Thursday, November 19, 2009

Wind Energy and the Real Battle for Market

Recently, we did a market study on the wind energy industry. Because we're a contract manufacturer, we thought we'd do well in the 10kw - 100kw range, avoiding the 1+ Mw utility size turbines. We did a study of those companies trying to gain a foothold in that market segment.

We found two things: 1) they predominantly talk about cost; 2) they talk about how well they capture the wind.

Number 2 has to do with blade design and control. We can't help them there.

Number 1 is important because it's related to payback. However, there are two elements to the payback equation: power saved or sold, and cost. Companies must be figuring no one has an advantage on the former, and so they've put all their competitive energies into cost. Hence, they get as many components as they can from overseas.

Payback = cost/power saved (sold) over "x" years

One of the things we know is that many companies don't maximize their generator efficiency when they try to take labor content out of the design. We also know that global supply chains can be costly because of long lead-times: high inventory, minimum buys to get pricing breaks and reduce the freight costs/unit, lots of storage space, lots of debt to pay for the inventory, higher than normal warranty costs because improvements can't get through the long supply chain quickly, etc. Even changing the parameters of the supply chain can reduce the wind turbine company's overall costs.

We thought to help our potential customers see how they need to focus on more than just cost of the unit. Look at payback. If the generator efficiency increases dramatically, the customer is decreasing their payback period. That's all the wind turbine customer cares about: how long till this $20,000+ investment is paid off?

At a recent trade industry show, we tried out the message. By golly, people are latching onto the message. Maybe we're creating some more common sense in the world.

Others have talked about this form of marketing. It's showing the real benefit to the customers, not just what's in it for you, but what's in it for them and, more importantly, how it helps their customers.

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