|
Federal Stimulus Targets Wind Industry
According to the American Wind Energy Association (AWEA), last month's federal Economic Stimulus Bill may be the most important renewable energy legislation passed by Congress in the past 30 years. Here’s why:
- It includes an extension of three years of the federal production tax credit (PTC). This provides roughly two cents per kilowatt hour in the form of a credit back to the provider of the wind power for a period of ten years. This new extension covers wind turbines installed through 2012.
- The legislation offers a new program that allows renewable energy developers the option of foregoing the PTC and instead securing a cash grant from the Treasury Department in the amount of a 30% investment tax credit (ITC). This grant is available for projects placed in service in 2009 or 2010, or placed in service before 2013 provided construction starts before the end of 2010.
- To help with the credit side, the stimulus also includes a $6 billion in US. Department of Energy (DOE) loan guarantee program. This is designed to help free up the credit markets and make money available sooner for wind park development—and orders for new turbines.
Also part of the law is a $1.6 billion increase in clean renewable energy bonds (CREBs), which benefit tax-exempt utilities such as rural cooperatives that have no use for the PTC, and targeted provisions to encourage investment in transmissions for renewables. For the growing small-wind industry, the package eliminates the cost caps for the small-wind tax credit.
This legislation is extraordinary for several reasons. One is the length of the PTC extension. In past years, it has expired on several occasions and has never been renewed for more than two years. This three-year extension on top of last fall’s one-year extension provides four years of PTC. This creates a stable financial support for wind industry investors that have never before existed in the US marketplace. The ITC program addresses immediate cash issues by allowing developers to monetize their PTC credits immediately. Lastly, the loan guarantee program addresses the credit side to accelerate the availability of money for loans for new windparks.
Interview with a Wind Turbine OEM
A few days after a recent wind conference, Great Lakes WIND Network met up with an experienced supply chain manager for a well-known wind turbine generator OEM. Like many, his company is seeking domestic alternatives to off-shore sources of components. Here's part of our conversation:
GLWN: When you return from meeting lots of manufacturers, you probably bring back a thick stack of business cards. What do you do with them?
OEM: During the event, I like to note on the cards which companies are already experienced in wind. Back at the office, I look through the rest to see which might be capable, and I'll ask them to send me a brochure with detailed manufacturing capabilities. If I see a fit, I may give them a call.
GLWN: What do you look for most in a potential supplier?
OEM: Here's where we start--we look for who is the most capable of making the part correctly.
GLWN: What is your biggest frustration?
OEM: What bothers me is that most of my quotes are high. Sometimes I'll get a great one, one that's well-presented, and the price is just too expensive.
GLWN: Why do you think that is?
OEM: It could be for any of several reasons. To begin, for companies that are inexperienced in doing wind work, I think they sometimes build an inefficiency into their pricing so that they don't quote too low.
U.S. regulations, such as OSHA and other standards, might add more costs to companies here. U.S. labor could be more expensive, too. And, of course, if the specification calls for sourcing special materials, such as certain alloy types that are available only from Europe or require an entire mill run, that raises costs.
GLWN: So what can manufacturers do to improve their competitiveness?
OEM: In one country, we get metal from a flame-cutting warehouse that nests orders together to optimize yield. Customers benefit with lower prices due to reduced scrap. If only we could find a steel cutter like that here.
I've sourced parts both in the U.S. and in Europe, and the problem isn't technology. There's enough here. Investments in tooling would help, and I just wish that more manufacturers would quote with the expectation that the new efficiencies will happen.
It's really a good time for manufacturers, but they need to remember that it's a world market and without competitive prices the opportunity can slip away for them just like it did for auto years ago.
Targeting the Wind Industry: McSwain Manufacturing
McSwain Manufacturing Corporation of Cincinnati, Ohio is a company that is leveraging its experience with one industry to expand its business in another. With almost 20 years in the industrial gas turbine market, McSwain, a division of Heroux Devtech, has developed an aggressive new business strategy that includes expanding relationships and marketing its core competencies of precision machining of high volume large industrial products. Applications now extend to multiple wind turbine OEMs and include main shafts, gearbox components, and main shaft bearing components.
 Main shafts machined by Héroux-Devtek/ McSwain Manufacturing Corporation |
Looking forward, VPGM Mike Meshay says his operation has strong corporate support for future capital investments to support growth in the wind industry. He cites its successful track record of matching growth requirements with new equipment and manpower, and he is targeting 50% of the company's 2012 business volume for the manufacturing of wind energy products.
Join Us in Chicago
May 4 through 7, 2009
AWEA's upcoming Conference and Exhibition in Chicago from May 4-7 may be your best opportunity to see and be seen by those who are buying and selling components in the wind industry. While AWEA has a number of display booths still available on their website, GLWN has created a cost-effective alternative.
It’s the Great Lakes Wind Network Pavilion, a 30x30 area that will highlight supply chain manufacturing. We have room for a few more companies, so don't miss out on a great opportunity. Details can be found on our website. For more information, contact Pamela Holmes at 216.588.1440 ext. 104.
Interested in Partnering with a European Company?
As more German wind turbine OEMs establish operations in the US, there's a growing interest for their EU supply chain partners to follow them to America. If you are a manufacturer looking for a possible joint venture opportunity, GLWN may be able to help you. Director Ed Weston will be attending and presenting at the 1st German American Energy Conference 2009, an event aimed at assisting German manufacturers with investment plans.
Ed would like to be able to provide specific connections for GLWN member companies at the show. If you are interested and haven't already done so, please contact Ed Weston at 216.588.1440 ext. 125 by March 15, 2009.
The 1st German American Energy Conference will take place in Berlin, Germany on March 30 through April 2, 2009. For more information, visit their website.
|