Wartsila finds lucrative niche in distributed power market

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Demand for traditional smokestack power plants is at an all-time high, as companies try to satisfy America’s insatiable demand for electricity. But demand for some forms of alternative energy is growing, too — and Annapolis-based Wartsila North America is reaping the rewards.

Thomas M. Carbone, president of Wartsila North America, says industrial and municipal users are seeking greater control over their power consumption.

Wartsila, subsidiary of a Finnish engine and power systems manufacturer, has carved out an increasingly lucrative niche in the budding distributed power market with several new contracts either signed or in the works, including a deal involving Trigen Baltimore Energy Corp. and Sweetheart Cup in Owings Mills.Wartsila posted $500 million in revenue last year — nearly doubling its performance in three years. Last year, the company’s power business accounted for half its total revenue base — and this year it is on track to capture 60 percent. The Annapolis office has added nearly 20 employees to keep up with demand.Moreover, during the last four years, the company has put 500 megawatts of power in the field — more than half that volume generated within the last 12 months. Another 100 megawatts are expected to be online by 2003. During the last year, Wartsila has signed eight contracts with small municipalities and others to install the company’s flagship product, PeakingPlus — a pre-engineered, gas engine power plant that allows customers to generate their own power when electricity demand is highest during hot and cold months. Wartsila’s newest PeakingPlus contract — its largest ever — is with PG&E National Energy Group, a Bethesda-based power producer. PG&E selected Wartsila to build a 110 megawatt power plant on a 7,000-foot-high plateau outside Denver for Xcel Energy, a Colorado utility.

“Wartsila really fits the bill,” said James A. Tramuto, a spokesman for PG&E’s western region. “Not only does its technology work at that altitude, it’s most efficient and fits all the other parameters — sensitivity to water, noise, height restrictions, air and noise emissions.”The company’s budding success is a sure sign that the distributed power market — ignored by regulators and policy makers until very recently — is coming into its own. The niche caters to industrial and municipal customers who don’t want to be at the mercy of their local utilities. Instead, these customers want to generate their own electricity — and to do so as efficiently as possible. That way, they avoid utility-driven brownouts and blackouts and may be able to sell extra power back to their utilities for profit.“This is just the beginning of a paradigm shift in the energy market,” said Thomas M. Carbone, president of Wartsila North America. “Many industrial and municipal users are seeking greater control over their power consumption.” He said two new contracts will be announced shortly with a Washington State municipal utility and an industrial customer in New Jersey.“Distributed generation is a very small business right now in the context of the overall power generation industry, but it’s a growing area,” said Howard Kagan, managing director of McManus & Miles, a New York power industry investment bank. “Historically, it was lumped together with other green conservation initiatives, but today, people look at it as a tool for sophisticated energy management,” Kagan said.Tramuto says distributed energy is increasingly perceived as a “silver bullet” to help solve regional energy problems and transmission constraints — issues not always adequately addressed by the dominant power merchants.“We don’t think one size fits all,” said Tramuto. He says the Bush administration’s budding national energy policy recognizes the need for diverse energy solutions. Distributed power “is one of those items they’ll have on their list for further development.”