Chinese Turbines Spun by Texas Winds Spur ‘Buy American’ Push
By Kim Chipman
April 13 (Bloomberg) -- Chinese turbines powered by west Texas winds are sparking a debate over whether “Buy American” rules should be imposed on renewable-energy investments backed by the U.S. government.
A-Power Energy Generation Systems Ltd., based in Shenyang, China, will supply turbines to a joint venture planning to build a $1.5 billion wind farm using equipment made in China. The group, which includes two U.S. partners, says it may seek financial aid from the Obama administration because the project will create at least 1,000 American jobs.
Lawmakers led by U.S. Senator Charles Schumer, a New York Democrat, say such assistance amounts to subsidizing green jobs outside the country. They want to slap made-in-America requirements on renewable-energy initiatives aided by the U.S., like those already faced by highway and water-treatment projects helped by President Barack Obama’s $787 billion economic stimulus plan.
“Congress is feeling pressure to make sure they won’t be held accountable for green jobs going overseas,” said Kevin Book, a managing director for Clearview Energy Partners LLC, a Washington-based policy research firm.
Buy-American restrictions may be added to climate legislation that will be introduced in the Senate as early as next week, Book said.
GE’s View
Producers of renewable-energy equipment, led by General Electric Co., the biggest U.S. maker of wind turbines, say such restrictions would hurt their ability to compete in a global clean-energy market that relies on parts from many countries. Buy-American provisions may cause other nations to retaliate by curbing their use of U.S. products, shrinking domestic job creation tied to exports, GE says.
The wind industry will create 20,000 U.S. jobs in the next decade and would generate more if the U.S. adopted clear policies and incentives for clean energy, such as requiring the use of power generated from renewable sources, said Steve Bolze, head of GE’s power and water unit.
“What the U.S. needs, which Europe, China and other countries have, is stable, long-term policy,” Bolze said in an interview.
Fairfield, Connecticut-based GE, the world’s No. 2 maker of wind turbines after Denmark-based Vestas Wind Systems A/S, is planning to invest 340 million euros ($462 million) in developing and expanding wind-turbine operations in the U.K., Germany, Norway and Sweden, creating a total of more than 2,000 jobs in those countries, Bolze said.
A-Power’s Turbines
“We need to be very, very careful about any kinds of protectionist measures” in clean energy, Commerce Secretary Gary Locke said in an April 8 interview.
The Texas project’s U.S. partners announced the 600- megawatt wind farm in a statement on Oct. 29. A-Power was “designated as the wind-turbine supplier for this high-profile project,” John Lin, the company’s chief operating officer, said in the statement.
The U.S. Renewable Energy Group, a Washington-based private- equity firm, and closely held Cielo Wind Power LP of Austin, Texas, are in the joint venture with Shenyang Power Group, a Chinese energy alliance that has A-Power as its biggest investor.
Schumer criticized the use of Chinese-made turbines at the time, and last month joined Democratic colleagues in introducing legislation that would make the Texas wind farm and projects like it that are dependent on foreign manufacturing ineligible for stimulus aid.
‘Can’t Sit Idly’
“We can’t sit idly by while China races to the forefront of clean-energy projects at the expense of U.S. manufacturing, U.S. jobs and U.S. energy independence,” Democratic Senator Sherrod Brown of Ohio, a cosponsor, said in a statement March 3. “And we certainly can’t shoot ourselves in the foot by helping to finance Chinese clean-energy production.”
Asia makes more than half the world’s wind and solar energy equipment and is widening its lead. China invested $34.5 billion in low-carbon energy technologies last year, according to Bloomberg New Energy Finance. The U.S. spent $18.6 billion.
Partners in the Texas wind farm will fully fund the project and construct the plant using only American labor, according to Ed Cunningham, a managing partner with the U.S. Renewable Energy Group.
“We will then have the opportunity to apply for incentives,” Cunningham said in an e-mailed statement on March 22. “All incentives would be repaid within just a few years through the federal taxes generated by the wind farm, and this doesn’t include the value tied to the thousands of high-paying, stable American jobs.”
BP, First Solar
The Buy American debate is growing as companies move renewable-energy jobs away from the U.S.
London-based oil company BP Plc said on March 26 that it’s ending U.S. production of solar panels at a plant in Frederick, Maryland, cutting 320 jobs, as it shifts production to joint ventures in China and India.
Tempe, Arizona-based First Solar Inc., which received $16.3 million in federal funds to hire 200 people at an Ohio plant, plans to do 71 percent of its manufacturing hiring in Malaysia, based on a company presentation to analysts in December.
As of mid-March, at least $1.6 billion of $2.7 billion in U.S. stimulus grants for clean-energy projects went to companies based outside the U.S., according to Denise Heckbert, an analyst in Toronto with Bloomberg New Energy Finance. Spain-based Iberdrola SA received $577 million and Germany’s E.ON AG is getting $324 million, she said.
“It doesn’t look good on paper, but actually the funds are supporting a substantial number of U.S. jobs,” she said. That’s a theme sounded by energy companies opposed to Buy American restrictions.
70% U.S.-Made
Partners in the 36,000-acre Texas wind farm, which would power 180,000 homes, have emphasized that the “vast majority” of jobs would go to Americans.
“A minimum of 70 percent of each wind turbine, including the massive towers and blades, will be wholly manufactured in the United States and made of American steel,” the U.S. Renewable Energy Group said in a statement on its Web site.
Half of the parts used in GE wind turbines are made in the U.S., up from 20 percent a few years ago, according to Kevin Walsh, managing director of renewable energy at GE’s financial services unit.
The Obama administration shares Schumer’s goal of ensuring that government aid creates U.S. jobs, said Matt Rogers, a senior adviser at the Energy Department.
“The good news is these programs have worked to create jobs and bring in a lot of foreign investment to the U.S.,” Rogers said in an interview. Two programs under the stimulus act aimed at promoting renewable energy have created or saved more than 20,000 U.S. jobs, according to the Energy Department.
Tax Credit
Obama’s request to extend a manufacturing tax credit for renewable-power companies is aimed at ensuring the industry moves in the same direction as automakers, which “run at about 70 to 75 percent U.S. domestic content,” Rogers said.
Concern that most wind-power jobs will flow overseas is exaggerated because of the heavy equipment required, said Walter Hornaday, president of Cielo Wind Power.
“It doesn’t make sense to haul 400,000 pounds of equipment around on the open ocean,” Hornaday said.
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