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Wind Power Pioneer Interview: Dale Osborn, DISGEN Corp.

Dale Osborn

Dale Osborn, DISGEN Corp., Evergreen, Colorado. (PIX11971)

Wind Power Pioneer Interview: Dale Osborn, DISGEN Corp.

Date: 12/1/2003

Location: Evergreen, CO

"As a wind-industry executive in the late 1980s and early 1990s, Dale Osborn led the U.S. wind industry's transition from a group of small firms charting new ground to the maturing industry it is today. During that period, he also led his company in a joint, industry-utility development program for a new generation of wind turbine technology employing power-electronic variable speed. This program was instrumental in maintaining momentum for the industry during a difficult period for wind in the United States and resulted in technology that is central to many of today's competitive wind turbines. Dale also consummated the deal for the first commercial-scale U.S. wind plant outside of California, in Lake Benton, Minnesota, and he continues to develop new commercial wind plants today." — Ed DeMeo, Renewable Energy Consulting Services Inc.

Tell us a little about your background and how you got involved in the field of wind energy.

A. I graduated in 1968 with a BS in industrial engineering and management from Oklahoma State University (OSU) and soon went to work for LTV building Corsair military aircraft. A year later, I served in the U.S. Army as a foot soldier and had a memorable vacation in I Corps, South Vietnam. In mid-1971, I returned to LTV and worked on the first Boeing 747 and Douglas DC-10 commercial jet liners. Then I returned to OSU for a master's degree, beginning a career in technology development and commercialization at Texas Instruments in 1973.

Opportunities abounded, so I worked on some of the first-ever electronic calculators, watches, microwave ovens, laser-guided missiles, speech technologies, and home computers. I learned cost control and design-to-cost techniques during my 13 years there and used those techniques in other businesses. In 1986, I was the first senior executive recruited into the regulated utility industry and served as vice president of marketing and business development for Public Service Company of Indiana, commercializing ground source heat pump technology and co-founding the International Ground Source Heat Pump Association.

I became interested in wind energy while working for Texas Instruments in Lubbock in 1979; the local Christian school had installed five small, downwind turbines on its property. I did not know then that by 1988 I would be president of the largest wind company in the country at the time, US WindPower. I served in that position until late 1992.

Q. You were president of a large company, and now you're the CEO of a small wind development operation; can you describe the differences in approach to the market represented by these two distinct models?

A. In 1988, US WindPower was a manufacturer, developer, financer, and operator of wind turbines and projects. It had several hundred employees involved in manufacturing and maintaining wind turbines. Maintenance and financing fees provided the cash flow to fund technology and project development. Being a relatively large company with owners who were very sophisticated financially, the firm focused on maximizing the economic gain to shareholders. Being the industry leader, as usual, the company displayed a measure of arrogance in the marketplace that added to its difficulties in the mid-1990s.

As a relatively small developer, Disgen is humbled regularly in its cash flow management activities, and we certainly have no room for arrogance. However, as its two owners, my son and I have the luxury of deciding what is important to us and what we are going to work on. Though it is important that we be able to care for ourselves and our employees with reasonable salaries and benefits, we are not driven by personal financial gain. That allows us to make decisions like supporting Native American tribes in education and development services while barely breaking even, if that, on costs.

It is difficult for a small firm to fund the development costs of large-scale commercial projects, particularly the cost of environmental and interconnection studies. Those two areas can easily exceed $150,000 per project site. Disgen diverts revenue from the sales of my knowledge to fund such activities, but those funds are always limited. So we have to be very selective in the projects we develop. Currently, we're developing about 1000 MW of qualified sites.

Q. What lessons were learned from the demise of Kenetech/US Windpower?

A. This is a tough question; I'm sure every former senior Kenetech person has his or her views. It is my view that investors were looking for an exit strategy, which required a market-leading technology and a sizable backlog of orders. We demonstrated the market-leading technology in the KVS 300-kW wind turbine in the early 1990s, but it was a complicated product deploying a state-of-the-art variable-speed drive, the grandfather of the product that GE Wind Energy offers today. It was also one of the largest and heaviest turbines at that time, though it resulted in the lowest cost of energy. The large backlog for the turbines was created by regulatory requirements in California.

The company was taken public in the mid-1990s. The technology had a few correctable problems, speculative inventory was purchased, and a cash limitation emerged. The biggest issue, though, was that as regulatory requirements changed, a significant part of the backlog disappeared.

I no longer served in the highest ranks at that time, but my conclusions are that (1) the owners never understood the complexity of the technology, (2) they made a fatal mistake in purchasing speculative inventory, (3) the board knew only what the CEO told them, and (4) their focus on economic gain versus quality engineering was the death knell. These conditions seem strangely similar to the horrendous failures of some major businesses in the last few years.

Q. What has changed in the market for wind energy since the heyday of US Windpower?

A. Technology advances and the quality of design and manufacturing today are light-years ahead of those of the late '80s and early '90s. We had 100-kW turbines then and have 2000-kW turbines today. Almost every turbine has state-of-the-art electronics. Environmental impact improvements in tower, turbine, and blade designs have virtually eliminated noise and rendered bird strikes almost irrelevant. Most dramatically, the cost of energy from modern turbines has plummeted; wind energy is cost-competitive with any new power plant constructed.

These improvements have rendered more and more sites economically developable. The public's awareness of the lower cost and environmental benefits of wind energy continues to grow, and has driven a portion of public policy.

Q. What has to happen for us to achieve AWEA's goal of 100,000 MW of wind energy by 2020?

A. In short, elected officials at both state and federal levels must become knowledgeable and courageous. Most of these officials issue sound bites on the environment, but they consistently vote to maintain the status quo and bow to entrenched fossil-fuel industries. With the entrance of GE Wind Energy into the market, the wind industry's ability to influence key decision makers and officials has started to shift. It is likely that other large U.S. manufacturers will join this market in the next several years, and greater influence will follow.

Regarding the 100,000-MW target, I think a national portfolio standard with competitive cost caps would allow that target to be achieved. However, getting such a policy will require considerable education, particularly on competitive economics. Currently in the utility industry, a favored tactic is to compare the kilowatt-hour "avoided cost" of existing power plants with the cost of new wind energy. It's a false comparison, but most elected officials don't understand avoided cost.

In Colorado, the Public Utilities Commission has analyzed the economics of a large wind project versus the cost of new coal, gas, and nuclear plants. The PUC concluded that wind energy has the lowest cost and provides the consumer with the least risk, because no long-term fuel price risk is involved.

It is important for people to understand that our economy currently operates on fossil-fuel power, and that will not change significantly for the foreseeable future. But we are simply behaving stupidly if we do not capitalize to some degree on lower cost and more environmentally friendly renewable technologies. Coal and gas are here to stay, but over time, room will be made for the 100,000 MW of wind.

Q. You have been very outspoken about the avian issue; why?

A. When I became president of US WindPower, we had an excellent, though small, environmental staff. This staff implemented a number of improvements in the wind facility, like wildlife boots on power poles. However, we were still incurring more than 20 golden eagle fatalities per year, and all of us viewed ourselves as environmentalists. At my naive direction, we sought help from federal and state agencies to help resolve the problem but were ultimately widely condemned as mass slaughterers of birds.

Altamont Pass in California is unique in its golden eagle population and in the availability of the ground squirrels they feed on. It is also the location of much older wind turbines, designed with lattice towers and 72-rpm rotors. Opponents of wind energy use the Altamont Pass data to scare permitting authorities and unknowledgeable citizens. But the bird strike data for the wind farm at Altamont Pass doesn't apply to any other wind facility in the world. The facts are that less than one-half of one percent of bird kills involve wind turbines, in comparison to those involving transmission lines, traffic fatalities, buildings, and tall communications towers with guy wires.

Continuing to focus on the Altamont Pass statistics, in my view, simply contributes to ignorance on this issue and is a huge disservice to the industry. I think it is time to argue this issue aggressively and armed with facts, not emotions. The facts heavily favor the wind industry.

Q. You've recently become heavily involved with wind development in Indian country; what are the opportunities and issues for Native American wind energy?

A. Many Native Americans residing on reservations live in conditions that would not be tolerated anywhere else in the United States. In many cases, unemployment tops 80%. Diabetes and other illnesses are often five times the national average. My belief is that developing wind energy represents the greatest economic development opportunity, other than coal and gas exploration, in rural America in my lifetime.

Indian reservations are as rural as it gets. So, if we can determine how to develop wind projects on tribal lands and create the maximum economic benefits for tribes and their members, then new jobs and revenues from sales of power will help tribes to manage other, almost overwhelming, issues in their lives.

Disgen performs a service function to tribes. Most of the tribes we work with are focused on economic development, sustainability, and self-determination. And the Department of Energy's Native American Program has been a godsend. Without this program, there would be no funds to help tribes start down an economic development path with wind energy. This is an effort that a money-motivated firm is not likely to pursue, however, because of the significant uncertainty involved in working with sovereign nations. But we believe that it is a noble effort and that if we succeed in serving the tribes, then future generations of Native Americans will have a higher quality of life. For Disgen, it doesn't get any better than that.

Q. You participated in the recent Department of the Interior/industry review of wind development policy on BLM lands; what were the issues and how has BLM responded? What's left to be done?

A. I was pleased to work with Ray Brady and Lee Otteni of the Bureau of Land Management in creating initial drafts of the Interim Policy on Wind Energy Development on Public Lands. This was a particularly satisfying experience because of their willingness to listen to the industry perspective and debate the issues before issuing a policy. Remarkably, the whole process took about six months, a very short period for a federal agency.

To me, the greatest benefits that emerged were that the policy will (1) be agency-wide, (2) be uniformly applied, (3) have an appeals process if there is a conflict with a BLM district office, and (4) provide a method of protecting a developer's investment in a specific site through project area payments. In addition, allowing wind energy development under an environmental assessment rather than requiring an automatic environmental impact statement is critical in opening public lands for development.

Personal time constraints have prevented me from being actively involved in public meetings to finalize the formal policy, but I want to commend the BLM for its process. It went exceedingly well and quickly, which was very important.

Q. Your company's name is DisGen, short for "distributed generation"; what's your vision for the DG concept?

A. The corporate name is Distributed Generation Systems, Inc., and we have shortened that to the logo, "Disgen." Founded in 1996, our focus was to provide emerging leading-edge technologies to the power industry. Because of my experience in the wind industry, we began working with Public Service Company of Colorado to develop the first wind project in the state and were recruited afterward for projects in several other states.

Currently, we are developing wind sites in 17 states and analyzing complementary technologies such as biomass, solar thermal, hydro systems, microturbines, and reciprocating engines. I believe that, as these technologies evolve and transmission becomes harder to permit, generating electricity at the point of consumption (distributed generation) will become more economically attractive.

Q. You have served from time to time on DOE/wind program industry peer review panels. What do you see as the appropriate role for DOE in wind energy development?

A. It is my view that the role of government, and of DOE specifically, is to motivate advances in the technology and in the materials associated with the technology, and to create and disseminate accurate and complete information on the pros and cons of wind energy, now and in the future. The information dissemination program should include analytical comparisons between generation technologies that are not biased because of political issues.

The Wind Powering America Program has been particularly effective in making information and experts available to a broad range of regulatory and political audiences.

Q. Is there anything else you'd like to add?

A. The wind industry is in transition and is rapidly acquiring a major industrial and commercial base in the United States. The participation of world-renowned firms like GE is elevating the economic potential and recognition of this industry to new levels. The expectation is that wind energy economics, while already superior in many places, will continue to improve.

As the industry's successes increase, the more entrenched competition will become even more vocal in its opposition. However, the benefits that accrue to rural economies as development increases will create a political force that will motivate traditional utilities to change their strategies and, ultimately, to embrace wind energy in an aggressive way. The question is not "if", but "when." The outlook is very bright. Disgen plans to be a niche participant in this industry for the foreseeable future, and is proud to be making a bit of difference in tomorrow's environment .

More Information

Osborn, D. (November-December 2003). "Winds of Change: The wind industry is poised to make a difference in the future of energy in America—the question is how fast its growth is going to be." Solar Today.

This information was last updated on August 02, 2011