Wizards of the Wind
Wizards of the Wind
The growing enthusiasm for alternative energy is blowing lots of business – and new competition – in WECS Electric Supply’s direction.
Sometimes, it’s a specialty distributor’s lot in life to see his specialty suddenly become the latest trend and find all kinds of generalists jumping into his business. Fortunately, that trendiness usually also means there’s a lot of new money being spent in his area of expertise. Having decades of experience and a list of customer references long enough to reach the ground from the top of a wind turbine puts a company like WECS Electric Supply in an enviable position. From his desk at the company’s modest headquarters in North Palm Springs, Calif., it’s easy for Bruce Hammett to see which way the wind is blowing. Farther down in the Coachella Valley, golf courses and manicured lawns form an irrigated oasis that’s almost ridiculously green. But up here where the desert mountains are still desert, blades of grass blanch in a losing battle for any bit of moisture. The green blows in with the wind. The north end of the valley, along the San Gorgonio Pass, is a patchwork of towering wind turbines. Hammett can tell you about each one. Not just the make and model, but whose gear is inside, when it was built, what it replaced, how much power it generates, how long ago it was down for maintenance — anything you want to know. Over the years since he founded WECS Electric Supply in 1984, Hammett has come to think of each individual turbine as a customer. Just as any electrical distributor outside salesperson can drive you through a visual wasteland of industrial parks and narrate with stories about what gets made inside each of those lookalike buildings and how they do it, Hammett’s knowledge of the turbines just spills out of him. And this knowledge extends far beyond the Coachella Valley. WECS Electric has bid on roughly 70 percent of the wind-power projects in North America over the past 25 years, and has won at least part of the business on about 40 percent of them, Hammett estimates. For those he doesn’t win on the construction side, there’s still follow-up maintenance and operating equipment. That’s why he considers each one a customer. WECS Electric is now the largest supplier of electrical parts and systems for wind-power turbines in North America. The company (its name is an acronym for “wind energy conversion systems,” the technical term for windpowered generators) was a two-person operation as recently as 2001, when Electrical Wholesaling did a cover story on WECS Electric (July 2001). It’s still a very lean operation, with five people working in the company’s headquarters, plus sales engineers in remote offices in Kansas City and Dallas. When Hammett started the company, wind power was still an esoteric curiosity for most of North America. By 2001, they were doing about $6 million dollars in sales per year. Now he doesn’t share his sales numbers, but says his company has grown along with the wind power industry. The world’s installed wind power capacity has doubled roughly every three years since 2000. Wind power’s production of electricity in the United States has doubled in just the last three years, and now is the largest in the world at over 25 GW at the end of 2008. Increases in public concern for environmental issues and in the economic viability of large-scale wind farms have dramatically changed the picture over the past few years. President Obama harnessed this enthusiasm in his election campaign and has made alternative energy a large part of his administration’s economic stimulus package. The American Recovery and Reinvestment Act of 2009, aka the stimulus package, includes several incentives for investing in alternative energy, including a grant program for developers, an extension of the wind energy production tax credit, a loan guarantee program for developers and manufacturers, investment in research and development and a tax credit for manufacturers. This array of incentives promises to further raise the stakes, but as of yet it’s had no direct impact, Hammett says. Yet, the economics of wind power, combined with mandates by some states and public utility boards to make wind and solar a larger part of the power mix, already are driving a rapid increase in wind energy projects, which in turn has brought many new players into the market. For WECS, this means a bunch of new potential customers and competitors. “Right now we have a thousand distributors trying to get into this,” Hammett says. “There’s some very good talent trying to get in, and some very shaky talent trying to get in. I have a lot of good competition out there. I also face a thousand other distributors who can sell it for a dollar less and get an order instead of me, but don’t know what it is they’re selling. “It’s just like in the contractor end of things, which is going to pose us a problem in the next couple of years,” he adds. “There’s a lot of talented contractors in this industry who love this industry, and there’s a lot of them who are trying to get into it who have been fixing milking machines and building houses.” To maintain his company’s position as the leading distributor in the market, Hammett is looking to reinforce his relationships with existing developers and contractors and his reputation among newcomers. He has the advantages not only of having been around from the beginning as key supplier to just about every wind energy project on the continent for the past quarter-century (as well as many offshore and overseas projects), but also of being active in all three “tiers” of the wind energy market — providing materials for new construction and “repower” projects, supplies for maintenance and operations, and parts for the manufacturers. Like most any good specialty distributor, Hammett’s ace in the hole is his deep stock of specialized product and deep knowledge of how those parts are used. The evolution of wind turbine technology and its international nature create a lot of subtle variations in the products required. Turbine manufacturers’ warranties typically expire after two years, which drives the maintenance and operations side of WECS Electric’s business. The technology used in wind turbines has advanced considerably since WECS Electric opened its doors. The first modern wind turbines, built in the early part of the 1980s, were able to produce around 30 kW each. Today, most turbines for land installation generate 1.5 MW to 2 MW. Towers have grown taller as the blades have grown longer, to the point that they’re bumping up against the limits of what’s practical on land with existing technology. Among the limiting factors are the practical considerations of transporting and installing the parts. The blades can only be so long (about 40m) before trucks can no longer move them down the road, over hills and around bends. That’s a boon for domestic manufacturing, because no one wants to ship these things by boat — better to build them as close to their ultimate destination as possible. The electrical equipment inside has evolved as well, primarily in the electronics that control the release of power onto the grid. Despite its turmoil, Hammett is glad to be in the wind market during this downturn. The difficulties in financial markets have produced a temporary lull in construction of new wind farms, but that’s unlikely to last. The two biggest obstacles to the wind power industry’s growth over the next three to four years are financing problems in the short term and utility interconnect issues in the longer term, Hammett says. “There are some wonderful places to put wind farms, but no place to put the energy,” he says. “If we don’t get the transmission problem solved in the next year-and-a-half or two years, we’ll still have places to build. Beyond that, we won’t have the ability to transmit the energy to the loads that would use it.
By Doug Chandler, Executive Editor