Demand-side policies will fuel growth in wind power manufacturing sector

The following is taken from the Executive Summary of a paper prepared by AWEA Senior Policy Analyst Jessica Isaacs and the Policy Task Force of AWEA's Manufacturing Working Group.

Since the rebirth of the American wind industry in 1999, 20,000 manufacturing jobs have been created in the wind sector. This growth has occurred despite the lack of stable, long-term policy support and the sporadic nature of the federal wind energy Production Tax Credit (PTC).

The instability of the PTC, which is typically renewed by Congress for short-term periods of one or two years, caused drops in demand in 2000, 2002 and 2004 of 75 percent or more, resulting in significant delay or deferral in U.S. wind manufacturing investment.

The majority (75%) of the current manufacturing jobs in the wind industry have been created since 2005 due to consistent PTC availability and the ARRA (American Recovery and Reinvestment Act of 2009) provisions during that period. Original equipment manufacturers (OEMs) have significantly increased their domestic presence over this span, and a supporting supply chain has also begun to develop. Notably, this expansion often benefits metal-working and other industries that have been experiencing decline.

Based on experience in the European Union (EU), where long-term policies supporting renewable energy are in place, the potential exists to expand the jobs supported by the U.S. supply chain by a factor of three to four, potentially adding tens of thousands of additional manufacturing jobs. A prerequisite for this growth, however, is implementation of long-term, stable demand-side policies–such as renewable energy standards, clean energy standards, PTC, transmission guidelines, etc.–related to driving renewable energy investment over a minimum period of 5 years, though preferably longer.

Such clarity will allow for demand stabilization and increased predictability in the renewable energy market, thus driving companies across the supply chain to invest, armed with a supporting business case and increased confidence. As occurred in the EU, turbine manufacturers will subsequently complete the localization of the supply chain, and benefit from reduced transport costs and risks, duty avoidance, currency risk and shortened supply channels. This will boost the level of domestic wind manufacturing, creating American jobs and investment across the country.

Timing is of the essence. The existing, renewable support policies expire in December, 2012. The industry is already reacting to this deadline with uncertainty, as is the supporting supply-side manufacturing base. Failure to act and provide the essential clarity in longer term policies will:

1. Cause existing investment to underperform and turn manufacturing job creation into layoffs: The gains since 2005 have a direct relationship to the relative stability of the PTC and ARRA policies since that time. The current domestic investment from turbine manufacturers, tower and blade manufacturers, and large component manufacturers can support a market outlook of more than 10 GW in demand. In a stable market, this is sufficient to spur investment broadly across the supply chain.  Inconsistent or deficient policy clarity is expected to more than halve that demand (to less than 5 GW), which will negatively affect decisions in the manufacturing base.

2. Lose the advantages created over the past five years of relatively stable support: The U.S. has made investments in wind, through existing policies, that have lowered the cost of wind and made it competitive with other new forms of generation. There are countless benefits to wind energy in addition to job creation and investment: no emissions, near-zero water use and rural economic development, among others. The policy support provided since 2005 has spurred 33.5 GW of wind development in the US and significantly reduced the levelized cost of energy (LCOE) for wind. However, this trend will not continue in the absence of policy support.

This policy task force, on behalf of the Manufacturing Working Group of AWEA, representing 75 member companies supporting over 5,000 manufacturing employees across the U.S., calls for enactment of clear, long-term and renewable-inclusive energy policies at the federal level. It is our collective view that the key to wind energy manufacturing job creation in the U.S. is strong demand-side policies; in the absence of stable, long-term demand for wind generation, no manufacturing-only policy will be sufficient to fully grow the US wind manufacturing sector. Consistent and predictable demand will drive business cases and manufacturing investment more than a stand-alone supply-side program and will better support long-term industry growth, supply chain domestication and ultimately, maximum job creation in America.

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