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Wind Power Pioneer Interview: Jim Dehlsen, Clipper Windpower

Jim Dehlsen

Jim Dehlsen, CEO and chairman, Clipper Windpower, Carpinteria, California (PIX12071)

Wind Power Pioneer Interview: Jim Dehlsen, Clipper Windpower

Date: 10/1/2003

Location: Carpinteria, CA

"Jim Dehlsen played a central role in transforming the fledgling wind industry into a multibillion-dollar commercial enterprise. As founder of Zond Energy (now GE Wind, the largest U.S. wind turbine manufacturer), Jim's innovative approach to reducing the cost of wind energy through advances in development techniques, finance, and technology has been key to making wind the fastest growing source of energy in the world. Today, Jim is still involved in ventures to promote and further reduce the cost of wind and other renewable technologies." — Kevin Rackstraw, Clipper Windpower

Tell us a bit about yourself and how you got started in the wind business.

A. I became interested in environmental and energy issues in the 1970s. At that time I had developed a product called Triflon (now TriFlo), a fluid lubricant based on micron-sized Teflon particles. This product had energy implications, since with better tribology machinery lasts longer and benefits from reduced friction in all, helping the energy factor. With my growing interest in energy, I started looking at the U.S. Department of Energy's (DOE's) wind turbine R&D that was going on and the fiscal and regulatory measures that had been implemented to encourage development of renewable energy. Triflon became a commercial success, and I sold the company in 1980 and resolved to pursue business in renewable energy.

Tell us about the Zond story.

A. I formed Zond in 1980, using the proceeds from the sale of Triflon to set up shop to pursue the most promising areas of renewables―solar thermal and wind energy. The strategy was based on the idea that the solar systems business was real and provided a way to generate near-term revenue, while planning my entry into wind. Shortly thereafter I acquired a small company in Santa Barbara, California, that installed battery-backed wind and PV solar systems for off grid applications. This accelerated my wind learning curve and helped me understand the technology, which was emerging in the United States and Europe.

It soon became clear that with Zond's limited resources we couldn't carry the solar business along with the development ideas I had for wind. Solar had to go.

The large turbine R&D work seemed out of reach for Zond, but several individuals in the United States were working on turbine designs of a size I thought suitable for grouping on windy ridgelines. In less than a year, Zond had the first 10 turbines online at the Victory Garden site in Tehachapi, California.

The performance of these turbines and others we tried was so dismal that we started designing a Zond machine. We also explored the few European turbine options. Finn Hansen had built and installed several turbines in Denmark, which were ruggedly designed and operating reasonably well. I found that Finn's work was clearly ahead of the Zond machine. To the astonishment of Finn and his family, the owners of the small Danish farm implement company Vestas, I ordered 150 V-15 turbines.

The years flew by to the mid-eighties, in a series of annual project development campaigns each with more advanced turbines and bigger projects, culminating in 1985 with orders to Vestas for 1100 machines. We referred to that year as the D-Day of wind where the sheer logistics of multiple project locations, the number of turbines to be installed in the few remaining months of the year, with construction activities often hampered by blizzard conditions, had our team working around the clock. Thanks to my wonderfully supportive wife Deanna, who kept our field crews nourished with her chili, we all survived the experience.

This amazing year was intended to show Wall Street that wind power was on a course of great progress and deserved attention from the capital markets. But instead, our initial public offering (IPO) by Dean Witter and Solomon had to be withdrawn as investment tax credits came to an end, and electric utilities reneged on power purchase contracts. During this same period, the price of oil sank from the mid-twenty dollar range to single digits. Our nation's energy problem had apparently gone away.

In the difficult times following scrubbing the IPO, we worked out arrangements with some 300 banks and suppliers to extend credit while trying to stabilize and survive the ending of this critical tax credit support that had effectively fueled the birth of the wind industry. Zond went into full survival mode, liquidating equipment and painfully laying off a large part of our outstanding team.

For the next several years, the only progress Zond made was by reengineering virtually every aspect of the wind projects we had built, with the goal of increasing revenue through greater productivity. We succeeded in increasing output by 22% from 1986 to 1989.

By the late 1980s, we had inspired Florida Power and Light (FPL) to invest in our remaining Tehachapi projects. This was the first significant institutional financing in the industry, leading to Zond's 77 MW, $157 million, Sky River facility in 1990. The project was realized despite what "experts" indicated were insurmountable obstacles, including Southern California Edison's (SCE's) extraordinary requirement that we provide 75 miles of 220 KV transmission lines, adding $30 million to the project cost. This, however, was the largest project in the industry to date, and its accomplishment became widely recognized for its performance and as a new model for wind projects of substantial scale and remote from the existing grid. Completing Sky River meant Zond's survival was now assured and that we could finally make good to the banks and our other generously supportive creditors who had grown to share our vision.

Now the central question was how to take wind forward. The answer always came back to driving down the cost of energy (COE). Zond would do this by building its own turbine (removing the manufactures' profit margin) along with technological innovations and up-scaling machine size. We were confident that we had something to offer in machine design, because we had solid experience in turbine installation, operation, maintenance, reengineering and parts fabrication on over 2000 turbines. A pivotal break came in 1993 when Zond was awarded grant support for turbine development by NREL/DOE, and work on the 550 KW Z40 got underway. The machine was christened in 1995, and again, enlightened DOE/NREL support was provided for demonstrating the technology with several key utilities.

Zond then focused on developing variable-speed technology to reduce the COE and in the process acquired patent rights from Kennetech, a wind industry competitor that declared bankruptcy in 1996. Since the early days, most of the reduction in COE had come from up-scaling machine size. Arguably, variable-speed operation was one of the most significant technological innovations since the inception of modern wind energy.

The variable-speed, 750 KW, Zond machine followed and our turbine manufacturing volume climbed sharply with the turbine needs for Zond's Storm Lake and Lake Benton projects, which again set new global records for project size. In 1996, work on a 1.5 MW turbine was started with our conviction that another significant reduction in COE could be achieved.

Anticipation of the company's capital needs for project development and manufacturing ramp-up led to a partial sale of the company in 1997 to Enron, then still a respected name in the energy sector. At our urging, Enron enabled the acquisition of Tacke, a German turbine manufacturer that had fallen into bankruptcy. By combining the best technologies from Zond and Tacke, the TZ 1.5 MW turbine went into production and has become one of the leading turbines in the global market.

While our wind energy business had stellar performance under the Enron umbrella, Enron collapsed into bankruptcy. In 2002, General Electric purchased the wind turbine technology rights and manufacturing assets and the newly formed GE Wind Division advanced rapidly with the 1.5 MW turbine to become the third largest turbine manufacturer in the industry.

Q. What were the key breakthroughs (technical, institutional, political) that converted wind from a California phenomenon to an internationally robust industry?

A. In my view, the earliest breakthrough was not in technology as would be expected, but the creation of a financial method for using the existing state and federal tax incentives for capital formation. Zond had an early lead in this effort, which resulted in $450 million of financing by the mid 1980s. This scale of capital formation allowed for serial turbine production, thereby supplying large fields of turbines, which provided wide operating experience and led to more rapid development of the technology.

Other vital breakthroughs that followed were:

  • Technology

    Understanding and quantifying the structural loads was a breakthrough that probably covered a 10-year span. This was the gate we needed to pass through to substantially scale up machine size, overall the greatest contributor to the reduction in COE. By defining appropriate levels of structural loads, the International Design Standards firmed up, which in turn broadened wind project financing sources. In a similar way, the availability of test facilities, most notably the NREL drive train and blade test facilities, has led to refinements in design and comfort to the financial community on which wind expansion depends.

  • Institutional

    Clearly the work of the U.S. Government laboratories played a crucial role in wind resource assessment and critically needed impetus to technology development―a role the private sector viewed as either too risky or representing an inadequate business opportunity. NREL has led and nurtured wind technology toward commercial viability since the 1970s and, in my view, this work represents one of the best return-on-investments in energy technology ever made by Uncle Sam.

  • Political

    We are now seeing a very important political breakthrough, which is the gaining of critical mass for wind energy from the farming and ranching sectors. This large constituency is a needed balance to the powerful and constant pressure on our policy makers from thermal energy interests.

Q. Looking back, did you foresee there would be 30,000 MW installed worldwide by 2004? How does today compare with your early vision for the industry?

A. Early on it seemed that the United States was destined to own the wind industry, but discontinuity in U.S. energy policy allowed our lead to slip away. Today we are in a formidable struggle to win back market share from the Europeans, which we can do thanks to NREL's and DOE's focus on driving down the COE and making wind competitive in low wind speed regimes.

Almost 20 years ago, as wind power approached 2000 MW in California, I believed that with continued government support it would be possible to more than double capacity every five years as wind spread across the country, and that extrapolation of the California experience would get you in the region of 30,000 MW by today.

As a nation, if we treated wind energy with the priority it deserves—based on, among other reasons, national security considerations, best energy value, environmental urgency, and jobs creation, almost any of which essentially justify elevating the priority for wind—I'm quite confident we could get the job done by 2010.

Q. AWEA has a goal of 100,000 MW installed by 2020. What has to happen for this goal to be fulfilled?

A. Two things are essential—transmission reform with selected system upgrading and properly valuing the cost of thermal generation including its external costs to society.

Q. What do you say to the "not in my back yard" (NIMBY) crowd who resist wind developments because of visual impacts?

A. I don't doubt the NIMBY reaction is well intentioned, but they don't yet seem to grasp the urgency we are now facing to shift away from carbon fuels. NIMBY visual concerns are trivial when compared to material benefits, at many levels, of getting on with the wide deployment of wind.

Q. You've recently returned to the industry and formed Clipper Windpower. What is your vision for Clipper's role in wind over the next decade?

A. Clipper's formation came from the joint decision with my son Brent to try to further our contribution to wind power, believing that we had been fortunate in accumulating some experience that could be put to good use in a still young industry. With the team that has come together, we believe the company has the ingredients to become a major factor in the global wind industry. The way there is through significant innovation at every level of the value chain, obviously with technology, but also including project development, financing and the way we interact in the electric power sector.

We would like Clipper to be seen as the leading source of innovation, making its products and services highly desirable and broadening the markets. At the same time Clipper should aim to be a model corporate citizen essentially fitting with the ethos of renewables and sustainability.

Q. What has given you the most satisfaction in your walk with the wind?

A. The opportunity to express creativity and build in an area that does some good.

Q. What has been the toughest challenge you've faced in the wind business?

A. This is a capital-intensive business and the financial resources necessary to achieve critical mass is getting larger. Capital formation has been the toughest challenge to the independent business operator in the wind industry.

It is encouraging to see new financial institutions taking note of wind energy. This indicates to me that within the next few years, financing will broaden considerably to mainstream sourcing.

Q. What words do you have for those young folks now entering the wind business?

A. Wind power should now be counted among the new major industrial opportunities. The great years for wind industry careers are just starting. But if your career is elsewhere, it is in your vital interest to support wind energy and other changes that will help move your generation to sustainability.

This information was last updated on August 02, 2011