cambridge, MA, in part to focus on large-scale turbine designs early this year.)

The company has already installed about 95 of its 100-kilowatt turbines, and those models have required a relatively low amount of maintenance, with 90 percent to 99 percent availability, Danner said. It’s also worth noting that these turbines are not deployed in professionally managed wind farms, where there are maintenance crews with cranes on hand, and the turbines also operate in harsh climates such as those in remote communities of Alaska.

“We are on the right track to be able to deliver that same level of reliability to the utility wind industry, which will translate into lower maintenance costs, higher availability, and greater efficiency,” Danner said.

The company’s key to delivering those high levels of efficiency and availability is its so-called “permanent magnet direct drive” design. The design enables the turbines to convert high-torque energy from its turning blades into electricity that can be sent into the electrical grid without gearboxes, which use many working parts that require maintenance and are attributed to downtime for many other turbines, according to the company.

The Detroit News reported on December 8 that Northern Power is expected to produce 13 of its utility-scale turbines, valued at $70 million to $75 million all together, over the next two years at its facilities in Michigan. (The company did not confirm those figures as of press time.) These figures provide an indication the large size of this business, given the high value of each turbine and potential demand for many of them. Yet Danner declined to provide details about its financing for wind turbines in Michigan. The turbines are both expensive to manufacture as well as to buy.

Wind Power Holdings, the owner of Northern Power Systems, said in an SEC filing in October 2009 that it planned to raise $45 million in an equity offering. But to date there have been no subsequent filings that give an update on that offering. Boston-based RockPort Capital Partners and Allen & Company in New York had invested about $50 million in Northern Power as of June 2009, when I last interviewed Danner about the company.

However, Northern Power has already showed that it’s built some strong partnerships for its utility-scale wind business in Michigan. Heritage, for example, announced last month that it secured agreements with Consumers Energy to provide the utility 28.6 megawatts and 12.3 megawatts from Heritage’s wind farms, which include the Heritage Garden and Heritage Stoney Corners II projects in Michigan.

As Danner says, Northern Power is interested in the Michigan market in part because of demand within the state for its products.

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