For Building This Business, the Answer's in the Wind
Twenty years ago, Andy Kruse was looking for ways to help him power up his Arizona ranch, which was off the electrical grid. He came across David Calley, who was making small wind generators as a hobby. When Kruse realized "there was no money in ranching," they teamed up to form Southwest Windpower and began hawking the 300-watt generators at trade shows. Now the winds of change have lifted the Flagstaff, Ariz., company into a new sphere. No longer just a side project, Southwest Windpower is poised to profit from the heightened interest in renewable energy.
"There's a solid change in people's thinking about renewables," says Kruse, vice president of business development at the 83-person company. "It's something that is here to stay for many years to come." Until now, Southwest mainly has made small wind machines used to provide electricity to locations that are not on the power grid, such as rural outposts and sailboats. The company kept improving its technology and now makes up to3,000-watt machines. But unlike wind farms, Southwest's machines, at $600 to $15,000, are made for homes and small businesses.
Yurt power. For such customers, wind complements solar power, working best when it's cloudy or dark or during storms. Oil companies use Southwest wind generators in offshore facilities. Nokia uses them in remote telecom towers. A Kashmiri goat herder uses a machine to power his yurt. Even research stations in Antarctica rely on the company's wind generators.
Southwest has sold more than 100,000 wind generators in 120 countries. But because its machines are complex and expensive, it had never cracked the mainstream consumer market of people looking to reduce their energy bills. So about five years ago, Kruse decided to make use of a federal Energy Department contract that it had inherited after buying a rival. The government helped Southwest with testing and certifying its cost-effective, user-friendly machines, but for the first time Kruse needed outside money to scale up production and marketing.
In 2003, Southwest started raising venture capital. It's now closing in on its second round of funding, bringing in a total of $18 million from four groups. The firm has been able to ride "a wave of momentum," says Kruse. Venture-capital investment in clean-technology companies jumped 78 percent to $2.9 billion in 2006 from a year earlier, according to the Cleantech Venture Network.
The flood of money comes from more than increased interest in green companies, says Scott Sklar, president of the Stella Group, an energy consultancy. Many renewable-energy companies that got started decades ago are finally figuring out how to make and sell products for broader markets. "These are more mature companies, not just guys wearing Birkenstocks," he says.
Southwest's products have kept evolving. Kruse put to work years of customer feedback to build the Skystream 3.7, which produces 1.8 kilowatts of electricity at a cost of $12,000. The miniwindmill is quieter than previous models and easier to use. It plugs directly into a building and even comes with a remote control that lets users monitor energy output. While the Skystream can cut energy bills at least 40 percent, Kruse calls the machine, which came out last November, "a status symbol." Customers bought Southwest's early wind generators for more practical reasons, but the latest model caters to customers "who want to make a difference," says Kruse.
Environmentally concerned homeowners in places like San Francisco are still out of luck. The 170-pound Skystream requires at least half an acre of property and local zoning allowing for 42-foot-high structures. So far, Southwest has shipped about 600 machines, which are produced at a Flagstaff factory. Kruse estimates that sales will double this year and that he'll add about 25 employees. "We have only just begun," he says, "to make a significant difference."
This story appears in the May 28, 2007 print edition of U.S. News & World Report.