Chinese Wind Energy

January 4th, 2011 - 14 Comments

The New York Times recently reported on China’s entry into the U.S. wind energy market. “While proponents say the Chinese manufacturers should be welcomed as an engine for creating more green jobs and speeding the adoption of renewable energy in this country, others see a threat to workers and profits in the still-embryonic American wind industry,” The Times reports.

Smeal’s Gerald Susman, chair of the college’s Sustainability Council, believes that China’s entry into the U.S. wind power market presents a mixed bag of new challenges and opportunities:

There may be some benefits and drawbacks from the Chinese entry into the U.S. wind market.  The Chinese heavily subsidize their domestic solar and wind industries via low-interest loans and make it difficult for foreign competitors to enter China.  That allows them considerable scale to lower costs.  They already have gained significant share in the U.S. solar market, and this may happen for wind too.  The U.S. government has subsidized wind mainly through the Production Tax Credit, but low or zero profits have reduced its attractiveness.  Wind demand in the United States is driven mainly by Renewable Energy Standards in the 30+ states that mandate renewable energy.  Chinese entry won’t increase demand much via lower prices because coal is cheap and natural gas is especially cheap now. 

The Times article points out that foreign firms already make up most of the wind market.  GE and Clipper have relatively small shares compared to Siemens, Vestas, Suzlon, and Mitsubishi.  These latter companies import most of their high-value-added, high intellectual property components because there is a limited skill-base in the United States to make these components.  U.S. manufacturing focuses on towers, nacelle covers, engine mounts, and blades, which are either low-value-added components or too big and too heavy to import. 

The best that we can hope for in the near term is increased jobs for people who manufacture the low-value-added components, assemble turbines from imported components, and construct towers and maintain them.  That’s not insignificant growth, however.

Tags: China, Energy, Globalization, Susman, Sustainability

This entry was posted on Tuesday, January 4th, 2011 at 12:33 pm and is filed under News. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

14 Responses to “Chinese Wind Energy”

1. John Myers says:

   January 6, 2011 at 3:08 pm

   I cringe when I read “companies import most of their high-value-added, high intellectual property components because there is a limited skill-base in the United States to make these components.”! Isn’t the USA supposed to be the home of the “best workers in the world” … who are limited by the higher wages that they demand for their talents?
   .
   … or are we really “paper tigers” whose pride will precede our fall?
2. Gerald Susman says:

   January 24, 2011 at 4:15 pm

   Large bearings and gear boxes are essential high-value added components in wind turbines that the Germans, Swiss and Spanish have manufactured for more than 20 years. There is a very long and steep learning curve required to master the skills and technology that are required to make these precision components. There are virtually no US suppliers who have been willing to make the long-term commitment in training and equipment investment needed to be a serious player for making them. Consequently, these components are imported primarily from Europe. The current situation has been due in part to an inconsistent policy to support the wind industry via the production tax credit, resulting in feast or famine years for sales. That was partially resolved in 2008 by extending the PTC for 8 years.

   Thank you for the opportunity to expand on this point. The problem is partially the limited skill base in a highly specialized market segment, which in turn is due to government policy choices and supplier investment priorities.
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