Entrepreneur runs like wind as utilities back renewables

West Australian
Monday 4/8/2008 Page: 28

The lights snap off in the five-story, grey concrete building in Pune, India, where Suzlon Energy - the fastest growing of the world's top five wind turbine makers - has its headquarters. After 30 seconds of darkness, the fluorescent bulbs flicker on as back-up generators kick in.

"For us, it's routine," Tulsi Tanti, Suzlon's billionaire founder, says. "You have to understand the country's limitation and, within that, develop your business." Mr Tanti, 50, made his fortune in a decade by supplying wind energy to Indian companies struggling with blackouts and soaring energy costs.

The entrepreneur got his start in 1993, when he bought two turbines to reduce the electricity bills at his textile company in the western state of Gujarat. Mr Tanti's employees dug the foundations, installed the towers and connected the turbines to India's overburdened power grid - taking advantage of government incentives that let the company swap the wind energy it generated for the electricity. it used.

"Within two years, we understood the economics and dynamics of the industry and realised wind is a good source," Mr Tanti says. "Why not focus on that industry?" Suzlon started in 1995 and now ranks as the No. 5 turbine maker worldwide. These are heady days for wind energy producers.

Companies can't keep pace with demand. With oil soaring above $US 147 a barrel in July and concern mounting about global warming, governments are enacting mandates to promote the use of alternatives such as solar and wind.

Last year, utilities and other companies installed a record 20,000 megawatts of wind energy, and the renewable energy source will make up 3 per cent of the world's electricity production in 2012, up from one per cent in 2007, according to the Brussels-based industry group Global Wind Energy Council. "Suzlon came out of nowhere," says Daniel McClure, a fund manager with IG Investment Management, in Toronto.

"They've executed very well under Tanti." Like the entire wind industry, Suzlon is hooked on a growing number of incentives pushed by governments around the globe. In 1997, Massachusetts was the first of 21 US states to begin mandating that utilities buy as much as 20 per cent of their power from renewable sources. US wind energy companies get a US2¢ tax credit for each kilowatt-hour of power they produce. Starting in 2004, Indian states enacted similar mandates as high as 10 per cent for utilities, and companies can claim 80 per cent depreciation on equipment costs in the first year.

China rolled out a plan last year requiring that 15 per cent of the country's energy consumption be met with power from renewable sources by 2020. And in January, the European Union agreed that the region would get 20 per cent of its power consumption from carbon-free sources by 2020 compared with about 6 per cent in 2005. To meet these clean energy rules, utilities are mostly buying wind energy because it's cheaper than other renewable sources such as solar.

"The main driver for wind energy is regulation coming in place in Europe and North America to obtain a greater amount of energy from clean sources," says Geneva-based Philippe De Weck, who helps manage the Clean Energy Fund.

"Solar is still very expensive today. Wind is really left as the only option to fulfil that goal." Mr Tanti, the son of a wheat and peanut farmer, attended small regional colleges after leaving high school, earning a business degree from the P.D. Malaviya Commerce College and electrical and mechanical engineering diplomas from a government polytechnic institute. Although Mr Tanti and his family's net worth rocketed to $US2.2 billion ($2.29 billion) after Suzlon's initial public offering in 2005, he shuns the luxurious lifestyle.

From his small office in Pune, 160km south-east of Bombay in the state of Maharashtra in western India, Mr Tanti says he's pushing his company to grow faster partly to reduce the threat of global warming. Suzlon, which has 13,000 employees worldwide and markets its products in North and South America, Europe, Australia and China, aims to control 25 per cent of the market by 2013, making it the No. 3 wind turbine company. Denmark's Vestas Wind Systems is No. 1 globally, followed by GE Energy.

"With the climate change crisis looming, we have to work faster against it," Mr Tanti says. "That is why high growth is the priority, not just the bottom line." As the company expands, it adds turbines to India's grid that produce more power than Suzlon uses to make the machines, which eliminates its carbon footprint, Mr Tanti says. Suzlon's new, 4.5-hectare campus just 10km from its headquarters will be lit mostly by sunlight to reduce power consumption. The campus will also collect rainwater for use on lawns among the low-rise buildings.

wind energy's main drawback - turbines don't work without a strong breeze - has kept it from becoming a major source of energy for more than a century. In 1887, American Charles F. Brush became the first person to produce power from wind. He built a windmill and used it for 20 years to charge batteries in the cellar of his mansion in Cleveland.

For decades, use of the renewable energy source remained limited because even in the best locations, where winds consistently blow at speeds greater than seven metres per second, turbines operate at only 30-40 per cent of their capacity.

"The issue with wind energy is that it's a variable source of electricity," Keith Hays, a Barcelona, Spain-based research director at Emerging Energy Research, says. "You just can't turn it off and on." Mr Tanti's interest in wind energy was first nurtured at a business owned by his father who quit farming and started a business to distribute potatoes that required a freezer to store them.

Mr Tanti returned from college in 1978 and joined his father's company, which had high energy costs. He installed fins on cooling coils inside the freezer to increase efficiency and moved the condenser to the top of the building, where wind flow helped cool it. Within a year, he'd cut energy consumption by 30 per cent.

Suzlon's sales did not take off until about 1999, when it began developing and operating big wind farms for companies such as Tata Finance and Bajaj Auto, India's second-biggest motorcycle maker. Suzlon has invested in manufacturing, opening nine plants in India, China and the US to support soaring global sales. By March last year, it had installed 3768 megawatts of wind energy, a sixfold increase over 2004. Suzlon's revenue has almost doubled each year since 2004, topping out at $US3.4 billion in the 12 months to March 31.