Wind Turbine Industry Collapsing, Green Jobs Flee To China

Even though the Wind Production Tax Credit (PTC) may be extended when Congress reconvenes in a post-election, lame duck session, American wind turbine manufacturers are laying off workers right and left. Estimates from the Institute for Energy Research (IER) indicate approximately 3,000 jobs have already been cut or designated to be cut soon. That number is almost 30% of the 11,000 direct manufacturing jobs in the industry. At the same time, the European Union (EU) has launched an investigation of Chinese photovoltaics exporters. Similar charges in the US led to the imposition of preliminary anti-subsidy tariffs on China in March and preliminary anti-dumping tariffs in May. Instead of bringing promised prosperity to developed nations, the green energy industry is collapsing or fleeing to the developing world.

Just as the US enters the last 30 days of a bitterly contested presidential race, a flood of bad news is coming from the green energy sector. This is particularly unwelcome to the Obama campaign, since Barack Obama has made the promotion of green jobs and manufacturing a cornerstone of his economic recovery plans. A stunning new report from the IER has revealed that the green energy manufacturing industry in America seems to be collapsing at the most inopportune time for the incumbent:

So, why is this job loss happening in the very energy sector that is most dear (along with solar) to the White House? Is it really just due to the looming expiration of the PTC, given that state mandates still exist, along with other special tax preferences? After all, the same drawbacks to windpower remain: up-front capital costs, intermittency, windy areas frequently far from population centers, and not-in-my-backyard environmental issues.

In fact, two other factors are weighing heavily on the wind industry; low-cost natural gas means a greater cost disadvantage for natural-gas-fired generation and overcapacity in the wind turbine manufacturing industry created by approximately $15 billion in nonrecurring stimulus .

The report goes on to itemize the damage—at least 14 wind turbine manufacturing companies have announced plans to lay off workers or have announced hiring freezes. About 3,000 jobs have been cut or are at risk in 15 states based on documented reports. Industry officials blame uncertainty surrounding an expiring tax incentive for the lost jobs and warn that more layoffs are likely without action from Congress, and economists note the industry faces pressure from low natural gas prices and softening demand for renewable electricity.

This year's publicly announced layoffs, potential layoffs and delayed factory expansions announced by companies in the wind industry.

A few examples: Siemens has announced 407 layoffs at its blade manufacturing facility in Fort Madison, Iowa, and 146 jobs at a factory in Hutchinson, Kansas, that produces housings for the turbine generators and gears, along with 330 temporary positions that will not be renewed; Katana Summit, a tower producer, is looking for a buyer and has indicated that it will lay off 214 employees in Columbus, Nebraska, and 79 in Ephrata, Washington if a buyer is not found; Clipper Windpower in Iowa is reducing its staff by 174 jobs, from 550 to 376. DMI Industries, another tower producer, is planning to lay off 167 workers in Tulsa, Oklahoma by November. Actual job losses are most certainly higher than these reports indicate, since layoffs at small local manufacturers and parts suppliers often goes unreported.

What is amazing is that this downturn comes in the face of state mandates requiring power producers to generate a certain percentage of their electricity from qualified renewable sources. Wind power, as the cheapest renewable energy source, should benefit greatly from such mandates. At last count, 30 states have renewable portfolio standards (RPS) that have been driving the demand for wind energy. Unfortunately for turbine manufacturers, utilities in most of these states already have enough wind capacity to meet their targets for the next several years. Add to the gas fueled drop in demand an excess capacity in wind turbine manufacturing and the wind turbine industry will not rebound any time soon.

Other estimates are just as dreary. Including parts suppliers, the industry employed about 75,000 workers as of the beginning of this year, according to the American Wind Energy Association. AWEA estimates the job losses will total 10,000 by the end of this year and 37,000 by the end of the first quarter of 2013 without an extension of the tax credit.

“I'm deeply distressed that our wind industry colleagues are facing furloughs and layoffs due to lack of stable tax policy,” AWEA CEO Denise Bode said in a recent statement. “Unfortunately, the industry has begun letting workers go up and down our American manufacturing supply chain, which the industry has so proudly built up in support of the U.S. economy and made-in-the-USA manufacturing. Congress must act now to give wind energy a stable business environment to keep building this new industry and save 37,000 American jobs by the first quarter of next year.”

It is a reasonable question to ask if this downturn in green energy fortunes is having any impact on the US presidential race. IEEE's energy commentator, Bill Sweet, reports that the impact is slight:

Despite controversy surrounding U.S. government subsidies for wind and solar companies like the failed Solyndra, Obama appears to have largely lost the active support of the clean-tech industry, while Romney has the enthusiastic backing of coal, oil, and natural gas interests. Why is that, and how much difference might it make?

A sharp decline in natural gas prices, which makes both electricity and home heating considerably cheaper, presumably is helping Obama and to some extent compensating for high gasoline prices. Gas prices today are half what they were in November 2008 and a quarter of what they were at their high, five months before that. The historically low prices have encouraged utilities to switch electricity generation feedstocks, from high-carbon coal to relatively low-carbon natural gas, lowering U.S. greenhouse gas emissions from what they otherwise might have been.

The upsurge in natural gas is no flash in the pan. The US Geological Survey (USGS) just released its first assessment of the Utica Shale. The Utica Shale lies beneath the Marcellus Shale, and both are part of the Appalachian Basin, which is the longest-producing petroleum province in the United States. The Marcellus Shale, at 84 TCF (trillion cubic feet) of natural gas, is the largest unconventional gas basin USGS has assessed. This is followed closely by the Greater Green River Basin in southwestern Wyoming, which has 84 TCF of undiscovered natural gas, of which 82 TCF is continuous (tight gas).

The Utica Shale contains about 38 trillion cubic feet of undiscovered, technically recoverable natural gas (at the mean estimate) according to the first assessment of this continuous (unconventional) natural gas accumulation by the U. S. Geological Survey. The Utica Shale has a mean of 940 million barrels of unconventional oil resources and a mean of 9 million barrels of unconventional natural gas liquids. Other areas remain to be surveyed, no wonder one energy analyst called natural gas the “blue elephant in the room.”

Moreover, burning natural gas produces far less carbon dioxide than burning coal. David Victor, a researcher at UCSD, estimates that a modern gas-fired power plant emits roughly two-fifths as much carbon as even the latest “clean” coal plant. According to his calculations, the United States has reduced its carbon emissions by about 400 million metric tons annually due to the switch from coal to natural gas. That is twice as much progress as European Union policy efforts have made in complying with the Kyoto Protocol. “There is no single event that has had as large and sustained an impact on carbon emissions as the gas revolution,” he says.

As bad as things are in wind manufacturing, the solar manufacturing industry looks even worse. The widely reported failure of Solyndra and several other high profile green industry firms in the US has painfully highlighted the inability of the Obama administration to pick winners in the alternative energy field. The favorite villain in the downfall of the US solar cell manufacturing industry is, of course, China. The US has already taken retaliatory trade measures and now it looks like Europe is not far behind.

There is little question that China owns the photovoltaic solar cell market. China exports 90% of its solar energy product, and Europe is by far its largest market. Competition from Chinese solar panel companies has devastated the industry in the EU. A particularly notable bankruptcy was that of Germany's Q Cells, which not long ago was the world's largest solar manufacturer. To add insult to injury, China's PV exporters have been able to collect generous government subsidies that had been created with local European manufacturers in mind. As a result, Europe’s PV imports from China totaled 21 billion euros (US $26.5 billion) last year.

All of this trade acrimony comes amid claims by Chinese exporters that the solar power industry is on the verge of “grid parity,” the point where solar electricity is price-competitive with other sources of electrical generation. Is solar really on the verge of competing on an equal basis with coal, natural gas and nuclear? Definitly not, says a recent report by The Hamilton Project, an economic policy initiative at the Brookings Institution, electricity from newly installed solar installations in the United States would be almost three times as expensive as electricity generated from natural gas and almost twice as expensive as electricity from coal.

The cost of electrical generation as of June, 2012.

Note that the cost of nuclear shown above is highly biased due to uncertain fiance charges and overweening government environmental regulation. More rational policies would bring the cost down significantly.

Still the primary message is clear, at least in America, the economics of energy is changing due to one thing—natural gas. economists say it is hard to overstate how significant the sudden availability of cheap natural gas is. “It is the largest change in our energy system since nuclear became part of the electricity grid 50 years ago. And I don't think we fully understand the implications,” says Michael Greenstone, an economist at MIT and director of the Hamilton Project.

Recently published electric power data show that, for the first time since EIA began collecting the data, generation from natural gas-fired plants is virtually equal to generation from coal-fired plants, with each fuel providing 32% of total generation. In April 2012, preliminary data show net electric generation from natural gas was 95.9 million megawatthours, only slightly below generation from coal, at 96.0 million megawatthours.

“Cheap natural gas has taken a big bite out of coal very quickly,” says David Victor, an energy expert at University of California, San Diego. “And there's going to be a bloodbath in wind power as well.” For investors and technologists hoping to make renewable energy, such as wind and solar power, cost-competitive with fossil fuels, reaching so-called grid parity has suddenly gotten much tougher, states a Technology Review from MIT: “Arguably, it's impossible to reach with existing technologies.”

“Of course grid parity is a moving target, and in the United States average electricity costs have been coming down sharply, mainly because of the revolution in unconventional natural gas ("fracking"),” comments EnergyWise's Sweet: “In Europe and especially Germany, prices have been tending in the other direction, mainly because of decisions to phase out or minimize nuclear, post-Fukushima. Just the same, European solar prices are still far higher than average electricity prices and solar prospects are still highly dependent on government subsidies.”

All of this illustrates the fragile nature of green jobs and green manufacturing jobs in particular. The entire wind industry is based on an economic fantasy and can only survive with government mandates and handouts. How anyone could think that expensive labor in developed countries could compete with cheaper labor from Asia and other developing areas is baffling. Even hightech manufacturing has migrated offshore—Apple may design its cutting edge products in the US but they are all manufactured in China.

Is it any wonder that solar cells, let alone wind turbines, cannot be manufactured profitably anywhere in the developed world? But then, the imbecility of politicians knows no bounds. If there is a bright spot in all of this energy mismanagement it is that fracking has delivered an energy boost that politicians have not yet managed to mess up. Simply put, there is no energy crisis except the one that our leaders have manufactured for us, through ignorance and wrongheaded policies.

Be safe, enjoy the interglacial and stay skeptical.

More evidence why green energy sucks

Some empty-headed green energy chick was blathering on on NPR a few mornings ago and made the statement that there were 100,000 solar energy jobs. She compared that to only 80,000 coal miners. Accuracy of the numbers aside, consider that those 80,000 coal miners provide 42% of US electricity generation and enough leftover to export. The 100,000 solar workers contribute a whopping 0.04%. With those ratios it would take 100,000,000 solar workers to replace coal. Oh yeah, we need to shut down the mines and all go solar, that will get us to full employment.

Francesco Banda Jasso

I just added your web page to my bookmarks. I enjoy reading your posts. Thank you!

Another one bites the dust

The list of failed green energy firms who received a Department of Energy subsidy grew a bit longer this past Tuesday as lithium ion battery maker A123 filed for bankruptcy. It had been rumored that the firm was in talks to move its manufacturing base to china but those talks evidently fell through. Either way, this is yet another black eye for Obama's ineffectual economic recovery plan built on green technology and fairy dust. Writing in Forbes, Laura Hoffmans put it this way:

But the real culprit is basic economics. Even with government largesse, electric cars aren’t yet economic. As much as politicians who, King Canute-like, believe they can control the economy wish it weren’t so, petroleum products remain cheap and plentiful—as do the cars they fuel. (Even true in California, though its politicians are doing their best to make gas prices their radically higher.) The federal government gives electric car buyers a (taxpayer funded) $7,500 tax credit, but the premium above a gas-guzzler is still an additional $10,000. That may be fine for Brad Pitt and George Clooney, but the rest of us may do the math and find better uses for that 10 grand. (Not to mention the sticky question of how the heck you dispose of those darn toxic batteries.)

The company was granted a $249 million DOE grant in 2009 and another $125 million in tax credits from the state of Michigan. To guaranty a market for A123’s batteries, American taxpayers also ponied up a $529 million loan for Fisker Automotive to make electric cars that would use those batteries. Johnson Controls plans to acquire A123’s automotive-business assets in a deal valued at $125 million and will provide financing of $72.5 million to support A123’s operations. For more see “A123 Bankruptcy, Clooney and Hubris.”

Solar Scam

I just got a spam email that is pushing solar power for your house. Let government subsidies pay to convert your house to solar power read the title. The ad claimed that solar will not only get rid of your elec bill, but also the gas bill. Oh boy, they almost had me convinced but then they blew it. They made this statement...

    Look out the window. Say hello to the sun. Then ask it "will you take care of my power consumption needs?" Did it say no? Well then my friend.. consider it a "yes". Case closed. Hit the link.. you only have 650,000,000,000 years until this offer expires (when the sun goes supernova).

1) The sun is not large enough to go supernova, it will turn into a red giant for a while and then a white dwarf.

2) This will happen in maybe 5 billion years, they only missed by 645 billion years.

Bogus internet scams are one thing, but did they have to include some bogus science as well?

How nice of them

It is so considerate of the hucksters to include bogus science in their spam. A nice tip off to anyone with basic scientific knowledge—not that anyone with a brain would be taken in by the rest of the message. Sadly, those too scientifically ignorant to detect the built-in bogosity could still fall for this scam.

No worries, mate.

No worries, mate. Those likely to be taken in are probably tree huggers anyway.

Romney, Obama campaign surrogates debate energy & climate issues

On October 5, representatives of the Romney and Obama campaigns debated energy before an audience at MIT. Technology Review editor Jason Pontin acted as moderator as Oren Cass, domestic policy director of Romney for President, and Joseph Aldy, a former White House adviser on energy and the environment, spoke for their respective candidates. The whole two-hour conversation was posted as a webcast today by EE News's EETV, along with a complete transcript.

As summarized by IEEE EnergyWise's Bill Sweet: “Cass claimed Federal permitting was too slow, and that some states do much better, issuing permits in two weeks rather than a year; but Aldy asked if it is really in the nation's interest for us to have 50 different set of rules on drilling, even from business's point of view.”

On the question of energy independence, Aldy claimed it meant not having to worry about world oil prices when buying gasoline at the pump—but then proceeded to implicitly contradict himself, saying that fuel efficiency standards would make the future total cost of gasoline lower even if world oil prices were higher. Sweet continued:

It was on the four Cs—climate change and “clean coal”—that the really sharp, irreducible differences emerged. Cass asserted that the Obama administration is flatly anti-coal; tellingly, he argued that the administration's stated support for "clean coal" is essentially disingenuoous because it means the administration only supports coal if all carbon associated with combustion can be captured and sequestered. Since carbon cannot for all practical purposes be captured and sequestered, argued the Republic surrogate, Obama in effect opposes all coal.

Cass repeatedly accused the Obama administration of having made an anti-coal agenda the centerpiece of its climate program. He said Romney does acknowledge that the world is warming, but is unsure about the magnitude and gravity of the trend. He said Romney favors a "no regrets" approach, with an emphasis on technology innovation. He wondered musingly what Obama's climate policy actually is.

Evidently, the Romney campaign does not see carbon capture and sequestration as an answer to greenhouse gas reduction, something this blog has asserted in the past (see “Why Carbon Sequestration Won't Work”). I have also expressed serious doubts about clean coal technology, while acknowledging that coal will not go away anytime soon, no matter how undesirable it is as an energy source. In short, I am not in total agreement with either candidate. I urge you to watch the debate or read the transcript and draw your own conclusions.

The US and EU are not alone

The US and EU are not the only ones with a failing solar cell industry. This morning on NPR, Steve Inskeep talked to Beijing-based economist Patrick Chovanec about too many subsidies in China's solar energy industry. Just like in Europe and America, such policies are resulting in money-losing companies. One company, Suntech, could soon be delisted from the New York Stock Exchange because it is performing poorly. You can listen to the interview here:

Artificial economies do not work

When are the chuckleheads in government going to figure it out? You cannot create a viable economy with government subsidies. You cannot make an industry sustainably profitable with public money, as soon as the subsidies go away the industry collapses. The USSR and eastern Europe communists proved it, the Obama administration is proving it and now the Chinese have had a socialist relapse.