Although they have yet to disclose the location of the new tower manufacturing facility, it would be situated to complement the company’s fist North American blade manufacturing plant, which recently opened its doors in Windsor, Colorado.

For the tower plant, the company will need a large parcel of land served by freight rail, a combination that Northern Colorado can provide at several locations, including the Windsor location, where construction proceeds on phase two of the blade plant. According to the Northern Colorado Business Review, more than 1,000 new jobs could result from further expansion of Vestas’ manufacturing presence.

Healthy Profit Margins Hide Industry Bottlenecks

In the second piece of big news for the Vestas, the company reported very strong earnings on Thursday - the kind of earnings that emphasize the wind energy industry’s resilience to the slumping economy. Net income for Vestas rose 94 percent to 33 million euros ($56 million) from 17 million euros a year earlier. The company was expected to earn 35.5 million euros, according to the median estimate in a Bloomberg survey of five analysts.

Despite the strong growth in the wind energy business worldwide, the overall demand pressure on the industry persists. According to Bloomberg, there are still long lead times for a number of key components that can last as long as 15 months. Of particular concern to turbine manufacturers is a global increase in demand for carbon-fiber, the graphite composite material that moderns turbines blade use because of their light weight, and high tensile strength.

With that said, it seems that it will be a few years before supply will match demand. Even as new manufacturers pop up around the globe, they are being outpaced by the increases in global demand for clean, renewable energy.

Sources:

• Northern Colorado Business Review
• Bloomberg

Other posts about the cleantech industry:

• “Can ‘Low-Hanging Fruit’ be Sexy: Two Energy Efficiency Stocks
• “Solar System Leases Taking Industry by Storm“
• “The Unlimited Potential of American Wind Energy: AWEA“

Photo: Vestas Wind Systems

The United States has a natural edge when it comes to wind energy. Unlike Europe, we have a lot of land with which to harness wind, including across sparsely populated areas. If NIMBY isn’t a problem, the potential for sustainable energy generation is even greater.

According to Roby Roberts, V.P. of Government Relations for Vestas, you need about 8,000 components to make a wind turbine, some of which are really big. Apparently the trick with so many bits and pieces is bringing them together; it doesn’t make sense to transport them over vast distances. Consider the iconic wind turbine propeller blades. Some of the largest blades are 80 meters long - over 260 feet! - which no doubt require special handling, licensing, and lots of money to transport. Instead of building or assembling many of these parts overseas, it makes much more economic sense to manufacture and assemble them locally. That means jobs, lots of them, for communities and regions where wind turbines can be built.

All of the industry leaders agreed that each of their companies was eager to build and expand their manufacturing and Research & Development capabilities across the United States, which would produce thousands of stable jobs. Julius Steiner, CEO of Gamesa USA, commented that if the supply chain could be built in the USA, it would be internationally competitive. That’s part of why, despite policy difficulties, international companies like Gamesa (founded in Spain) have jumped into the US market without any guarantee of a production tax credit (PTC) extensions.

“The PTC provides an incentive of two cents per kilowatt-hour generated to facilities that produce electricity from renewable energy resources…The credit can be claimed for 10 years, beginning on the date the qualified facility is placed in service. The facility must begin operation before the credit expires.” - AWEA newsroom

It’s not that the wind industry needs tax credits to exist, but they do need the PTC to expand and build a supply chain. Without these tax credits, building the manufacturing infrastructure for large-scale wind turbine projects would be nearly impossible. The key to investment in manufacturing is a long-term outlook.

Randall Swisher, Executive Director of the AWEA, said the industry needed five years minimum of policy stability to expand the existing infrastructure foundation. Roby Roberts of Vesta claimed that once the supply chain is in place, prices should drop, making the industry even more competitive. If Congress extends the PTC for even a year, these companies will continue to expand their manufacturing capabilities. Fortunately all of these companies have already built the first links of a solid supply chain, all of them are optimistic that the tax credits will come, and all are commited to the US market.

The importance of the PTC can be gleaned if you take a step back. Internationally, the markets with the most lucrative potential for the wind industry are the USA, Europe, China and India. Europe has a lucrative policy system in place, and China recently announced their own policy to spur the development of wind power. That leaves the United States as a kind of uncertain frontier where, like the Wild West, fortunes could be made or lost. The fortune at stake is not just local jobs, but leadership in a lucrative technology which these industry leaders agree is “limitless”.

Wind power is already booming, but because energy demand is always rising and wind is renewable, this industry could grow for decades without slowing down. All they need is enough time to build, which relies upon the PTC. Julius Steiner characterized this moment as, “the middle of the beginning for the renewable energy industry.” He compared potential renewable energy policy to the laws that made the Interstate Highway system possible, hoping for a similar national push towards a nationally beneficial energy infrastructure. They were all unanimous in a sense of urgency: the time to expand the PTC was now. If the tax credits are allowed to expire, opportunities could be lost and manufacturing jobs will be the first to suffer.

I left with a firm impression that these industry leaders are optimistic about the future. Having survived previous boom-and-bust cycles, they felt that they had passed a critical phase in their industry development, and that a foundation had been built on their end. But, I agree with Julius Steiner when he said that we needed to get the “fundamentals right in our country” by setting a policy foundation for renewable energy to launch from.

Several states have already begun to move in that direction, but the wind and sun know no political boundaries. Even a minimum national policy would help us diversify the power grid, move towards energy independence, and build manufacturing jobs at home instead of exporting them overseas. On top of it all, we would have cleaner air and contribute less to climate change. Wind power is already a leader among renewable energy technologies, and its future is bright - that is not in question. The question instead is whether or not we, as a nation, will support it now and reap the economic and ecological benefits later, or delay it another year while our competition forges ahead.

See a video of highlights from the press conference here.

(AP Photo/The Rosen Group, Kevin Wolf via AWEA’s Flickr)

(Many thanks to Kate Marshall for a copy of the graph.)

In China to open the second and third of seven plants by the first quarter of 2008, Vestas Chief Executive Ditlev Engel said he was certain that the company would be able to compete with cheaper rivals for the wind market in China.

"There are many firms in China trying to get involved in the business but our experience from around the world is that it is not as easy as it looks," he said in a group interview.

With 20 years of experience — the life of the wind turbine power plant — Vestas is competing in a market that is drawing a multitude of companies. Their $80 million investment in to the Chinese power market is expected also to bring Vestas a new export market.

"China will keep growing now, as a very important part of the wind power business, not just on the sales side but also on the sourcing," Engel said.

China has recently come under the spotlight of world conservation groups, with its number 2 spot oil consumption, and its number 1 spot in coal production making them one of the most polluted countries.

Vestas Australia Wind Technology will close its 2 1/2 year-old turbine blade factory in Portland, Victoria at the end of this year. Consequently, 130 jobs will be lost. The Danish company's Asia-Pacific senior vice president, Jorn Hammer, was quite forthcoming with his criticism of the Australian government:

"It's not viable for us to make further investments in the Australian market...we don't see the market as big enough in Australia to justify the expense...When we committed to build the factory we believed there was support for the wind industry in Australia, and that has not come through to the extent we anticipated.

We have the view that if the government steps up to the plate and puts the necessary security for a long-term market in place we'll have another look at the market, but I guess we'll be a little more careful next time...(Not) just believing in what they've been telling us, we need to see some hard evidence to justify investment."

Australian officials were upset with the divestment, and some pointed fingers at the Howard administration, which has been criticized in the past for moving too slowly to address climate change and implement solutions.