U.S. Wind Power Manufacturers Slowly Return to Work with Extension of Production Tax Credit

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Companies that manufacture equipment for the U.S. wind power industry are slowly getting back to work, thanks in part to the extension of the federal Production Tax Credit (PTC). The PTC, extended earlier this year, provided a tax credit of 2.2 cents per kilowatt-hour of electricity produced for a period of 10 years, assuming construction of a windfarm begins by the end of 2013. Another factor bringing employees back to factories is state renewable portfolio standards (RPS), which mandate that a certain percentage of electricity come from renewable resources like wind power. About 30 states have RPS mandates in place.

In January, Vestas landed another wind tower order that added about 100 jobs to its factory in Pueblo, Colorado. That deal was to manufacture wind towers for non-Vestas wind projects over the next two years. In announcing the order, Vestas said it was part of the company's effort to become more flexible and nimble. "We're definitely seeing a lot more market activity than we were a year ago," Andrew Longeteig, a spokesman for Vestas, told Industrial Info. "There are a lot more requests for proposals (RFP) from utilities, and we're optimistic about 2013. That order for our Pueblo site would not have happened without the PTC extension."

The addition of 100 jobs at its Pueblo plant pushed Vestas' Colorado employment to more than 1,100 people, Longeteig said. For most of 2012, the manufacturer employed between 1,700 and 1,800 people in Colorado, its North American manufacturing hub.

Leeco Steel LLC (Lisle, Illinois) is another OEM benefitting from the extension of the PTC. Leeco manufacturers steel plates used in wind towers. John Purcell, vice president of the company's energy division, said Leeco has tripled the size of its operations because it's getting so many wind power-related orders.

"Illinois is open for business for wind, and the industry is hiring and the wind industry stands to be busy again," Purcell told the Illinois Public News Service.

"Original equipment manufacturers (OEMs) for the wind power industry are gradually adding shifts and restoring capacity that was idled last year," said David Pickering, Industrial Info's vice president of research for Industrial Manufacturing. "Although the stop-start-stop nature of the wind power business creates supply-chain dislocations, that is part of life when you depend on demand created in part by state and federal policy."

"I'm still a little leery of all these announced windfarms making it through construction and getting to operation. We expect some of these orders will be changed over time--some will be delayed, some will be cancelled, some will be accelerated, and some of these turbines will find a home in another project."

"We're seeing an upward trend that will affect OEMs in a positive way," Tom Darin, Western Regional Representative of the American Wind Energy Association (AWEA) (Washington, D.C.), said in an interview. "We are optimistic that we will see an expansion of wind projects this year, and things will really pick up in 2014 and 2015."

Darin said that the positive outlook was being driven by the PTC extension and state renewable energy requirements: "Utilities in Colorado, Oklahoma, the Midwest and elsewhere are responding to incentives and putting out RFPs. As those projects develop, equipment orders will be placed and OEMs will benefit."

There are about 550 wind power manufacturing sites across the U.S., according to AWEA. Nationwide, the industry employs about 75,000 people. During 2012, manufacturers of wind towers, blades, nacelles and other wind power equipment were forced to idle production lines, cut shifts and reduce employees as new windfarm development ground to a halt. Last year, when extending the PTC looked doubtful, developers and manufacturers focused on near-term projects that would break ground before the tax credit expired on December 31. That temporarily emptied the industry's pipeline of farther-out development activities. Now that the PTC has been extended, OEMs are slowly ramping up production to meet new demand.

Earlier this month, General Electric Company (NYSE:GE) (Fairfield, Connecticut) announced it would supply 59 of its new 1.7-100 brilliant wind turbines to a windfarm in Michigan that is owned by NextEra Energy Resources, a unit of NextEra Energy Incorporated (NYSE:NEE) (Miami, Florida). The new turbines have a hub height of about 262 feet. GE said its new line of turbines, named "Brilliant," includes advanced software to analyze tens of thousands of data points every second, which helps manage wind's variability and provide smooth, predictable power.

GE also will supply 87 wind turbines to Phase II of the Spinning Spur Wind Ranch in Oldham County, Texas. Those turbines are rated at 1.85 MW each. Construction of that project is scheduled to begin next month and finish in mid-2014. For more information on that project, see May 13, 2013, article - EDF Renewable Energy Announces Windfarm Addition at Spinning Spur in Texas Panhandle.

The U.S. division of Siemens AG (NYSE:SI) (Munch, Germany) also announced good news. It recently landed a contract to construct the federal government's largest windfarm, consisting of five 2.3-megawatt (MW) wind turbines located on 1,500 acres of government-owned land near Amarillo, Texas. The award was made by the National Nuclear Security Administration (NNSA), a division of the U.S. Department of Energy (DoE) (Washington, D.C.). The windfarm is expected to generate more than 60% of the electricity required annually for the Pantex facility.

Shortly after the PTC was renewed in January, Siemens also announced plans to build a new, 40,000-square-foot, state-of-the-art wind service training center in Orlando, Florida. The new facility, scheduled to be operating this summer, will offer advanced skills and safety training to meet Siemens' growing demand for wind power service technicians. Although not engaged in manufacturing, the new Siemens training center is further evidence that the wind power supply chain is reviving.

That revival could be significantly accelerated by MidAmerican Energy's recent commitment to invest up to $1.9 billion to build new windfarms in Iowa. MidAmerican (Des Moines, Iowa), a subsidiary of Berkshire Hathaway (NYSE:BRK-A) (Omaha, Nebraska), has not selected equipment suppliers or sites for the windfarms yet, but in an announcement earlier this month, the company said it plans to have them built in time to quality for the PTC.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.