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There's a fresh wind blowing through the rolling hills around Gorham, where Pika Energy LLC recently erected one of three pilot test turbines aimed at halving the cost of current wind power systems to bring them into the budgets of more homeowners.
Tapping the trend toward alternative energy sources to replace coal, the two-year-old company also is raking in cash as it scales up manufacturing to start making its first product, the T701 home wind turbine, by this spring. In early January, the company won a $150,000 contract from the federal National Renewable Energy Laboratory in Golden, Colo., as part of the lab's Small Wind Turbine Competitiveness Improvement Project. And in late 2012, it received a $218,000 loan from the Maine Technology Institute. Those add to an earlier MTI development loan for $274,000 and $250,000 from the Maine Angels, plus money from the company's founders to top a total of $1 million in investment so far. And Pika continues to seek money as it grows, co-founder and President Ben Polito says.
"We expect to start selling turbines in mid-2013, and to start earning revenue in 2013. And we aim to break even by the end of 2014," he told Mainebiz in a recent interview at the company's headquarters next to the pilot turbine. The other two pilot turbines are in Cape Elizabeth and Bethel. This year, he expects the company to almost double its staff of six to 10. But it is keeping a tight rein on expenses, he emphasizes.
"We operate cheaply," he says. "We work in a basement and buy our supplies on eBay. We're thrifty to the core."
Polito and fellow Massachusetts Institute of Technology graduates Keith Richtman, who is principal mechanical engineer, and Joshua Kaufman, who is director of R&D, founded the company in 2010. They worked with Southwest Windpower, based in Flagstaff, Ariz., in the mid-2000s to develop a competitive small wind turbine called the Skystream. That is the turbine brand former President George H.W. Bush installed at his compound in Kennebunkport in 2007.
While the market for such systems is still nascent, U.S. wind system manufacturers' sales both at home and abroad increased more than 13% in 2011, to $115 million, representing 7,300 turbines, according to an American Wind Energy Association report. Worldwide, sales were $397 million, amounting to more than 21,000 turbines. U.S. turbine sales are expected to rise as the economy improves, state incentive programs are refreshed and certified turbines are installed. The federal 30% Investment Tax Credit that phases out in 2016 remains an important financial incentive, the report says. That credit is different from the recently debated and renewed wind credit for utilities.
The report also notes that the U.S. small wind power industry represents about 1,600 full-time equivalent jobs. The small U.S. wind installations annually displace about 178,000 metric tons of carbon dioxide, about the same as taking 31,000 cars off the roads.
Pika is casting a wider net than just the wind turbine market, with a microgrid system called REbus that can tie together wind and solar energy into a hybrid system. Polito notes that the United States currently produces only about 3% of its electricity from wind, and that number is nudging up slowly.
"Solar products already are commoditized. This is a way for solar companies to diversify," says Andrew Hickok, director of business development for Pika. "We see a market for more differentiated products, a market for hybrid systems."
Polito adds that more than 90% of customers with wind power want to add solar. "It's like a Lego piece," he says. "And it adds to the resale value of a property. There's less than a 10-year payback period."
As part of its microgrid system, Pika sells an inverter technology that could charge electric car batteries or be used off-grid. The current system stores power in the Central Maine Power Co. grid that then goes back to the consumer. The company plans to offer a battery option for off-grid use some time in 2014. The off-grid market is still small, Kaufman says, but remote locations are an exciting opportunity.
The T701 turbine system works on the company's REbus microgrid, which lets homeowners combine different energy sources, including solar. REbus also connects to the Web and has built-in Wi-Fi to track the system's performance. The system includes an inverter to convert the product's direct current energy into alternating current for the electric grid. The power rating of the turbine is 1.8 kilowatts. The minimum wind speed needed to run the turbine is 6-7 miles per hour, but the system can withstand hurricanes with gusts to 140mph, Polito says. Ideally, the turbine will be at an exposed site with 10-11 mph of wind on average.
While the turbine is much smaller than the huge industrial turbines that are part of the main power grid — its blades are only 65 inches long — it still is not a do-it-yourself, off-grid product, Polito says. And it is designed to be durable, to last 20 years with no maintenance, adds Richtman. "We designed this with the same mindset as a washing machine," he explains. "The homeowner doesn't have to do maintenance." While industrial turbines need to be lubricated weekly, Pika's does not. It was designed to be high frequency and quiet, he says.
Currently, small wind turbines cost $20,000 or more, but Polito said Pika's system will run $8,000 to $10,000 installed, and $5,000 more for the solar hybrid option. He says the company not only is frugal in sourcing its system components; it also aims at zero waste, such as the turbine's core, which is made from strips of magnetic coils like a Slinky.
"We are operating on a different level to apply technology to drive down the cost of energy further," says Polito. "We developed technology to decrease costs, including the turbine blade and alternator manufacturing. We decreased the number of parts and simplified them." The REbus technology uses the same turbine and inverter in on- and off-grid applications and at different voltages. He adds that the company looked at how to manufacture its products more cost-effectively by taking a look at the entire system.
The company plans to begin tests near Denver in early 2013 to check for reliability. Polito explains that the Midwest and western United States, with their wide open areas, are especially good locations for testing and locating the towers. The company also is looking for beta site hosts to see customers' reactions. The first production turbines are to be beta tested in the early spring to summer of this year. Kaufman explains that the company uses Google Earth and wind maps on the Web to look for good locations for the turbines.
The company is now tooling up production for those tests, and is looking for a bigger, new site for manufacturing in the Portland area, he says. Pika has less than 1,000 square feet of space in Gorham, and wants to increase that to 3,000-4,000 square feet to set up pilot units and final assembly.
"Maine is increasingly the place to build innovative products," says Hickok, the company's business development specialist. He notes Pika was the first Maine company to win the Northeast regional competition of the Cleantech Open.
While he says it still is difficult to attract talent, things are improving because of the state's high quality of life and the build-up of critical mass in business. For example, last semester the company had an intern from the University of Maine's innovation engineering program — funded by Blackstone — who will join the company full time this spring, says Polito.
Its growth plans are not limited to Maine. It plans to export the systems to countries with demand for wind power, such as Germany and Japan.
The payback for a wind turbine system depends on how much wind is available, electricity rates, and state and federal incentives, Polito explains.
"So it could be anywhere from three to 20 years," says Polito. "But our business model is to not depend on incentives. We want to produce power that is not subsidized."
Hickok says Pika is talking with domestic dealers in states where wind power is popular, such as California, Texas, Washington and New Hampshire.
"We have a good list of potential customers," he says. "Some customers want to lower their electric bill, reduce their environmental impact or feel independent. But they also can save up to 70% on their electricity."
And as in the solar industry, the company is looking at a leasing model to put the system within reach of more people, Polito says. "Solar is sold with leases now, and that's a big opportunity going forward. Leasing makes [the technology] more affordable."
Pika's competitors include Southwest Windpower, Oklahoma-based Bergey WindPower and some smaller European companies, all of which have more expensive systems, he says.
In the future, the company should be able to chisel the cost of its system down even more, he says. And it is looking for additional early stage funding. "We need some private funding to get us to product launch, so we want to raise about $400K more," he says. "And at the end of the year we'll look for $1 million more for growth, marketing and to look at overseas markets."
Lori Valigra, a writer based in Harrison, can be reached at firstname.lastname@example.org.
Editor's note: This story has been changed from its original version to correct the loan amount Pika Energy received from the federal government, and to correct the spelling of Bergey WindPower.