U.S. WIND MANUFACTURING HAS BULL POTENTIAL

Wind turbine industry growing in the U.S.; Although imports have continued to rise, manufacture of wind turbine parts in the U.S. is increasing.
Renee Schoof, April 12, 2009 (McClatchy News Service via Miami Herald)

SUMMARY
With the 2008 boom in wind energy, wind turbine parts manufacturing grew. At the same time, the import of turbine parts also increased.

Imports of turbine parts from Europe and Asia increased from $60 million in 2004 to $2.5 billion in 2008. Imports of equipment usually, but not always, used for wind energy also grew between 2004 and 2008. Meanwhile, the U.S. part of the wind turbine parts manufacturing business grew from 30% in 2005 to ~50% through 2008.

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According to the U.S. International Trade Commission (ITC):
(1) Companies assembling nacelles (the big box that sits on the tower containing the gear box and generator) went from 1 in 2004 (GE) to 5 in 2008 (GE, Clipper Windpower and Composite Technology Corp. subsidiary DeWind in the U.S. and Acciona and Gamesa in Spain). 5 foreign firms plan to build U.S. plants.
(2) 11 or more blade manufacturers and 16 tower manufacturers have or have planned plants in the U. S.
(3) New plants announced in the first three quarters of 2008 will evenutally add up to 4,000 jobs (w/wages from $13-to-$20/hour).
(4) Imports leveled in 2008 to $2.5 billion (from $2.4 billion in 2007).

The opportunity is only going to get bigger. (click to enlarge)

COMMENTARY
The leveling of turbine parts imports between 2007 and 2008 indicates U.S. manufacturers have already begun to seize the huge opportunity indicated by all the import activity and new U.S. installation in the preceding 3 years.

The opportunity should get much much bigger. The wind power industry presently supplies just under 2% of U.S. electricity and plans to supply 20% by 2030.

Vestas, the world's largest wind turbine maker, has made ~20% of U.S. wind turbines, but none in the U.S. This underscores the huge opportunity for domestic manufacturers because the cost of shipping turbine parts is significant enough to make local manufacturing far preferable.

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Vestas clearly sees the opportunity. It completed its first Colorado manufacturing facility this year, is building 3 more Colorado facilities and plans to make all turbines for its U.S. installations in the U.S. by 2010.

U.S. companies can and are expected to ramp up manufacturing capacity to meet more of the U.S. turbine and turbine parts demand. As manufacturing capacity grows, U.S. companies are expected to compete for investment and export opportunities in China, South America and the rest of North America.

GE is the biggest U.S. turbine supplier. In 2008, it made 1 of every 2 U.S. turbines. GE imports some parts, including some blades and some manufacturing raw material, but it also has an extensive U.S. supply chain, including companies in Iowa, Texas and the Dakotas.

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Every turbine GE sold in 2008 was in a state that has a Renewable Electricity Standard (RES) requiring utilities to obtain a specific portion of electricity from New Energy sources by a date certain.

While GE endorses the 3-year extension of the production tax credit (PTC) in last fall's financial rescue package and the grants that made the PTC workable in the recently passed stimulus bill, it now wants a national RES that will do for the enitre country what it has begun to do in 30 states.

Which states don't have an RES? The ones in white. (click to enlarge)

QUOTES
- Roby Roberts, senior vice president, Vestas: ''Wind is positioned to help take a lot of those manufacturing jobs that have been lost, especially in the auto industry, and move them into the work we're trying to do…''
- ITC report: ''[Domestic U.S. wind turbine parts manufacturing is increasing] due to new investments in production, a growing domestic market and a recent period of stable tax policy.''
- Thomas Rumsey, communications chief, GE: ''[The recently passed federal incentives allow] for stable investment, and smaller companies can get into the game…''