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Wednesday, August 26, 2009

US Must Not Blow Its Chance as Foreign Investments Bring Wind Jobs Ashore

Originally posted at The Breakthrough Institute

It's strange to hear of "insourcing"--the transfer of manufacturing jobs into the United States instead of out--but that's exactly what's happening with Denmark's wind giant Vestas, according to a New York Times article yesterday.

According to the report, a combination of global recession and domestic stimulus spending on clean energy is adding up to a boon for the American clean energy manufacturing industry.

In Europe, Vestas has seen several nations slow down their rates of added wind capacity, and flagging government support combined with financial difficulties has impeded the construction of new projects. By contrast, the United States built 8,500 megawatts of wind capacity in 2008 to Britain's 500, and demand for turbine technology is high. So for opportunities in a more robust wind market, Vestas has begun to look across the Atlantic.

The New York Times reports:

"Vestas is rapidly expanding its production base in the United States, where it says it has created more than 1,200 skilled jobs. The company expects that number to climb to more than 4,000 by the end of 2010, if President Obama's Recovery and Reinvestment Plan is carried out. Vestas believes that the Obama-led push to more renewables will stimulate demand and re-establish the United States as the world's largest market for wind turbines. It hopes Congress will pass a national renewable energy standard that will stabilize the U.S. market in the long run."

That's a key point. The US wind market has been historically unstable, due to a periodically lapsing production tax credit and other forms of inconsistent government backing. The American Recovery and Reinvestment Act (ARRA) this year created a market boom by delivering $65 billion for clean energy, efficiency retrofits and similar investments, including $2.3 billion in tax credits for clean energy manufacturers and a three-year extension of the production tax credit for wind power.

However, the clean energy investments begun in ARRA are temporary. Clean energy manufacturing incentives are short-term and even the production tax credit, finally extended for more than one year at a time, will expire in 2012. If the US doesn't build on ARRA's clean energy down payment with a substantial, sustained policy of government support for the wind industry and other emerging clean technologies, demand for renewable energy is likely to collapse--and foreign firms like Vestas will quickly stop opening doors within US borders.

In the NYT report, a Vestas representative was quite clear that nations must have strong and continued support for clean energy industries in order to attract the company's investment.

"A key prerequisite is having long-term, stable national schemes that provide the industry with the necessary opportunities to plan and invest in employees, technology and production facilities," he said.

So far, the United States is in danger of lacking such a long-term strategy to grow clean energy industries after the stimulus investments expire in 2012. The American Clean Energy and Security Act (ACES) would invest just about $10 billion a year in clean energy, defined broadly--less than a third of the annual level established by Obama's stimulus plan. The good news is that manufacturing-friendly measures like Senator Sherrod Brown's proposed IMPACT bill--which would establish a $30 billion loan fund for clean energy manufacturers--look likely to make up a part of the climate bill currently before Congress. But the US must take a similarly strategic approach to nurturing all sectors of the clean energy industry in order to continue earning foreign investment and gaining manufacturing jobs.

Meanwhile, major wind manufacturers like Vestas and Germany's Siemens have also taken notice of the promising wind market in China.

"In China, Vestas has five factories in Tianjin, a sales office in Beijing, a new factory in Hohhot and a procurement office in Shanghai and is currently building additional facilities in Xuzhou. It wants the turbines it sells in China to be 100 percent Chinese-made. Siemens is also expanding in China, building a new $85 million plant that will open next year in Shanghai with 400 workers.

'China could soon become the largest wind energy market in the world. We are rigorously advancing the internationalization of our manufacturing network for wind turbines to optimally meet the needs of our customers,' said Wolfgang Dehen, CEO of the Siemens Energy Sector, in a statement."

Unlike the United States, China is poised to provide foreign wind companies with strong assurance of continued growth in the wind market, in the form of a $440-660 billion clean energy investment package set to be released this year. That could spell trouble if the United States fails to make similar investments in its clean energy industries--inevitably, manufacturers seeking the best market conditions will close facilities and shift valuable jobs from American to Chinese shores.

For now, Vestas has signaled confidence in the US wind market. According to the report,

"With the Obama administration promising big investments in green energy, wind turbine producers see the United States as the key to the industry's future."

Indeed, Obama's substantial stimulus funding has laid the foundation for booming American markets in wind and other clean energy sectors, and foreign technology producers are taking notice. The challenge is to ensure that the U.S. remains on top of the wind market, and also opens other domestic clean energy markets to capitalize on the inflow of money and jobs from abroad. The United States can do this by enacting a stable, long-term national strategy that invests at least $30 billion per year in the development and deployment of clean energy technologies, and by passing measures like Brown's IMPACT bill to support American clean energy manufacturing.

Without this strategy, we risk losing the forward momentum of ARRA investments, and we forfeit the chance to secure the prosperous clean energy economy so recently set in motion.

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