September 3, 2010 Newsletter

The Light in the Tunnel...It MIGHT be China

By Ed Weston, Director, GLWN

The Chinese government was featured in USA Today this week when it announced the immediate closing of 2,087 obsolete factories nationwide to help cut its energy use per unit of gross domestic product by 20% between 2006 and 2010. Certainly it's a bold statement to make during a time of worldwide recession.

The real story, though, is the commitment the Chinese are making to expand alternative energy, particularly wind. Over $700 billion has been earmarked for investment in developing clean energy over the next decade as China seeks to meet a target of generating 15% of its energy from renewable resources by 2020. I had an opportunity to see first-hand what's happening during a ten-day visit last month. My trip included stops in Beijing, Wuhan, and Shanghai and tours of four wind turbine OEMs. Here are some observations:

• despite a market where installations have doubled every year for the past five, competition among Chinese wind turbine OEMs is fierce. That's because over 80 wind turbine OEMs are fighting for new business—compared with about 15 currently in the U.S.
• one outcome of this competition is a heavy focus on design. Chinese OEMs are not content with licensing designs, although that's how most started years ago. Rather, each company I met described extraordinary investments in research and development, including, in some cases, purchasing the European design house with whom they began. Touring the plants, I saw newly-designed machines being assembled and shipped to on-shore and off-shore applications.
• the European influence is not limited to just turbine design. At Beijing's Wind Power Asia 2010 show, the feel from walking the floor was more like a trip to Berlin. Component suppliers from Germany, Spain, Italy, Denmark, and France seemed to dominate with their displays. I got the same feeling when touring wind turbine assembly plants. They reminded me of what I've seen in Europe—spotless plants, well-organized flows, extensive use of overhead cranes, lean processes, and heavy use of metrics (key performance indicators) visible throughout.
• quality is a lesson that's being learned. The high cost of turbine failure—both in cash and in reputation—is causing Chinese OEMs to take more care in selection and management of their component supply chain. Low price is no longer the preferred option. Vendor shifts to higher-quality component suppliers were described in detail.
• there's great interest in the U.S. market, and the Chinese business model for OEMs may be an asset. That's because in China wind turbine OEMs typically obtain financing and develop their own wind farms, which they then sell quickly to one of the country's utilities. Coming to America, some are prepared to provide financing or take an equity stake to get demonstration projects started. For U.S. developers and utilities, that may be what it takes to get new deals moving in today's market.
• localization of supply chain is another common theme heard in discussions. China's domestic content requirements have encouraged many European multi-nationals to invest in Chinese component plants, and as a result Chinese OEMs are accustomed to purchasing from local suppliers. As they move forward with U.S. operations, it's their stated plan to again source locally—which could mean good things for North American manufacturers looking for more opportunities to expand into the wind industry.

GLWN works with wind turbine OEMs and first tier suppliers in Asia, Europe, and North America to help them develop localized supply chains for original equipment and service support. Our mission for manufacturers is to increase the domestic content of North America's turbines. As a result of the trip, supply chain connections with prospective Chinese OEMs has already begun.

I welcome your questions and comments. Please contact me at EWeston@glwn.org.

AETI Joins GLWN

American Electric Technologies, Inc. (AETI), the premium supplier of custom-designed power distribution and control solutions for the traditional and alternative energy industries, announces its entry into the GLWN network, the foremost supplier database for North American wind turbine OEMs and wind farm EPCs alike.

AETI leverages its 60 years of on- and off-shore harsh-duty power distribution and conversion expertise, electrical services, and construction support capabilities to ensure robust and reliable twenty-year design life products for wind turbine OEMs and wind farm developers and owner/operators. Products for the wind industry include 690 VAC wind converters up to 6 MW, control systems and 38 kV arc flash mitigation switchgear up to 3000 amps per circuit breaker.

Unlike competitive offerings, AETI works with the OEM or EPC to provide customer specific platforms that directly address the electrical and mechanical packaging requirements of the turbine or farm application. Building to specification or print is not an issue, and when first designing the power conversion or distribution product, AETI can provide system integration and packaging advice to help shorten the product realization time and drive down manufacturing cost while improving operating reliability.

Industry Leaders Challenge Details of New
DOE Loan Guarantee Program

Department of Energy Secretary Steven Chu announced in mid-August a new Loan Guarantee Solicitation intended to support the deployment of renewable energy projects that will increase employment in the nation's green manufacturing sector. However, some believe that manufacturers need to pause before rushing in.

That's because the program, as written, excludes many of the capital projects that are needed to improve the competitiveness of U.S. companies, according to industry representatives assembled by the American Wind Energy Association (AWEA) last week. In addition to an overly high investment threshold ($75M), other issues identified by the group include large application fees and ambitious application deadlines.

"Clearly, more could be done and should be done to support U.S. manufacturers who are competing with heavily-capitalized companies in Europe and Asia," explained GLWN Director of Technical Services Patrick Fullenkamp. Tom Maves, Deputy Director of Manufacturing and Supply Chain for AWEA, committed to drive the discussions with DOE.

Ready to Break Into the Wind Industry:
Penn United Technologies, Inc.

Penn United should be viewed as a preferred potential vendor to manufacturers of community and utility scale wind turbines. Your facility is certainly one that would meet or exceed most OEM auditor's requirements.

That was the assessment by GLWN after performing a Wind Capabilities Profile for Penn United Technologies, Inc. earlier this summer. Penn United is a full service metal manufacturing facility with core competencies in the sectors of precision machining, tooling and precision die design and manufacture, metal stamping, metal plating, precision ground components, precision CNC grinding machines, carbide wear components, custom automated equipment, and product assembly.

It all started with a question—is wind a good new market for diversification? How could the company quickly find out how well its core competencies matched up with the requirements for wind turbine manufacturing?

Penn United reached to GLWN for answers, and GLWN responded with its Wind Profile process. GLWN toured their western Pennsylvania plant and reviewed its attributes against an extensive list of capabilities, quality management systems, and competitiveness indices that GLWN has compiled based on wind turbine OEM standards. Managers were interviewed, and results were compiled.

The profile showed that Penn United is "well suited to be a primary supplier to a wind turbine drive manufacturer or tier 1 within the utility scale or community wind markets" despite a lack of prior wind manufacturing experience. Best-fit components were identified, tailored business contacts were provided, and specific recommendations were made for changes that could help improve Penn's performance during the selection process.

To learn more about the Wind Capabilities Profile, contact Dale Reckman at 513.497.5214.

GLWN's Newest Members

Gigawatt Members

• IHS Emerging Energy Research, Cambridge, MA
• Northern Power Systems, Barre, VT

Megawatt Members

• Art Galvanizing Works, Cleveland, OH
• Better Way Products, New Paris, IN
• Coldwater Machine Company LLC, Coldwater, OH
• Detroit Diesel Remanufacturing Central, Emporia, KS
• Ebner Furnaces Inc., Wadsworth, OH
• Energy Composites Corporation, Wisconsin Rapids, WI
• FBT Inc., St. Catharines, ON
• Hodge Foundry, Greenville, PA
• Kalt Manufacturing Company, North Ridgeville, OH
• MetoKote Corporation, Lima, OH
• Nation Coating Systems, Inc., Franklin, OH
• Norlake Manufacturing Company, Elyria, OH
• SIPCO, Webster, TX
• Westerman Companies, Bremen, OH

Kilowatt Members

• Diamond Tool Inc., Eastlake, OH
• Dynapar, Gurnee, IL
• Dyson Corporation, Painesville, OH
• Flash Technology, an SPX Division, Franklin, TN
• Heidtman Steel Products, Toledo, OH
• Latrobe Specialty Steel, Latrobe, PA
• Schunk Graphite Technology LLC, Menomonee Falls, WI
• Timken Company, Canton, OH
• Ventower Industries, Monroe, MI