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GE had a problem. Its researchers were inventing a lot of interesting ways to eke out more power from already installed wind turbines—a software adjustment, adding a vortex-inducing strip of metal, and so on—but customers weren’t buying. Nevermind that GE carefully analyzed how much more their customers could make, and how fast they could pay off the investment.

Getting people to buy into little improvements is not GE’s problem alone. Startups that offer modest improvements to the incumbent technology struggle to get attention. There’s a similar problem when it comes to efficiency gains. A little upfront investment by homeowners and businesses in insulation, light sensors, and other equipment can quickly pay for itself. But those investments often don’t get made.

In the realm of efficiency, the issue is starting to be tackled by companies that offer to cover the upfront cost in return for cashing in on utility-bill savings. Solar installation companies like SolarCity are doing the same thing (see “Why SolarCity Is Succeeding in a Difficult Solar Industry”). 

GE recently decided to take a similar tack. It’s been gathering huge amounts of data from the thousands of wind turbines it’s already installed. Based on that data, it’s been able to figure out how to improve power output by tweaking how the wind turbines are controlled, something that it’s demonstrated with some of its customers.

Using that know-how, it’s decided to offer a service package (called Power Up) to its customers. GE will analyze a wind farm, determine what software and hardware improvements could improve performance, and how much more electricity the customers could expect to generate. Then GE will make the improvements free of charge. The customer only pays GE if power output and profits increase.

“We have products that make a lot of sense, but sometimes customers choose not to buy them,” says Andy Holt, general manager of renwable energy services at GE. In the new setup, GE takes on the risk instead of the customers, and he hopes that will lead to more customers taking advantage of the company’s innovations. He thinks the changes could improve the profitability of wind farms by 20 percent—something that could be especially key this year, when there’s been about 7 to 8 percent less wind than usual.

The program could also increase the amount of renewable energy on the market. If the changes result in even a fifth as much power increase as GE expects across the 9,000 1.5-megawatt GE turbines currently in operation, it would add enough electricity to power 33,000 homes.

So that’s a solution for companies like GE that have a big enough balance sheet to take on the risk themselves. I have no idea how startups with small but interesting innovations are going to solve their problem.

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Tagged: Energy, renewable energy, GE, wind turbines, business models

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