Renewable Energy Investor Says Wind Industry Ripe for Innovation

2/18/10Follow @bvbigelow

You could say I blew into the wind power event that Cleantech San Diego organized here last week. The canapés were gone by the time I arrived, but the show was just getting started. I got there in time to hear keynote speaker Jim McDermott of energy investment fund U.S. Renewables Group describe a somewhat stormy outlook for renewable energy companies developing wind projects.

In surveying the windswept landscape, McDermott sees plenty of opportunities for wind energy developers. “There’s a huge amount of class 3 wind out there,” he says, referring to the basic level of wind energy required if providers want to pour power into the electrical grid. “There’s even still some class 4 and 5 out there, particularly in the offshore markets.”

In the United States, McDermott says about 300 megawatts of wind power were under development in 2008—which dwarfs the amount of biomass, geothermal, solar, and every other type of renewable energy under development. But with the collapse of the capital markets and the massive downturn, McDermott says there’s also been a tremendous amount of carnage.

About one-third of the projects under development—representing about 100 megawatts of renewable energy—were effectively wiped out. “Not that these were bad projects,” McDermott says. “There was just no money. For about six months, there was no money for any project at any price.” He estimates that major utilities stepped in to acquire another 100 megawatts of project assets—at cost.

Wind developers have little choice because the number of major financial firms willing to finance such projects has plunged by two-thirds, the amount of capital available has substantially shrunk, and financing terms have become much more stringent. McDermott says USRG sees what’s left as an investment opportunity because project valuations have fallen dramatically.

Nevertheless, wind power remains the dominant renewable energy technology. McDermott says 75 percent of all renewable energy assets that are built in the United States are wind-powered. In short, the market is ripe for innovation.

“There is a lot of innovation that remains to be done in terms of the blades, turbines, gear boxes, and everything else,” McDermott says. As an example of … Next Page »

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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