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Tax Credit in Doubt, Wind Power Industry Is Withering


“I hope they call us back because they are really, really good jobs,” said Miguel Orobiyi, who was furloughed from Gamesa.
Jessica Kourkounis for The New York Times


Wind turbine hubs being assembled by Gamesa in Fairless Hills, Pa., where most workers have been furloughed.
Jessica Kourkounis for The New York Times


Vending machines are used to distribute tools at the Gamesa plant, built on the grounds of a shuttered U.S. Steel factory.
Jessica Kourkounis for The New York Times


Workers prepare the bottom casing of a nacelle, a camper-size device that is designed to capture energy from slow winds.
Jessica Kourkounis for The New York Times

By DIANE CARDWELL
Published: September 20, 2012

FAIRLESS HILLS, Pa. — Last month, Gamesa, a major maker of wind turbines [ http://topics.nytimes.com/top/reference/timestopics/subjects/w/wind_power/index.html ], completed the first significant order of its latest innovation: a camper-size box that can capture the energy of slow winds, potentially opening new parts of the country to wind power.

But by the time the last of the devices, worth more than $1.25 million, was hitched to a rail car, Gamesa had furloughed 92 of the 115 workers who made them.

“We are all really sad,” said Miguel Orobiyi, 34, who worked as a mechanical assembler at the Gamesa plant for nearly five years. “I hope they call us back because they are really, really good jobs.”

Similar cuts are happening throughout the American wind sector, which includes hundreds of manufacturers, from multinationals that make giant windmills to smaller local manufacturers that supply specialty steel or bolts. In recent months, companies have announced almost 1,700 layoffs.

At its peak in 2008 and 2009, the industry employed about 85,000 people, according to the American Wind Energy Association, the industry’s principal trade group.

About 10,000 of those jobs have disappeared since, according to the association, as wind companies have been buffeted by weak demand for electricity, stiff competition from cheap natural gas and cheaper options from Asian competitors. Chinese manufacturers, who can often underprice goods because of generous state subsidies, have moved into the American market and have become an issue in the larger trade tensions between the countries. In July, the United States Commerce Department imposed tariffs on steel turbine towers from China after finding that manufacturers had been selling them for less than the cost of production.

And now, on top of the business challenges, the industry is facing a big political problem in Washington: the Dec. 31 expiration of a federal tax credit that makes wind power more competitive with other sources of electricity.

The tax break, which costs about $1 billion a year, has been periodically renewed by Congress with support from both parties. This year, however, it has become a wedge issue in the presidential contest. President Obama has traveled to wind-heavy swing states like Iowa to tout his support for the subsidy. Mitt Romney, the Republican nominee, has said he opposes the wind credit, and that has galvanized Republicans in Congress against it, perhaps dooming any extension or at least delaying it until after the election despite a last-ditch lobbying effort from proponents this week.

Opponents argue that the industry has had long enough to wean itself from the subsidy and, with wind representing a small percentage of total electricity generation, the taxpayers’ investment has yielded an insufficient return.

“Big Wind has had extension after extension after extension,” said Benjamin Cole, a spokesman for the American Energy Alliance, a group partly financed by oil [ http://topics.nytimes.com/top/news/business/energy-environment/oil-petroleum-and-gasoline/index.html ] interests that has been lobbying against the credit in Washington. “The government shouldn’t be continuing to prop up industries that never seem to be able to get off their training wheels.”

But without the tax credit in place, the wind business “falls off a cliff,” said Ryan Wiser, a staff scientist at Lawrence Berkeley National Laboratory who studies the market potential of renewable electricity sources.

The industry’s precariousness was apparent a few weeks ago at the Gamesa factory, as a crew loaded the guts of the company’s newest model of the component, a device known as a nacelle, into its fiberglass shell. Only 50 completed nacelles awaited pickup in a yard once filled with three times as many, most of the production line stood idle, and shelves rated to hold 7,270 pounds of parts and equipment lay bare.

“We’ve done a lot to get really efficient here,” said Tom Bell, the manager of the plant, which was built on the grounds of a shuttered U.S. Steel factory that was once a bedrock of the local economy. “Now we just need a few more orders.”

Industry executives and analysts say that the looming end of the production tax credit, which subsidizes wind power by 2.2 cents a kilowatt-hour, has made project developers skittish about investing or going forward. That reluctance has rippled through the supply chain.

On Tuesday, Siemens, the German-based turbine-maker, announced it would lay off 945 workers in Kansas, Iowa and Florida, including part-timers. Last week Katana Summit, a tower manufacturer, said it would shut down operations in Nebraska and Washington if it could not find a buyer. Vestas, the world’s largest turbine manufacturer, with operations in Colorado and Texas, recently laid off 1,400 workers globally on top of 2,300 layoffs announced earlier this year. Clipper Windpower, with manufacturing in Iowa, is reducing its staff by a third, to 376 from 550. DMI Industries, another tower producer, is planning to lay off 167 workers in Tulsa by November.

Wind industry jobs range in pay from about $30,000 a year for assemblers to almost $100,000 a year for engineers, according to the Bureau of Labor Statistics.

The industry’s contraction follows several years of sustained growth — with a few hiccups during the downturn — that has helped wind power edge closer to the cost of electricity from conventional fuels. The number of turbine manufacturers grew to nine in 2010 from just one in 2005, according to the United States International Trade Commission, while the number of component makers increased tenfold in roughly the same period to almost 400, according to the Congressional Research Service.

Aside from Clipper Windpower and General Electric, most of the turbine manufacturers operating in the United States have headquarters overseas, especially in Europe, where wind power took off first, spurred by clean energy policies and generous subsidies.

As the United States put in place mandates and subsidies of its own, several large outfits, including the Spanish company Gamesa, set up shop stateside. Because the turbines, made of roughly 8,000 parts, are so large and heavy — blades half the length of a football field, towers rising hundreds of feet in the air, motors weighing in the tons — they are difficult and expensive to transport.

As a result, manufacturers invested billions to develop a supply chain in the United States. More than 100 companies contribute parts to Gamesa’s 75-ton devices, which are the most expensive and complex major components of high-tech windmills.

Some longtime Gamesa partners like Hine Hydraulics followed the company from Spain, investing millions in building plants in the United States and sending workers to Spain for expensive training.

Rich Miller, who works for Hine in Quakertown, Pa., said that when he went to Spain to learn how to build and test power units for its hydraulic systems, it was his first trip out of the country.

“That was quite an experience in itself,” said Mr. Miller, who is 58, adding that he probably learned more in four years at Hine than at previous jobs.

Now he worries about having to move on. “Hopefully it will go back to the way things were.” Losing his job at his age, he said, “would be devastating for me.”

© 2012 The New York Times Company

http://www.nytimes.com/2012/09/21/business/energy-environment/as-a-tax-credit-wanes-jobs-vanish-in-wind-power-industry.html [ http://www.nytimes.com/2012/09/21/business/energy-environment/as-a-tax-credit-wanes-jobs-vanish-in-wind-power-industry.html?pagewanted=all ] [with comments]


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Montana ranchers see biggest fears realized as Asian energy demands fuel coal export boom

By Associated Press, Published: September 21m 2012

ROUNDUP, Mont. — The big mining companies first came knocking on Ellen Pfister’s door in the 1970s, ready to tap the huge coal deposits beneath her family’s eastern Montana ranch.

Pfister and others successfully fended them off, and as the coal industry retreated domestically, it appeared their battle might be won. But now, a fast-growing market in exporting coal to Asia has Pfister and other ranchers seeing their long-held fears become reality.

With the once-shuttered Bull Mountain Mine under new ownership, mining activity beneath Pfister’s 300-head cattle ranch is in full swing, on target to produce more than 9 million tons of coal this year. At least once a day on average a coal train more than a mile long pulls out of the mine that sits atop an estimated one billion tons of the fuel. Sixty percent is destined for overseas markets, including Asia.

Pfister’s biggest worry is that mining could permanently damage her water supplies — a crucial necessity on a ranch set in an arid landscape of sandstone, sage brush and ponderosa pine trees stunted by periodic drought.

“I’m trying to figure out how to protect myself,” said Pfister. “If you don’t have water, you have to go someplace else.”

U.S. coal exports hit their highest level in two decades last year, with 107 million tons of coal sent primarily to Asia and Europe. Some project volumes to double again in the next five years as the industry moves aggressively to build and expand coal ports on the West Coast and Gulf of Mexico.

Coal’s opponents are waging a political public relations battle to squash the export ambitions, and success for the industry could be undermined if the global energy market wanes. But for Pfister, the changes she’s long feared are here.

Trucks rumble along access roads to the mine carved into the rocky coulees that lace through the ranch, which Pfister inherited from her mother and runs with husband, Don Golder. Giant fissures have appeared where portions of the mine collapsed after coal was removed. About ten acres have been cleared for an emergency escape portal for miners and for ventilation equipment.

Mine owner Signal Peak Energy controls the mineral rights under portions of Pfister’s property, and federal law gives the company extraction rights and Pfister little or no compensation for her trouble. Pfister said she’s made other concessions, as well, including easements for the escape portal and installation of a gas pipeline network to clear the mine of dangerous carbon monoxide. She worried miners could get killed otherwise, she said.

Signal Peak president John DeMichiei said the company will address any concerns raised by Pfister, but has to access the mine through her property to deal with unexpected events such as the high carbon monoxide levels.

The mine also has pledged to provide water to Pfister if her springs run dry. Pfister said that could end up cancelling her legal rights to those springs in the future, making her forever dependent on the mine.

For the industry, Bull Mountain and other export mines in Wyoming and Montana represent a bet that overseas sales could reverse the industry’s downward spiral.

It’s a different world than when the Interior Department laid out a sweeping plan for coal development that ranchers said would sacrifice their livelihoods. In 1971, the agency-commissioned North Central Power Study called for building huge strip mines across the Northern Plains to serve 10,000-megawatt power plants spread across four states.

The effort was aimed at fueling the development of the American West. But while some strip mines were built, the plan was never fully realized as local residents rallied in opposition, new mining restrictions were adopted and energy markets shifted in favor of other fuels.

Once the undisputed king in electricity generation, coal has seen its share of the U.S. market drop sharply in recent years. Domestic demand for the fuel has fallen by about a third since its peak in 2007 as the U.S. relies more heavily on cheap, natural gas. With more coal plants closing because of rising costs and tighter regulations — including this week’s announcement that a 154-megawatt plant south of Bull Mountain in Billings would be mothballed — the prospects of coal reclaiming its historical throne are doubtful.

Analyst Jonny Sultoon with energy consultant Wood Mackenzie described the outlook for burning coal in the U.S. as “pretty bleak.”

Backing the industry are the railways that ship coal; unions that want more mining, shipping and construction work; and lawmakers from both sides of the aisle who see political advantage in joining the push for jobs. Pfister is among only about 40 ranchers and others make up the Bull Mountain Land Alliance that has opposed Signal Peak. That compares to more than 300 jobs created since the mine re-opened.

Montana is well positioned to tap into the export market with its relative proximity to the West Coast and an estimated 120 billion tons of coal — more than any other state and most countries. Only China and Russia have more. The industry has enjoyed almost eight years of solid support from Gov. Brian Schweitzer, who pushed tax breaks for Signal Peak and is a close associate of the mine’s owners, the Boich family.

Schweitzer is a strong advocate for renewable energy. Still, he argues exports can bring economic development without additional pollution. Coal plants in Korea, India and China will be built regardless of where the fuel comes from, he says.

“They’re not building new boilers just for Montana coal,” he said. “But we would be creating jobs in Montana.”

Lined up against exports are conservation groups and politicians in some cities and states along shipping routes.

Beyond the impacts of mining, they warn a parade of coal trains will cause significant traffic delays in bigger cities and alter rural communities. And they say pushing more coal onto the international market will boost emissions of poisonous mercury and climate-changing greenhouse gases.

“Economics 101 tells you when you increase the supply of something, the price will go down and people will consume more of it,” said Eric de Place, a researcher with the Seattle-based Sightline Institute.

Bull Mountain plans to ramp up production in coming years to 15 million tons annually. Cloud Peak Energy and Arch Coal, Inc. are seeking to build new export mines in southeastern Montana. In neighboring Wyoming, Arch and Peabody Energy have recently started shipping coal once slated for U.S. markets to the Gulf Coast for export.

“As long as it’s in the ground there,” Pfister said, “there is somebody that wants to get it out and do something with it because they see a dollar there.”

Copyright 2012 The Associated Press

http://www.washingtonpost.com/business/montana-ranchers-see-biggest-fears-realized-as-asian-energy-demands-fuel-coal-export-boom/2012/09/21/c86c1818-041c-11e2-9132-f2750cd65f97_story.html


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New CO2 Cost Estimate Gives Renewables An Edge


image via Shutterstock

by Pete Danko
Posted on September 17th, 2012

It’s the wild card in the renewables vs. fossil fuels debate: What price to put on carbon dioxide, which exacts social costs that escape capture by the free market?

The United States has estimated CO2’s toll to be $21 per ton, but a new analysis [ http://www.springerlink.com/content/863287021p06m441/fulltext.pdf ] [PDF] says the true cost is actually between $55 and $266 per ton – numbers that if accepted, would make renewables a far more competitive player in the energy marketplace.

“The analysis shows that if the well-being of future generations is properly taken into consideration, the benefits of cleaner electricity sources are greater than their upfront costs, both for new generation, and for replacing our dirtiest plants,” Laurie Johnson, chief economist in the climate and clean air program at the Natural Resources Defense Council, writes in a blog post [ http://switchboard.nrdc.org/blogs/ljohnson/co2pollutioncost_part1.html ] that explains the study she co-authored. “In contrast, using the government’s estimate of CO2 damage costs tends to favor dirtier energy sources, and an ever riskier climate.”

What accounts for the vast difference with the government’s figure? It comes down to what economists call “discounting.” This is a standard practice of shrinking – discounting – the value of things to reflect how much more a dollar today, in real terms, is worth than a dollar tomorrow. (Johnson explains the concept nicely as “compound interest running in the opposite direction.” She writes: “if you deposited $41,200 into a bank account today it would grow to approximately $100,000 in thirty years. You’d have a real net gain of $58,800. Economists thus say that $100,000 in thirty years should be valued today at $41,200.”)

The impact of this can be profound. Johnson points out that the government’s “lowest discount rate of 2.5 percent per year would value $100,000 worth of climate damages happening thirty years from now at approximately $48,000 (and at one hundred years roughly $8,500).” (You can download a PDF of the government report here [ http://www.epa.gov/oms/climate/regulations/scc-tsd.pdf ].)

Johnson makes a host of wonky econ arguments as to why this discounting is excessive, but the heart of the argument is that the trade-offs we’re talking about here are intergenerational. As Johnson says: “many of the people benefitting from emitting CO2 today are not the same people as those that will be harmed by it in the future.”

So instead of using the government’s annual discount rates of 2.5, 3 and 5 percent, the new study uses 1, 1.5 and 5 percent. With the lower discount rates, even natural gas, at outrageously low prices now due to the shale gas boom, loses its edge.

“At our two lowest discount rates (1 and 1.5 percent), we find that the real cost (i.e. generation costs inclusive of pollution damages) of building new electricity generation from natural gas (what the market currently favors) is higher than for wind or natural gas with (carbon capture and sequestration),” Johnson writes. “At 1 percent, solar photovoltaic and coal with CCS would also be cheaper. These findings are driven by differences in climate change costs only, as SO2 pollution from coal with capture is small, and negligible for natural gas. When the government’s (higher) discount rates are used, conventional natural gas appears to be cheaper than these cleaner technologies.”

Copyright 2012 Earth Techling

http://www.earthtechling.com/2012/09/real-co2-cost-could-make-renewables-a-no-brainer/ [with comments] [also at http://www.huffingtonpost.com/2012/09/20/carbon-dioxide-cost-per-ton_n_1898306.html (with comments)]


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