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SMALL BUSINESS : Firm is trying to turn wind power on its axis : Green Wave Energy and investors are banking on the unconventional design of its microturbines

November 17, 2009|Tiffany Hsu

The potential for profit is blowing in the wind, and Green Wave Energy Corp. plans to catch it.

Among its secret weapons: an 11-foot-tall, blazingly white, nearly indestructible prototype generator that produces as much as 11 kilowatts of electricity using gusts of wind.

The fiberglass contraption could make homespun, do-it-yourself wind power a reality, Chief Executive Mark Holmes said. A model version recently stood amid yachts in a Newport Beach shipyard before being disassembled for updates, but Holmes envisions it moving soon into the backyards and rooftops of homes and businesses.

"It's gee-whiz stuff," he said. "It gets really Space Age."

Green Wave has big dreams for its generators, known as microturbines, and for a product that churns out energy using ocean waves. There are also ambitious plans for a park filled with larger turbines.

The wind-energy industry is growing, in part with help from federal stimulus money. For the first nine months of the year, more than 5,800 megawatts of wind projects were added to the nation's energy supply, up nearly 40% from the same period last year, according to the American Wind Energy Assn.

But for fledgling energy companies such as Green Wave, staying aloft can be a major challenge.

"It's been hard getting this off the ground," Holmes said.

Unlike most windmills' propeller-shaped turbines, the Green Wave products operate on a vertical axis, merry-go-round style.

More than 20 U.S. companies build or are developing vertical-axis turbines. Around 200 urban or rooftop units were sold in 2008, double the 2007 number.

Sales of small wind turbines soared last year to $77 million and 10,500 units capable of generating 17.3 megawatts of electricity, marking a 78% increase in capacity sold from 2007, according to the American Wind Energy Assn.

Holmes has invested $100,000 of his own money since Green Wave launched in October 2008 with a vast underestimation of the resources, time and effort needed to operate.

Development costs have been about $1.7 million, about four times higher than the team had expected.

The crew quickly learned the value of resourcefulness.

Friends, family and other investors, who have pitched in $110,000, have given Green Wave access to $1.5 million in facilities, supplies, vehicles, equipment and services, Holmes said.

The company has no official employees. Instead, all partners who provide services, equipment and working space are considered shareholders and officers. Most Green Wave workers have day jobs, such as the man who engineers corneas for eye replacement surgeries when he isn't designing turbine parts.

Using shareholders' properties -- the shipyard, a 10-acre manufacturing facility in Perris, two others in Santa Ana and Costa Mesa, and a garage in Orange -- saves thousands of dollars in rent a year. Instead of using an expensive wind tunnel to test the strength of the turbines, team members hitch a 4-foot prototype to a truck bed and go for a 55-mph spin.

But even though Holmes is an ace at being thrifty, he's less adept when it comes to government regulations and holdups, he said.

Before wave-power generators can even get close to public waterways, companies must hack through a pack of regulatory agencies, including the California Coastal Commission and the Federal Energy Regulatory Commission. The process, Holmes said, could take as long as three years and cost thousands of dollars in legal, permitting and other fees.

Fewer than 1% of small wind turbines are built in urban settings because of poor wind quality and zoning restrictions, according to the wind energy association. Convoluted permitting practices and resistant city planning departments thwart a third of all potential installations, the group said.

"The regulatory maze is so thick and complex that I am fairly certain no one can navigate it but well-trained lawyers -- and even for them, it's rather daunting," Holmes said.

The federal government and several states offer rebates and tax credits to stir investment in the wind industry. California, according to the association, boasts some of the strongest sales in the market.

There's plenty of competition from a crush of other young energy companies, all angling to set themselves apart.

Buying and installing a small turbine costs an average of $3,000 to $5,000 a kilowatt, according to the wind energy group. Recouping the investment could take six to 30 years.

Green Wave tries to position itself first as a company with money-saving products, while touting its eco-friendly qualities.

"We're here to make money," Holmes said. "We're the new guys on the block. If we didn't show up with a better mousetrap, we wouldn't have a chance."

Although he majored in chemistry in college, Holmes, 49, strayed from science for nearly two decades as he pursued a career as a maritime and corporate lawyer. In the 1990s, however, he worked on bankruptcy cases involving solar energy companies.

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