Deal Radar 2010: Urban Green Energy

Urban Green Energy (UGE) is a manufacturer of wind turbines and related products such as wind- and solar-powered street lamps. The company is a player in the “small wind” market, which includes turbines with rated capacity of up to 100 kilowatts. Such turbines are used from northern Canada to Antarctica for a variety of on-grid and off-grid purposes, from supplementing traditional electricity to powering boats, vacation homes, special radar equipment, and so forth. Small wind remains a niche market, but it is growing. Global small wind turbine sales were $203 million in 2009 and could double by 2013, according to Pike Research.

Founded in 2007 with sales commencing in 2009, UGE has a global network of over 100 distributors and has sold products in more than 20 countries. The company’s headquarters is in New York City, with sales offices in London and Beijing.

UGE’s CEO and co-founder is Nick Blitterswyk. An actuary and environmentalist by background, Blitterswyk left JPMorgan to start UGE with the goal of providing more adaptable wind turbines for applications such as building integrated energy generation. The other two founders are Wendy Liu and Xiangrong Xie. Liu is a New York native with a finance background and serves as the company’s chairman. Xie is the chairman of JiaYun International, a diversified holding company that owns real estate, tourism, natural resources, and clean energy companies, among others. Xie serves as UGE’s president and is currently based in Beijing. The co-founders hired experienced wind energy and manufacturing engineers to develop UGE’s technology.

The American Wind Energy Association (AWEA) estimates that in 2008, the United States market was approximately 10,500 units and the world market approximately 19,000 units. The AWEA estimates 78% domestic sales growth and 53% global sales growth in that year. Although UGE believes that the association underestimated annual sales levels, the growth curve is clear. The small wind market is growing rapidly thanks to increased government incentives and consumer awareness along with innovative, more adaptable products that increase small wind’s reach into new markets. The domestic industry got a boost from the recent 30% investment tax credit (ITC) over eight years, which is given for the purchases of wind turbines of up to 100 kilowatts. The government removed the cap on these benefits last February. The United Kingdom, another of UGE’s key markets, is the other country where small wind has received strong support in the form of government subsidies. Britain is likely to introduce a feed-in tariff in 2010, and last April the financial benefits of the country’s “Renewable Obligation” were doubled, according to Sun & Wind Energy.

Most wind turbines are HAWTs, or horizontal axis wind turbines: propeller-shaped devices with three blades that spin around an axis that is parallel the ground. Vertical axis turbines (VAWTs), on the other hand, have a rotor that revolves around an axis that is perpendicular to the ground, similar to a barbershop pole or corkscrew.

UGE specializes in VAWTs and currently manufactures three models: the UGE-300 (300 watts rated capacity – $3,060 for the turbine and $5,300 for the complete system); UGE-1K (1 kilowatt rated capacity – $6,120 turbine/$10,600 complete); and UGE-4K (4 kilowatts rated capacity – $16,150 turbine/$21,450 complete). All are mounted on steel towers. UGE had sales of approximately $1.5 million in 2009, with shipments of the UGE-4K starting in July and the UGE-600 and UGE-1K later in the year. The company reported a small loss for the year; it forecasts 2010 sales at $10 million. Current capacity on UGE’s 25 acres of land is approximately 2,000 units after the factory doubled in size in late 2009, and there are plans to increase capacity to 10,000 units per year within two years.

To date, UGE has been financed internally by its three co-founders and a small minority partner in one of its subsidiaries. Its “front end” has been bootstrapped thanks to its ability to take deposits for orders of current and future products. Now that the company has brought manufacturing to its current level, it is beginning to focus on increasing its sales and marketing. UGE is in the early stages of a round of capital raising, which it expects to complete in the first half of 2010.

The AWEA believes that there are about 219 small wind turbine manufacturers worldwide. UGE did not disclose how many units it has sold thus far, but according to Sun & Wind Energy, UGE’s plan to sell generators at a total capacity of 1,000 kilowatts as early as 2009 would put the company in fourth place, behind U.S.-based Bergey Windpower and the Dutch firm Fortis Wind Energy, both founded in the late 1970s, and fellow vertical turbine maker Mariah Power, the CEO of which was featured in a recent Entrepreneur Journeys interview. Mariah Power was founded in 2005 and is in its first full year of operations, with about $2 million in quarterly revenue. California-based WePOWER also specializes in vertical axis wind turbines. Most of their products are 1.2 kilowatts to 12 kilowatts, somewhat larger than UGE’s. And others are hard at work: three French designers have created Wind-It, a solution that uses VAWTs very similar to UGE’s. These turbines are attached to existing electrical structures such as pylons or telecom towers. The electricity generated is fed into the power grid.

UGE has also used this approach and recently mounted turbines on  Alcatel-Lucent’s cellular communication spires to generate power for the company to use. Other clients include Verizon, Raytheon, the U.S. Air Force, and Gazely’s.

UGE believes that in the vertical axis market, its advantage lies in devoting equal energy to product performance, patent ownership, management experience, engineering skill, manufacturing capacity, and international reach. Establishing a low-cost manufacturing base was also important and was achieved thanks to the founders’ connections. The goal is to build a premium product at an affordable price that is available worldwide, and to continue to create innovative products for the wind industry.

As a new company, UGE has the short-term goal of rapid sales growth and is focused on expanding its product line and distribution network. As the wind industry continues to grow and attract attention, UGE is interested in strategic partnerships that will allow its products to be sold to a wider audience.

Recommended Readings
Toward Zero-Energy Buildings: Kevin Surace, Serious Materials
Engine For Green Jobs: Premier Power CEO Dean Marks
Deal Radar 2009: Hydro Green Energy

This segment is a part in the series : Deal Radar 2010