Wind Industry Expects its Slowdown to be only Temporary
WALLED LAKE, Mich. - Michael and Sharon Medwid did what other family businesses are trying around the country: They invested in a new shop and machinery to build parts for wind turbines and to reap the benefits of America's expansion of wind energy. Then the recession clobbered them.
Now they're running lean to survive until credit flows again and they can be part of a wind energy initiative to reach a national goal of doubling renewable energy in three years.
The recession has slowed down the whole wind industry this year, from materials to final assembly of turbines. Experts say that getting it up to speed to produce the number of turbines needed to generate large amounts of renewable energy will require more government support and innovation to make the parts lighter, stronger and cheaper.
Despite the hurdles, manufacturers in the wind business sense opportunity.
"We're creating an industry we can manufacture here," said Michael Medwid, 63, who started as a 19-year-old apprentice to his uncle's tool and die business and began his own company in Detroit in 1971 supplying the auto industry.
President Barack Obama says the energy revolution from fossil fuels to the efficient use of clean energy such as wind will yield millions of jobs. Those jobs will be important for building support for Obama's plan to reduce greenhouse gas emissions in line with what scientists say is necessary to control global warming.
Sen. Debbie Stabenow of Michigan is one of 15 Democratic senators who are withholding support from the idea of mandatory emissions limits until they see how their states fare.
"I know our energy policy and our climate change policy will work if we focus on jobs," Stabenow said Thursday at a hearing of the Senate Energy Committee.
Stabenow has been saying often lately that each wind turbine has more than 8,000 parts and adding, with a smile, that "every single one of those is going to be made in Michigan."
That's unlikely, of course, as the country has more than 100 wind turbine and turbine parts factories in 40 states from the Southeast to the West Coast.
Christine Real de Azua, a spokeswoman for the American Wind Energy Association, said wind energy should drive economic recovery by offering a broad range of jobs and business opportunities. There are 85,000 jobs in wind power already.
However, a "mind-boggling number" of the turbines installed so far have been imported from Europe and Asia, said George Sterzinger, who works on ideas for expanding domestic production as the executive director of the Renewable Energy Policy Project in Washington.
The 127 turbines at Puget Sound Energy's Wild Horse Wind Power Project, which opened in 2006 near Ellensburg, Wash., for example, were built by Denmark-based Vestas.
"Right now we're buying a lot of technology from European countries: Germany, Spain and Denmark. But there's absolutely no question that 20 years ago we led the world in photovoltaics and wind, and we have the resources to at least be on par again," Sterzinger said.
The U.S. excels in the "manufacturing intelligence part," including design, engineering and finding ways to lower production costs, said Dan Radomski of Detroit-based NextEnergy, a nonprofit corporation. It finds potential wind-parts suppliers, helps them secure financing and then connects them to turbine assembly companies, which outsource most of the parts they assemble.
Wind turbine companies haven't been able to find enough suppliers, Radomski said. Wind is a mechanical system, much like an automobile, he said. Michigan has lost thousands of auto jobs and has hit 11.6 percent unemployment, the highest in the country.
"Knowing that they were desperately trying to line up suppliers and we had a very hungry manufacturing base here in Michigan, we set out to go to the next level, to get the two groups connected," he said.
He said that Vestas of Denmark and other turbine-assembly companies were looking for U.S. suppliers to save on transportation, exchange-rate swings and import duties. Partnerships make logistics easier, too.
Some Michigan companies say they can take American engineering and business ingenuity - and some of the manufacturing techniques from making auto parts - and do a better job than wind turbine manufacturing so far.
"There are lots of things to be fixed and lots of ways to cut costs," said Jeff Metts, the president of Dowding Machining in Eaton Rapids, Mich.
Metts said his company, which recently built a new factory to produce wind turbine parts, had a plan to modernize the machining of turbine hubs from 24 hours to fewer than four hours.
The downturn has cost Dowding, however. Its core business is down by half and it's laid off 103 of its 250 employees.
"It's a very difficult time. We should be miserable," Metts said. "But I am so excited about the immediate future, where we're going."
The United States installed 4,000 wind turbines last year, but it will have to add more than 10,000 annually to reach the Obama administration's goal of 25 percent renewable-energy production by 2025, he said.
"This business is just unbelievable. I have so much hope for it. And this downturn; where you couldn't talk to anybody before, now people want to hear your ideas," Metts said.
He said that skilled machinists at his nonunion company earned $25 to $30 an hour. Medwid's company is also nonunion and pays up to $28 an hour.
Like Metts, the Medwids think they'll make it through the recession. The other parts of their business - oil and gas equipment and auto parts - also are down. Last year they bought an empty industrial building and machines to produce wind turbine parts, expecting to create about 20 jobs. Each machine needs one operator at a time.
Recently the Medwids' company, Three M Tool and Machine, and a sister firm laid off 19 of their 75 employees, but still lost money.
"You get geared up for a certain volume and you can't dump your overhead," Medwid said. "But if you don't have the equipment, you can't get the orders."
Radomski, of NextEnergy, said that the credit crunch had hurt the wind industry. The stimulus bill and the extension of tax credits should help some projects get financed, but much will depend on whether banks can get rid of their bad assets and resume lending. He predicted that the industry will grow quickly again and that someday 2009 will look like "nothing more than a blip on the screen."
Donald Grimes, a senior researcher in the Institute of Labor and Industrial Relations at the University of Michigan, said wind energy wouldn't result in a large net increase in jobs, partly because it would replace jobs making equipment for existing power plants. Most of the 3.5 million green jobs the president promises are likely to be in construction for weatherization, not in manufacturing, Grimes said.
Sterzinger, the renewable energy analyst, said part of what's needed in the U.S. was manufacturers and research universities collaborating on technology innovation, the key for keeping a competitive advantage globally.
Sterzinger argues that without more federal support, the U.S. will miss out on creating new manufacturing, which in turn will drive up the costs of renewable energy.
The U.S. wind industry group said the boost it needed was the national commitment to 25 percent renewable energy by 2025 and more investment in transmission lines.
"The country has missed out on this opportunity in past years and the Europeans have been the ones to really build up their own renewable energy industry," spokeswoman Real de Azua said. "It's time for us to do that here."