Alternative Energy's Fortunes Shift With the Winds

One Man's Effort to Build a Turbine Company Reflects the Ups and Downs of Oil, the Economy and Commitment
By JEFFREY BALL

Cedar Rapids, Iowa -- James Dehlsen has spent decades trying to build a bigger and better machine to convert a breeze into electricity.
As much as anyone, he helped create the modern wind-power business, riding waves of interest in alternative energy and weathering downturns when that enthusiasm died down. At this point in the cycle, he doesn't exactly have the wind at his back.
"The industry has been impacted pretty heavily," says Mr. Dehlsen, chairman of Clipper Windpower, one of a few U.S. wind-turbine makers. Asked about the demand for turbines, he says: "It's not up."

President Barack Obama and politicians of both parties vow a renewable-energy revolution. The ups and downs of Mr. Dehlsen's company show both the promise and the difficulty of that vision. Creating reliable energy from a fuel as fickle as the wind is difficult. Doing so without predictable and prolonged help from Capitol Hill and Wall Street is all but impossible.
Few industries are as hard to change as energy. Fossil fuel, entrenched and convenient, follows a boom-and-bust cycle that keeps interrupting the development and adoption of alternatives. The interest in renewable energy rises with the price of oil and falls with it, too. Phasing in new energy sources on a scale big enough to matter would take consistent effort over decades -- something that, so far, hasn't happened in the biggest oil-consuming country in the world.
Europe has been more consistent. Longstanding subsidies there have incubated renewable-energy companies that now have gone global -- much like higher gasoline taxes have pushed most Europeans away from gas-guzzling cars. In good economic times, the U.S. chose not to match Europe's renewable-energy subsidies. So Europe, which generally isn't as windy as the U.S., emerged early on as a global wind-power leader.
Today's recession is whipsawing renewable-energy companies regardless of their nationality. According to New Energy Finance, an industry analyst, new investment in "clean energy" -- sources such as wind, solar and biofuels -- sank 53% globally in the first quarter from the same period last year. Layoffs and production cutbacks are spreading throughout the industry, which just months ago was soaring. In response, the U.S. is moving to boost its subsidies, largely to generate what Mr. Obama calls "green jobs."
That's a big opportunity for Clipper -- if it can get past the recession. In the past few months, Clipper has laid off one-quarter of the workers at its factory in this Rust Belt city, and it has slashed its production of wind turbines by more than half. Like many of its competitors, it's spending huge sums fixing mechanical problems that couldn't have come at a worse time. The industry might have ironed out those glitches had it developed without the fits and starts.
Today's wind turbines weigh more than 300 tons and stand some 300 feet tall. Climbing their internal ladders to the top requires wearing a mountaineer-style safety harness and takes 10 or 15 sweaty minutes. Their three fiberglass blades slice through a circle of airspace covering nearly two acres. The blades turn gears, which run generators, which produce electricity.
When Mr. Dehlsen started his first wind company in 1980, turbines were "made in people's garages," he recalls. At the time, oil prices were surging, and tax breaks for new sources of energy were waiting to be exploited. Mr. Dehlsen's company, Zond Systems, began importing turbines from Vestas, a Danish equipment maker then entering the wind business.
By 1985, the good times had ended. Oil prices sank, Washington withdrew the tax credits, and private financing for wind power dried up.
Mr. Dehlsen spent the next two decades trying to develop turbines that would produce more power at lower cost. In 2000, he sold Zond to Enron, then a highflying energy company. The following year, he founded Clipper and began developing an even bigger turbine. In 2005, he tested it in a howling Wyoming snowstorm.
His timing was good. Once again, oil prices were rising, another U.S. tax break was in place, and investors were pouring money into wind.
Clipper leased an abandoned printing-press factory in Cedar Rapids and retooled it to make turbines. The location was sensible if not sexy. The windiest solid swath of the U.S. is a corridor stretching from Texas to the Dakotas. Iowa sits along it.
The arrival of Clipper and other wind-energy companies was a blessing for Iowa, which had been losing manufacturing jobs. Among those hired was Jeff Pottebaum, who was a maintenance worker at a local hospital before Clipper hired him in 2006 for $15 an hour. "I thought I had the world by the tail," the 41-year-old says.
In 2007, Clipper's first full year of production, cracks developed on the blades of some turbines the company had installed, and the teeth on some turbines' gears began to wear prematurely. In response, Clipper reinforced the blades of all its turbines. It also brought the gearboxes of all its turbines back to the factory to check and, if necessary, repair. Then, last year, more problems emerged with blades and with a few gearboxes. Those prompted additional fixes. Clipper says the problems originated with suppliers.
But the industry can't control the economy. Last fall, the debt markets collapsed, the recession set in, and orders for new turbines screeched to a halt. Clipper halved production, to about four turbines per week. In January, it laid off about 80 workers, including Mr. Pottebaum.
"I was with a company where I thought the sky was the limit," says Mr. Pottebaum, who now has a temporary job in landscaping. He would return to Clipper, he says, "in a heartbeat."
Other wind-turbine makers also have had layoffs -- enough to worry Iowa Gov. Chet Culver. "We've got to help them hold on," he says between meetings at the state capitol. Gov. Culver is glad that several wind-turbine companies -- including those based abroad -- have set up factories in his state. "Long-term, I think this is probably the strongest sector of our economy," he says. "I can't predict today what the future is going to be -- how long these companies are going to have to struggle."
Clipper is seeking a loan guarantee under the Obama administration's economic-stimulus plan. At the Cedar Rapids plant, Clipper's chief executive, Douglas Pertz, invokes national interest as a reason the government should help his firm. As the country assists its automotive icons, he argues, it also should help loosen up funding for its renewable-energy companies. It would be problematic for the country "for Clipper to not survive," he says. Yet the renewable-energy industry is one of many sectors competing for stimulus aid.
Vestas has grown into a global wind-power juggernaut largely because of the reliability of European renewable-energy policy, says Roby Roberts, a Vestas senior vice president. "It takes continuity, predictability and consistency, and that's not what the U.S. has ever had," he says. Vestas now is expanding in the U.S., he says, largely because the U.S. is implementing more supportive policy.
Out behind Clipper's plant, shrink-wrapped in plastic, the finished pieces of wind turbines are piling up as they wait to be picked up by buyers facing financial difficulty themselves.
Write to Jeffrey Ball at jeffrey.ball@wsj.com