Wind Energy Industry Says PTC a Necessity
01 May, 2012
By Rachel Duran
In Wisconsin, the manufacturing base consists of unique engineered componentry, electronics, controls and plastics, which has allowed suppliers to reposition and credibly participate in renewable energy markets. Wisconsin Wind Works, a consortium of nearly 300 suppliers and manufacturers, includes companies that have traditionally built huge pieces of equipment or built equipment that produces other equipment. These companies participate in different markets, which require sophisticated components and the ability to hit high tolerance marks, such as wind energy.
These factors attracted Spain-based Ingeteam, a supplier to the wind and solar energy industries, to Milwaukee. The Milwaukee 7 economic development organization partnered with The New North Inc. to attract the company to the state. “Part of the reason they selected Wisconsin was our supply chain directory,” says Jerry Murphy, executive director, The New North, which markets 18 counties in northeast Wisconsin. “They were interested in finding a place that had talent and a supply chain base, and yet, was close to the plains states,” Murphy says. “They could garner all the benefits of their business model in one place.”
Companies based in The New North region participate in Wisconsin Wind Works, which offers a searchable online directory, which consists of 16 categories. “People go to the directory and shop,” says Ann Duginske, research and development project manager, The New North. “We know that individual companies are successful.”
The Portland (Ore.) Development Commission has also developed an online database of suppliers that would ideally support wind energy activities. Through the NW Connectory, the commission is opening doors for traditional manufacturers to develop new lines of business in the wind energy industry.
The Portland region’s long-term advantage is in providing manufacturing expertise to service and maintain the existing industry in the Pacific Northwest. For example, there is a cluster of wind farms operating in the Columbia Gorge region, an hour from the Portland metro.
Portland is home to the North American headquarters for Iberdrola, the second-largest wind power operator in the nation. The headquarters operation includes the company’s National Control Center, which manages 3,300 turbines in 20 different balancing areas. The company has recently signed a 10-year lease in Portland. “It is our talent base and ability to fill high-skilled positions,” says Pam Neal, senior project coordinator, Portland Development Commission, commenting on the area’s business climate advantages. “I would say that in addition to finding talent, Iberdrola would say they like their location,” says Anne Mangan, senior communications coordinator, Portland Development Commission. “This is a soft advantage that goes to Portland’s quality of life. When they were weighing where to keep their North American headquarters office, those elements came into play.”
Another wind energy company attracted to Portland is Vestas, a leader in producing high-tech wind systems, which this month will move its North American headquarters to Portland’s Pearl district. The LEED Platinum building is a $66 million investment.
In regard to supplier activities in the metro, Miles Fiberglass & Composites of Oregon City, which traditionally works in the RV industry, is conducting repairs to blades. “We have a couple of manufacturers that have historically made other parts, such as shipbuilding, that find their equipment is adaptable to servicing turbine engines,” Mangan says.
Moving to Texas, the western part of the state is a magnet for wind energy farms due to the region’s wind capacities. Midland is located in the region, and has the talent base, skill sets and incentives to support suppliers’ needs. “West Texas and Midland are home to a trained and skilled workforce in oil and gas activities, skills that transfer to manufacturing activities in the wind and renewable energy industries,” says Pam Welch, president, Midland Economic Development Corp.
The corporation owns a 70-acre site to support industry’s expansion needs. A transload facility is located on one side of the property. What’s more, out at the Midland International Airport’s business and industrial park is a 40,000-square-foot facility, which is expandable to 160,000 square feet.
In Wisconsin, suppliers produce hubs, cones, towers, gear boxes — everything but blades. The state is also home to a strong aftermarket for parts, where many companies are involved in rebuilding electronic components and gears. Industry members are also poised to support small wind turbine manufacturing activities. Renewegy LLC of Oshkosh is selling small turbines in multiples so that organizations can establish small turbines at their sites. The marketplace includes college campuses, tribal properties, schools and municipalities, which will use the power generated onsite, and not feed it to the grid. “A good example is the Northern Power project at the Port of Milwaukee, which has a 100-kilowatt wind turbine that became operational March 1,” Duginske says. The onsite generation allows organizations to better manage electricity.
Set The Stage
One thing businesses appreciate is predictability. Particularly in an industry that saw investments of $20 billion in 2009, the high water mark for the wind energy industry. In the past five years, the annual investment has averaged $15.5 billion. In comparison, “the entire Keystone pipeline is $9 billion,” says Peter Kelley, vice president of public affairs, American Wind Energy Association (AWEA).
The challenge to the wind energy industry’s manufacturers and wind farm developers is in sustaining this growth. Through a combination of foreign investments into the expanding U.S. marketplace, and access to a federal tax credit, the percentage of wind energy equipment made in the country has increased from 25 percent to 60 percent in just five years. By 2016, the price for wind energy is expected to equal other forms of energy. Moreover, improvements in technologies have opened up markets to wind farm development that were previously not accessible.
However, the federal Production Tax Credit will expire at the end of this year, which is creating uncertainties in the wind energy marketplace. Because lead times can run 18 months ahead for some of the industry’s manufacturers, an extension of the credit will go a long way in shoring up contracts, Kelley says. The tax credit has been in play in one form or another since 1992. The extension could pass during this summer’s legislative session, or in the December session, commonly known as the “lame duck session;” if it happens at all.
Passage of an extension in the December session would be destructive to the industry, Kelley says. “Clearly, if you don’t find out until December as to what the terms of a contract are going to be, basically you miss all of 2013.”
AWEA is urging Congress to pass an extension of the credit. “Increasingly, overseas manufacturers are setting up shop here,” Kelley says. “They are insourcing manufacturing while everybody else is outsourcing manufacturing.” Foreign investors are establishing U.S. manufacturing operations closer to wind farms in order to lower the shipping costs involved in moving these large and heavy components. At this time, approximately 100 wind farms are being built in America per year.
Moving forward, Kelley notes that industry members say the uncertainty as to what the tax policy will be is more of a constraint than access to funding in regard to industry expansion. “We have always said we don’t need it [tax credit] forever but we do need predictability so we can move on.”
“Currently, capital is going elsewhere,” Kelley says. NextEra Energy Resources, the largest wind energy provider in the country, has announced it will not develop in the United States during the next two years, and will instead invest in projects in Canada.
A New Mother Lode
As AWEA and the wind energy industry advocate for legislative support, innovations continue to grow the industry’s position among renewable energy resources. Manufacturers have begun incorporating carbon fiber in wind blades, which allows them to be built 18 percent to 20 percent longer, generating more electricity from locations where once wind farms weren’t considered feasible. “Where will you put these farms and how does that relate to land development and location decisions?” Kelley says. “All of a sudden, it is like we have discovered a new mother lode of wind power in this country.”
Because electricity can increasingly be generated at lower wind speeds, new markets for wind farm developments have opened up in places such as North Carolina, Tennessee, northern Georgia and on the Florida coast.
Wind towers are also getting taller, with some being built at 400 feet or higher, able to tap into the higher wind speeds.
The long-term business case for wind energy remains strong. It provides a hedge against volatile fuel prices found in other energy sectors. Utilities want a diverse portfolio to keep rates low and stable, and wind energy, with rates as low as they have ever been, figures into this goal. Also, unlike other forms of energy, wind energy activities don’t require the use of water to operate. Many areas of the country are in a drought so available water supplies are a large concern in rapidly developing areas.
Kelley says the wind energy industry is an important investor in the U.S. economy. The extension of the federal Production Tax Credit, the one key incentive supporting the growth of the industry, compels private sector investments, which creates jobs.
For complete details about the organizations featured in this article, visit:
American Wind Energy Association
Midland (Texas) Economic Development Corp.
Portland (Ore.) Development Commission
The New North Inc.
Wisconsin Wind Works