Pint-size windmills could become a big source of power

A surge in demand for small wind-power systems is likely to build mightily over the next three years, according to a report released Wednesday by alternative energy research company Pike Research. Larger government subsidies, rising electricity costs, fewer regulatory burdens and lower prices for these small systems are all converging to generate demand.

According to Pike Research principal Clint Wheelock, small wind systems will generate roughly 38 megawatts of power in the U.S. this year, or less than one-quarter of what a standard coal-fired powerplant delivers on a regular basis. That should grow by 25% each year and hit a total of 115 megawatts in 2013, says Wheelock.

I wrote about small wind systems a few months ago and how financing alternatives for homeowners have begun to appear. According to the small wind system installers I spoke with, this financing has proven to be a crucial selling point because it lowers the upfront installation cost down considerably. It could even possibly match the new "no money down" financing arrangements seen in California, Arizona and Nevada, where solar power is most economical.

At the same time, producers of small wind systems, such as Southwest Windpower and Swift Wind Turbines, are quickly ramping up production to meet the growing demand.

20% Annual Growth?

Tracking exact revenues from small wind-power companies remains difficult due to the distributed nature of the installations and the fact that most of these systems are used in conjunction with solar photovoltaic and other alternative energy systems. However, Wheelock estimates the 2008 revenue totals for small wind devices be around $165 million, rising to $412 million in 2013.

Revenue growth will average 20% per year as per-unit prices fall along with rising production. The growth in small wind power is in strong contrast to layoffs at wind turbine producers in other parts of the world, as Earth2Tech notes.

Will pint-sized windmills sprout on every rooftop in America? Unlikely. Small wind remains difficult to take to a mass scale because it still requires tall poles to achieve maximum efficacy. The problem with tall poles is that many homeowner associations, cities and towns frown on such installations. Further, wind is highly periodic and usually comes at night, precisely when power prices from the traditional grid are at their lowest.

This means homeowners and small-business owners must also install expensive battery systems to capture the wind power in order to tap it during times of peak use in a household or business.

Lastly, small wind is extremely location-specific. Solar panels in temperate Northeastern states are viable, but wind power needs to be located near mountains, oceans or on great plains and deserts -- close to or on geographic features or wind corridors that aren't as omnipresent as sunshine.

Bundling Wind Revenues

Still, the arrival of easier financing could start a virtuous cycle that stimulates growth by not only encouraging homeowners to buy small wind-generation kits but also for financiers to create both funding and securitizations (still a dirty word, but a funding vehicle seemingly tailor-made for this sort of stuff). Power producer agreements and/or revenue-backed securities could be formed to create steady revenue streams from groups of homeowners with windmills.

I spoke to Adam Boucher of Ethos Fund, a small power system financier, at the AlwaysOnGoingGreen Conference in September, and he said bundling financed wind installations into securities was definitely a possibility. This could also open the door for large financiers such as Goldman Sachs (GS) or General Electric (GE) to buy into small wind in a big way.

The upshot? This industry has a nice tailwind blowing behind it, so get ready for lift-off.

Alex Salkever is Senior Writer at AOL Daily Finance covering technology and greentech. Follow him on twitter @alexsalkever, read his articles, or email him at

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