Blown Away: Tracking stimulus grants for renewable energy

Foreign companies control wind manufacturing

Monday, February 8th, 2010 

Foreign competitors don’t just dominate the business of developing and operating wind farms, they also hold the upper hand in manufacturing turbines and other key components. Analysts say as much as 70 percent of the economic activity from investing in wind power comes from the manufacturing of turbines, making the lack of domestic manufacturing the biggest hurdle for the administration to overcome in its effort to create long-lasting and high-paying green collar jobs.

The modern wind turbine was invented in the United States, but after several decades of neglect starting in the 1980s, the domestic industry is in shambles. There are only two homegrown American turbine manufacturers of any significance – General Electric and Clipper Wind . Both also import some parts from factories overseas

GE Energy’s turbine business was built on the ashes of Enron – once the nation’s dominant turbine manufacturer. Enron, in turn, acquired the business when it took over Kenetech – one of the last U.S. wind companies left standing after the brutal 1980s when the nascent wind industry found itself out in the cold, ignored by an uninterested administration.

Between them, GE and Clipper accounted for 49.3 percent of the U.S. turbine market in 2008; through the first three quarters of 2009, that had slipped to 45.7 percent. For wind plants currently under development, the two U.S. companies only have 32.3 percent of the market.

U.S. companies import turbine parts

GE Energy has three turbine manufacturing facilities in the United States. – in Greenville, S.C., Pensacola, Fla., and Tehachapi, Calif. GE also operates at least three wind turbine component manufacturing facilities in China. The company is also working to open another plant in Vietnam with the announced purpose of manufacturing up to 10,000 tons of components for use by GE in other countries.

According to U.S. Customs and Border Protection records, GE frequently imports a wide variety of components from all over the globe – sometimes to locations near wind farms being developed and sometimes to ports near their assembly plants. The shipments were as varied as:

•    Eight sets of heavy hubs for a 1.5 megawatt turbine, weighing a total of 107 tons that arrived in the port of Charleston, S.C. on Aug. 28, 2009, shipped from Sao Paulo, Brazil.

•    Eighteen sets of yaw drives – a key component that relies on complex gear and braking systems to keep wind turbines facing into the wind as it changes direction – that arrived in Long Beach, Calif., on Nov. 30, 2009, destined for GE’s Pensacola plant. According to the bill of lading, the drives were shipped from the port of Nagoya in Japan, by the Japanese manufacturer Nabtesco Corporation.

Clipper Wind controlled just six percent of the U.S. market in 2008, and the struggling company was rescued in early December by a large investment from United Technology – a Connecticut-based industrial conglomerate that also owns jet engine maker Pratt & Whitney and Otis elevators.

Clipper has a plant in Cedar Rapids, Iowa, but a review of customs records indicates the company has imported major components from a variety of countries, including:

•    Tower supports, each weighing 18 tons, from Germany.

•    Eleven-ton main drive shafts from Lorentzlaan, Netherlands.

•    Dozens of shipments throughout 2009 of nacelle parts and hubs shipped from a Brazilian company based near Sao Paulo.  

•    Fifty-two tons of alloyed steel from Brazil.

Matt Rogers, senior advisor on the stimulus to Secretary of Energy Steven Chu, told ABC News that as recently as five years ago, the average domestic content in U.S.-built turbines was as low as 20 percent. Today, he said, it's near 60 percent.

Foreign-sounding names

Rob Gramlich, the American Wind Energy Association’s vice-president of public policy, said in an interview with the Workshop that it is unfair to tar all companies with the brush of being “foreign” just because of their apparent national origin.

“(Turbine manufacturer) Gamesa has made major commitments to jobs in the U.S. but they happen to have a foreign sounding name,” Gramlich said, referring to the company that recently set up manufacturing in southeastern Pennsylvania.

But Gamesa has far more than a foreign-sounding name – it is a foreign company , with many manufacturing plants around the globe, headquartered in Spain and tied by a strategic deal to fellow Spanish company Iberdrola. The company’s profits return to Spain and an American company does not own the intellectual property they use.

Still, Gamesa has been hailed as a success story. It has set up the full complement of manufacturing in the U.S. – tower, blade and nacelle assembly – largely with the state of Pennsylvania’s help. In 2005, the company agreed to locate a major manufacturing facility on the site of an old U.S. Steel plant in Fairless Hills, Pa., north of Philadelphia. In exchange for $10 million in grants, loans and tax credits from the state and county, Gamesa promised to create 1,250 jobs within five to seven years. In a separate deal, the state gave Gamesa $9.3 million to open a facility in the western part of the state.

 “What you want is the jobs. What you’re looking for in this story, and on (Capitol Hill) and in the administration, is the jobs,” Gramlich said. “So, it’s a very different thing to talk about one company that may be based abroad but may be producing here.”

The reality is that Gamesa is the only foreign wind manufacturer that makes all three major components in the United States. Out of the seven foreign-owned manufacturers that made turbines installed on wind farms that received grant money, only Gamesa and Danish turbine giant Vestas have any significant investment in America.

Overseas wind companies slowing U.S. production

Both companies have recently experienced slowdowns. At one point Gamesa employed over 1,000 workers but more than 300 were laid off in 2009. The company now employs 784, including management and support staff.

Vestas Americas operates one blade factory in Colorado but is in the midst of opening two new facilities for towers and nacelles as part of what company officials told the Workshop was a $2.2 billion investment in the U.S. Despite the optimistic plans, and the awarding of $51.7 million in tax credits to help the expansion, the company announced a total production shutdown of its one open plant. The company did opt to keep its employees on the job, retooling and preparing for new orders.

Of the remaining five foreign-owned companies that installed turbines under the grant program:

•    Acciona , (Spain) which installed 136 turbines under the grant program, has a turbine assembly facility in West Branch, Iowa. Lured to Iowa with $4.8 million in incentives, the Spanish company opened its only U.S. facility in 2008. The plant employed roughly 150 workers, with the average worker making about $15 an hour, but earlier this year laid off about one-third of its workers and battled rumors the facility was to shut down. Acciona declined the Workshop’s interview request.

•    Mitsubishi Power Systems (Japan) which installed 382 turbines under the grant program, has no U.S. manufacturing. Under the manufacturing tax credit program announced on Jan. 8, the Japanese industrial titan will receive $5.1 million in credits if it opens a proposed facility in Fort Smith, Ark. Workers at the proposed $100 million facility, will assemble imported components. A patent dispute with General Electric held up the project, but a Jan. 9 ruling by the U.S. International Trade Commission in favor of Mitsubishi has allowed planning to continue.

•    Nordex (Germany) responsible for 25 turbines under the grant program, has no U.S. manufacturing. Under the manufacturing tax credit program, Nordex has qualified for $22.1 million in credits to help build a proposed Jonesboro, Ark. The company promised to create 700 full-time jobs with an average pay of $17 an hour in exchange for $100 million in financing by the Jonesboro City Council and several million dollars worth of site improvements.  

•    Siemens Energy (Germany) installed 79 turbines under the grant program. This German conglomerate, which makes everything from telephones to trains to ultrasound machines, has a blade factory in Fort Madison, Iowa. Siemens was lured to Fort Madison by about $5 million in incentives and the facility employs about 260 workers. Siemens received $7.7 million in tax credits on Jan. 9 to help with the construction of two proposed new facilities, a nacelles assembly plant in Hutchinson, Kan., and a steel tower factory in Texas.

A separate division of the conglomerate, Siemens Industry, was awarded $28.3 million in tax credits to help it expand a factory in Elgin, Ill., to make wind turbine gearbox parts.

•    Suzlon (India) a recent Indian entry to the market that has quickly risen to the fifth largest turbine installer in the United States, installed 172 turbines under the grant program. Suzlon opened a blade plant in Pipestone, Minn., in 2007 and once employed 500 workers. Following layoffs this summer, the plant is now down to 164 employees.

•    REpower (India) a Germany company that was purchased by Suzlon in 2008, installed 53 turbines under the grant program. REpower has no listed plans to establish manufacturing in the United States.