WHEN WIND WORKS, THERE’S LOTS OF WORK IN WIND

New Report Provides Blueprint for Building Domestic Wind Energy Component Supply Chain; BlueGreen Alliance, American Wind Energy Association, and USW Provide “Manufacturing Blueprint” to Build Out Domestic Wind Energy Supply Chain and Create U.S. Manufacturing Jobs
June 28, 2010 (American Wind Energy Association)

THE POINT
Wind energy is not only the most mature and capable of the New Energies right now, it is also the leading voice of the New Energy industries.

That is why it is so interesting to see that, in response to the U.S. New Energy industries’ currently slowing momentum, wind is reaching out, forming alliances and pushing harder than ever for the federal policies that will matter.

Late in 2009, the American Wind Energy Association (AWEA) and the other New Energy industries reached out to the natural gas industry in an attempt to find common ground in the nation's fight against coal dependence and the fight against greenhouse gas emissions (GhGs).

Early in June, 2010, AWEA and the United Steelworkers Union (USW) formed a Partnership for Progress and called for a national Renewable Electricity Standard (RES). Shortly after that, AWEA joined the Alliance to Save Energy, the Business Council for Sustainable Energy, the Biomass Power Association, Growth Energy, the Energy Recovery Council, the Geothermal Energy Association, the National Hydropower Association, and the Solar Energy Industries Association to declare THE TIME IS NOW for a national RES.

Now AWEA has joined the USW and its labor union and environmentalist partners in the Blue-Green Alliance to release "Winds of Change: A Manufacturing Blueprint for the Wind Industry. The Blueprint calls for an RES requiring U.S. utilities to obtain 25% of their power from New Energy sources by 2025.

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Wind, the ultimate American can-do energy industry, can and is doing what it has to. That it created a boom from 2004 to 2008, rose to a pinnacle of accomplishment and took over international leadership in wind energy production despite shoddy and inconsistent federal policy support means nothing now. That it went from 2,500 U.S. jobs in 2004 to 18,500 jobs in 2009 means nothing now. That it quadrupled its yearly capacity additions to 10 gigawatts in 2009 and finished the year with a world-leading 35+ gigawatts of cumulative U.S. capacity means nothing now.

What matters now is that the New Energies – and their new allies – be heard.

Political leaders in Washington, D.C., will – when they finish eulogizing Senator Byrd and tormenting Ms. Kagan – go to work on legislation in response to the April coal mine cave-in disaster that killed 29 miners and the even worse Gulf oil spill that killed 11 offshore oil platform workers and resulted in an environmental and economic atrocity for the region.

What matters now is that those political leaders get the message that fossil fuel-perpetrated devastations will only come to an end when the nation turns with all its might to New Energy.

What matters now is that those political leaders come to understand there is a choice in the kind of energy they subsidize and there are real and devastating consequences when they subsidize dirty and dangerous energies.

What matters now is that those political leaders also come to understand there is a huge opportunity for the nation in New Energy. It is an opportunity to staunch the flow of U.S. treasure to profoundly troubled places and people, to enhance the nation’s energy security, to invest in domestic sources of power generation in a way that will rehabilitate its economy and to get the nation on the world’s side in the fight against climate change and killer air pollution.

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So the wind industry is speaking out. It is calling for federal policies that will give it a level playing field against its Old Energy competitors. Industries like nuclear energy, natural gas and coal have long had support in the form of federal subsidies, guarantees and incentives. The Old Energies, in fact, could not exist without such support. Wind and the other New Energies aske only that the rules be fair. Either take away their competitors’ advantages or give them long term policies like:

(1) A national Renewable Electricity Standard (RES) requiring U.S. utilities to obtain 25% of their power from New Energy sources by 2025,
(2) An extension of the Recovery Act's 1603 convertible tax credit,
(3) A cap and price on greenhouse gas emissions (GhGs) with protections for vulnerable domestic industries,
(4) Legislation to facilitate extensive development of new transmission infrastructure,
(5) Expanded funding for the Advanced Energy Manufacturing Tax Credit to subsidize the building and renovation of manufacturing capacity,
(6) Further loan guarantees for new and renovated New Energy manufacturing capacity, (7) Enactment and funding of the Investments for Manufacturing Progress and Clean Technology (IMPACT) and Renewable Energy Market Access Program (REMAP) Acts to grow the domestic manufacturing supply chain,
(8) Funding for the Green Jobs Act to insure a trained job force, and
(9) Support for states to further develop similar subsidies, guarantees and incentives.

During the press conference held to announce the release of Winds Of Change, one of the speakers intended to say that not backing U.S. turbine makers with strong policies could result in the “cessation” of manufacturing activity and the wealth of economic benefits that come with it. He inadvertently said “secession” instead. But his malapropism was closer to the truth.

Turbine manufacturing will not cease. It will secede from the U.S. and move to other countries, countries like Turkey and China and India where they are backing their New Energy industries because they see what the fossil fuel addicts in U.S. political power centers refuse to see. They see that New Energy is the future and no matter how hard they try to stop it, it is coming. It is coming and it is bringing enormous opportunities for those countries smart enough to seize them. The time is now. NOW.

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THE DETAILS
Because Pennsylvania enacted RES, Gamesa – the world’s 7th biggest turbine manufacturer – chose the state for manufacturing facilities that added 1000+ steel workers to the job rolls.

On the strength of only an inconsistent federal production tax credit (PTC) and some strong state policies, the wind industry grew its manufacturing sector jobs 7 times over in the last 5 years to 18,500. Strong, long-term policies could generate tens of thousands of jobs.

The record-breaking growth in the wind industry from 2004 to 2009 came because
Congress sustained the PTC over that period. During that period, the domestic supply chain was developed but turbine manufacturing capacity lagged because the world’s biggest turbine companies are not based in the U.S. and require longer-term policy support to make the kinds of large and extended investments necessary to build plants.

The result of Congress allowing crucial 2009 Recovery Act benefits for wind to expire at the end 2010 is that wind development fell off in the first quarter of 2010 to its lowest point in 3 years: 539 megawatts. At its current pace, it may not achieve even a quarter of its 2009 benchmark.

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Another bust looms, with 14,000 planned manufacturing jobs and billions in revenues threatened.

The U.S. wind industry grew an average of 39% per year from 2004 to 2009. It added 10,000 megawatts in 2009, bringing cumulative capacity to a world-leading 35,000+ megawatts, enough to power 9.7 million U.S. homes.

The last time the U.S. led the world was in the early 1980s. Because of the failure of federal policy, U.S. wind looks to lose its world leadership to China either this year or next.

The U.S. invented utility-scale wind energy in the early 1980s as the result of the Energy Tax Act of 1978 that created a 15% Energy Investment Tax Credit (EITC) through 1985 and the Public Utilities Regulatory Policies Act of 1978 that required utilities to purchase New Energy.

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In 1985, the wind industry built 1,000 megawatts but – because of waning policy support and cheap natural gas – never achieved that level of development again until 2001.

In 1986, the U.S. had ~90% of the world’s wind capacity, most in California. Between 1987 and 1997, the EITC expired, Europe grew strong policies, the U.S. built less than 50 megawatts of wind per year and, by 1998, the U.S. had 1,853 megawatts of wind while Europe had 6,453 megawatts.

The U.S. got back in the game after 2001, thanks largely to state RESs, other state policies, and the re-enactment of the federal PTC yearly from 2005 to 2009. The wind industry went from a 2004 installed capacity of 6,700 megawatts to 2009’s 35,000 megawatts.

The supply chain grew but turbine manufacturers rarely took the plunge because of such inconsistency in federal policy.

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2009’s record-breaking growth was directly attributable to the Recovery Act’s extension of the PTC for 3 years and allowing it to be converted into a 30% Investment Tax Credit (ITC) that could be exchanged for a cash grant through 2010.

As AWEA and its blue collar allies continually insist, wind turbine manufacturers need longer-term policies and the long-term promise of markets – comparable to what they can get in Europe, China and India -- in order to make the big investments their facilities require.

China has set the goal of building 100 gigawatts of wind by 2020 and the central government is doing everything possible to support its wind industry in achieving the target. Its industry built almost 14 gigawatts in 2009 and looks ready to leave the U.S. industry in the dust sometime in 2011 or 2012.

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The U.S. wind industry’s “fundamentals” are considered sound. All that’s lacking is strong, long-term supportive policy: (1) The wind industry manufacturing sector added/expanded 100+ facilities since 2007 and has 240+ facilities in a ready-to-serve component supply chain. The domestic sector has tower and blade makers and nacelle assembly facilities. (2) Makers of nacelle internals, the smaller, highly complex, high-value “brains and heart” of a turbine, are just getting started. (3) In 2005, the U.S. wind industry built ~2,500 megawatts and ~25% was from the domestic manufacturing supply chain but in 2009 it built 10,000+ megawatts and ~50% was from the domestic manufacturing supply chain. (5) Research suggests there is no reason the domestic manufacturing supply chain cannot supply a significantly larger portion of what is installed in the U.S. if the turbines themselves are also made domestically.

Towers: There are 20 U.S. utility-scale turbine tower makers, 14 added since 2004. Texas, which has the biggest U.S. installed capacity, has 25% of the online and announced tower manufacturing. The value of imported towers fell in 2009 while the value of the domestic market grew 20%, indicating strong demand for U.S. towers.

Blades: There are 13 U.S. blade manufacturing facilities, 9 added since 2004. 3 are planned. The value of imported blades fell in 2009 while the U.S. installations grew, again indicative of strong demand for domestic blades.

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OEMs and Nacelle Assembly: 9 turbine manufacturers, or original equipment
manufacturers (OEMs), had more than a percent of U.S. wind installations. There 8 domestic nacelle assembly facilities and 8 more are planned.

Nacelle Internals: As nacelle assembly facilities double (see above), demand for nacelle internals, the very complex, high-value components that make up the “heart and brains” of the turbine, will grow.

The first U.S. facility for any of the 3 major components – gearboxes, generators and drives – came online in 2009. There is also a growing supply chain for smaller, sub-components like bearings, electricals and hydraulic systems.

Needed: New foundry capacity to do the castings required in utility-scale turbines. Large castings (the mainframe, hub, rotor shaft, etc.) weigh 30 tons and more. Domestic manufacturing of them is much preferable to shipping them.

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Offshore Wind Turbines: There is no U.S. offshore wind industry. It is all opportunity.

The study includes discussions of:
(1) the job potential in wind manufacturing (showing that the current 14,000 jobs waiting in wind manufacturing could grow to 30,000 with supportive policies),
(2) the factors that will drive growth in a domestic wind manufacturing sector (showing the most important factor is the sheer price advantage from making the 250-to-400 ton turbines near where they will be erected rather than importing them), and
(3) the role state policies can play in building a domestic manufacturing sector (showing states' biggest roles should be in supporting markets and training workers).

The last part of the new paper is a discussion of the urgently needed policy measures that will build a long-term market to support a domestic wind energy manufacturing sector.

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(1) A national Renewable Electricity Standard (RES) requiring U.S. utilities to obtain 25% of their power from New Energy sources by 2025:

36 countries, including China and all the EU member states, have an RES. Research shows a national RES would bring 274,000 new U.S. jobs. 29 states and D.C. already have an RES. It is not currently high on the Congressional agenda.

(2) A cap and price on greenhouse gas emissions (GhGs) with protections for vulnerable domestic industries:

Caps should match the Intergovernmental Panel on Climate Change (IPCC)-stated call for GhG reductions of 80% below the 1990 level by 2050. Mechanisms must be legislated though which the caps can be achieved. Research shows hard caps with a workable mechanism to achieve them and protections for vulnerable domestic industries could drive the growth of New Energy even more effectively than an RES.

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(3) An extension the Recovery Act 1603 convertible tax:

The Treasure grant in lieu of the ITC not only salvaged a recession-year downturn in the wind industry but turned it into a record year. The Renewable Energy
Expansion Act of 2010, from Congressman Earl Blumenauer (D-Ore), and the American Renewable Energy Jobs Act, from Senator Charles Schumer (D-NY), would both extend the cash grant option through 2012. Any serviceable bill should make the mechanism automatic. Any extension should also: (a) Require goals, (b) Require reporting, and (c) Require feedback data analysis to reconcile experience with the bill’s intent.

(4) Expanded funding of $5 billion for the Advanced Energy Manufacturing Tax Credit to subsidize the building and renovation of manufacturing capacity:

It should also: (a) Add selection criteria, (b) Strengthen existing selection criteria, (c) Include criteria targeting specific market segments, and (d) Establish goals and submit an analysis of collected data to Congress.

(5) Further loan guarantees for new and renovated New Energy manufacturing capacity:

Longterm, lower-cost debt is especially important to manufacturers because their capital costs are so high and the current financial environment makes it otherwise prohibitively expensive. A variety of mechanisms exist. The report recommends funding a pair of them at ~$2 billion each.

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(6) Enactment and funding of the Investments for Manufacturing Progress and Clean Technology (IMPACT) and Renewable Energy Market Access Program (REMAP) Acts to grow the domestic supply manufacturing supply chain:

IMPACT creates a $30 billion state-level loan fund and adds $1.5 billion to the existing Manufacturing Extension Partnership program to help New Energy manufacturers retool.

The Renewable Energy Market Access Program (REMAP) would help small and medium-sized New Energy companies export to existing and new markets abroad and learn how to best access foreign markets.

(7) Funding for the Green Jobs Act at $125 million per year to insure a trained job force:

The New Energy manufacturing sector requires workers with skills but ~1.6 million U.S. manufacturing workers are near retirement age and 57% of working adults lack basic skills or an educational credential beyond high school. The Green Jobs Act helps close the skills gap and should be fully funded at its authorized level of $125 million per year.

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(8) Legislation to facilitate extensive development of new transmission infrastructure:

To use 25% New Energy, a complete effort from local, state, and federal officials to fund and build new transmission infrastructure will be necessary. It will require streamlined permitting, funding, skilled workers to build and implement it but it will create big economic benefits. Policy barriers, the biggest obstacle, can be addressed through (a) Interconnection-Wide Transmission Planning, (b) Interconnection-Wide Transmission Cost Allocation and Certainty for Cost Recovery, and (c) Federal Siting initiatives.

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QUOTES
- From the report’s conclusion: “The American wind industry has made impressive strides towards increasing domestic content in installed wind turbines and has brought thousands of jobs online in manufacturing. However, the wind manufacturing sector is still developing, with the opportunity to bring tens of thousands of additional jobs online. In order to justify investment in opening new facilities and expanding or retooling existing facilities, Congress must take action to ensure a long-term, stable wind energy market. Coupled with other policies to support the U.S. manufacturing sector, these actions would enable the wind industry to develop robust supply chains and employ thousands of Americans in good, clean energy jobs.”