Ingeteam CEO Aitor Sotes: Growth opportunity for foreign firms in U.S. wind power market

Experts say Europe and Asia are full-speed-ahead for renewable energy. So why are companies coming to North America?

In June, Spanish energy firm Ingeteam announced its plans for a $15 million wind power manufacturing facility in Milwaukee, Wisconsin. The announcement was interesting because it both renews Milwaukee's historical role as a cradle for manufacturing and demonstrates that there's money to be made for foreign companies by setting up shop in the U.S. -- even if wind power has a single-digit share of the nation's energy mix.

Curious to know more, I called Ingeteam CEO Aitor Sotes at his office in Zamudio, Spain to ask him about his North American strategy for renewable energy and how his company its in with General Electric, Denmark's Vestas and others in the wind market.

SmartPlanet: Aitor, why North America? Why now?

AS: We have had products in the U.S. before 2008, but our legal presence started in 2008. We opened a service business to support and maintain wind farms with Acciona.

In 2009, our corporate leadership decided that in order for us to grow and keep growing, we need to tackle the U.S. market. In order to play in the big leagues, we need to be here manufacturing generators and power electronics. Initially, that was the core, that's why we came here.

In order to be successful in the U.S., we had to be here manufacturing.

On the generator side, there weren't so many people manufacturing in the U.S. for the wind industry. It's something that could attract our current customers, but also new ones.

The U.S. market obviously has potential for growth.

We grew from $250 million to $750 million in sales in four years. We weren't a company mature enough to make the big step [until now].

SmartPlanet: Why did you locate in America's Rust Belt?

AS: Being in the Midwest was for us a no-brainer, but the decision took almost a year to make. We checked over 85 different sites in different counties and states -- Grand Rapids, Michiga; Fort Wayn, Indiana; Dubuque, Iowa -- and settled in seven to 10 counties around Milwaukee.

Milwaukee had the biggest concentration of electrical and motor manufacturing labor. The state and city governments helped us out with a big package of incentives.

There are other great areas. But our customers are wind turbine manufacturers, so being close to them is one of the key elements for us. Anywhere in the Midwest for us was going to cover that factor.

Avoiding growing pains was having access to a good pool of labor.

SmartPlanet: Wind isn't the only type of renewable energy Ingeteam works with in Spain. Do you expect to enter other markets here in the U.S.?

AS: Initially in the U.S., we're going to go to our bread-and-butter expertise, which is wind and solar energy. But with manufacturing, we're going to make it easy to make motors for the high-speed train, for instance, or hydro...not so much biomass.

In the U.S., we also have a small sales office in Santa Clara, California for the PV solar market. We intend to tackle manufacturing inverters.

We have room for expanding at the current site. That's always a possibility, but in the short-term, we're going with wind and solar. We'll focus and establish our presence in the U.S. with things we do the best.

For wind and solar, you have the natural resources. I think that in the U.S., industry is not as mature as it is in Europe. Obviously there are some limiting factors: the needs for incentives to get this industry going, the aging grid and the ability to bring the electricity to it.

As time passes, we believe this company will be able to self-sustain.

SmartPlanet: Wind power entails several components, from turbines to meters. Do you see the company expanding to develop America's smart grid?

AS: We're solely dedicated to transmission and distribution. We are working with a couple of companies in R&D for the transmission and distribution areas. We're trying to establish in parallel those relationships.

SmartPlanet: Do you think America is ready for a smart grid?

AS: The technology could be available, but if there's not a will to use it...that's when it becomes political.

We've been talking with a couple of labs in the U.S. for smart grid projects. We believe that more sooner than later, those changes in the environment, if you will, will occur. There's agreement on both sides of the aisle in Washington that it's important for the U.S. to become independent from foreign sources of energy.

How and when that materializes, we're hoping sooner rather than later. I don't think there's any turning back.

SmartPlanet: Some people say renewables are doomed if government subsidies aren't renewed. Is the political climate stable enough to ensure investment from overseas companies like Ingeteam?

AS: These projects are a very capital-intensive projects. They need a lot of investment up front. From a social point of view, they need governmental assistance. In a long-term view, you want the public to experience the results of these projects so that the upfront cost is more justified.

In the U.S., especially in [high-speed] rail...it's hard to compare Spain and the U.S., geographically. At the beginning, having the Spanish government extend so much money in something unknown., it was hard to tell the public. Now people can't think of Spain or Europe without thinking of high-speed trains. We need to make the case in the U.S.

Solar is a market that's less mature. The investors are more willing to finance projects. It's easier to touch, the return on investment -- it takes less time to set up, it's less capital intensive -- is shorter. There's even more growth there than in wind for us. There are more limiting factors, however, such as getting your projects certified under UL standards.

We're looking at solar as an area of great opportunity for us. We have the whole scale, from the residential to the utility scale. We're also looking to grow our business in China.

Photo: Sotes listening to Milwaukee mayor Tom Barrett during the June 22, 2010 groundbreaking ceremony for the facility. (Barrett for Wisconsin/Flickr)

This post was originally published on Smartplanet.com