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Region antes up on energy, wind included
By Joe Boomgaard | MiBiz
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WEST MICHIGAN — The winds of change are blowing throughout the industrial sectors in West Michigan, and many people in the private sector and government are betting on the region’s manufacturing capabilities to serve the needs of a new energy economy.
Economic developers ask that as long as the money is flowing from the government coffers, why shouldn’t West Michigan make a play for the money, regardless of one’s beliefs in whether the government should be “playing favorites” with taxpayers’ money? These aren’t promoters of big government, but rather people who see the opportunity to drive the region’s industrial sector forward and diversify — and create jobs and wealth.
Holland is a prime example. In just about a year, LG Chem and Johnson Controls-Saft have announced around $1 billion in direct investment just in alternative battery technologies. Randy Thelen, president of Lakeshore Advantage and not one known to exaggerate economic development numbers, conservatively estimates that 10,000 jobs will be created in Holland by 2020 as the supply chain for the battery industry develops.
And it’s not just in transportation, either. Energetx Composites LLC, an offshoot of S2 Yachts Inc., last year announced plans to invest $37 million to produce wind turbine blades. The company received $3.5 million in loans from the $15 million Clean Energy Advanced Manufacturing initiative funded by the American Recovery and Reinvestment Act. The Michigan Strategic Fund just named Energetx a Center of Energy Excellence, which provides an additional $3.5 million for a collaboration with the Oak Ridge National Laboratory and Dow Chemical Co. to manufacture wind turbine blades with advanced composite materials. According to the state, Dow will deliver innovative materials and technical expertise to Energetx, and the University of Michigan and Kettering University will contribute workforce training. The project will receive $3.5 million in matching funds from the U.S. Department of Energy.
In April, Gov. Jennifer Granholm announced small manufacturers could compete for another $20 million — $15 million in grants and $5 million in loans — funded by the same initiative. Applications for renewable energy projects were due May 7, while companies with energy efficiency manufacturing proposals have until May 21.
Join my network
With or without government help, nearly 20 companies spanning the region currently comprise the West Michigan Wind Manufacturers Network, a no-cost program The Right Place Inc. organized for local manufacturers already working in the wind energy industry.
The network works to explore synergies and promote the region’s capabilities in the promising new industry. The companies want help in promoting opportunities for manufacturers in the wind energy supply chain. The idea is that companies that are in the industry should get to know one another so that they best leverage the region’s manufacturing strengths and collectively get more business.
Even the Michigan Manufacturers Association — a group that lobbied hard against, but eventually supported a watered down statewide Renewable Portfolio Standard mandating 10 percent of energy be made from renewable sources by 2020 — is dipping its toes into the wind energy industry. It’s offering its members a chance — for an extra $2,000 on top of membership dues — to be part of a marketing program the association would take to utilities and wind OEMs to show the capabilities of Michigan’s manufacturers.
“The idea behind it is to not get into policy, but to market them as a group,” MMA CEO Chuck Hadden told MiBiz while attending the Great Lakes Renewable Energy Association meeting in Detroit. “We want to talk to the utilities … and work to provide them with manufactured products that work in the wind industry.
“We see this as an economic development tool to help our guys find work. My guys are doing this as a way to diversify and move in to another area.”
The initial response to the committee has been positive as about 50 manufacturers showed up at the first meeting in March, Hadden said. By the middle of May, Hadden expects to have a clearer picture of what MMA might do moving forward.
Crowded market?
As Michigan makes a play for the wind industry, John DiDonato, VP for development of NextEra Energy Resources, a developer and manager of alternative energy projects, said there’s a 10,000-megawatt overcapacity in the manufacturing of wind turbines.
DiDonato, speaking recently at the GLREA conference, said the worldwide capacity for manufacturing is about 30,000 megawatts, of which the U.S. accounts for between 6,000 and 8,000 megawatts, but only 20,000 megawatts of turbines will be built in 2010.
For a number of reasons, especially because the state was late in passing an RPS, most industry watchers agree Michigan has missed the boat on gaining an OEM for land-based wind turbines. However, others — Hadden included — think the state has an opportunity to become a center for offshore wind technology and manufacturing.
But Joe Welch, CEO of ITC Holdings Corp., a company that operates electricity transmission infrastructure, said that too much of the manufacturing capability in the U.S. is long gone. His company has proposed building a $12 billion Green Power Express transmission system to bring power generated by wind farms in the Midwest to load centers in the eastern U.S.
To do so, the company would need 54 high voltage transformers, but when it went to the largest transformer manufacturer, it was told it needed a two-year lead time and would exhaust the worldwide supply of transformers in six years. In all, ITC would have to wait eight years to get the transformers.
“We’ve let our production go,” Welch said. “There’s no manufacturing capability on the transmission side. It’s all offshore. It’s a supply chain issue — we just can’t do it.”
“We must either expand the grid and make renewables a reality, …or people will just die on the vine,” Welch said.
However, some say the future of power will be a distributed system where renewable energy will be made and consumed locally, not transmitted over hundreds of miles via an inefficient system in which a great deal of power is lost.
MMA’s Hadden, for one, said it was interesting to hear Welch’s comments. He’s taking them to his members to see if there’s any opportunity for the state’s manufacturers to help.
Uncertainty slows developments
Developers like NextEra want to locate wind farms in the sweet spot where load and good wind potential intersect, but those two factors aren’t often found together. Michigan is no exception, and it has smaller tracts of land — many close to houses, unlike the vast farmlands of the Midwest — that would be good locations for a wind farm, DiDonato said.
“But what else is needed to build and develop wind farms is that developers need to have the ability to site them,” he said. “There is an uncertainty when we get into the local process.”
States like Wisconsin, Texas and North Dakota that have put the approval process for wind turbine sites under a statewide office are attractive to developers because there is only one tier of government to deal with.
Where the jobs are, and aren’t
However, the state does have it right in that economic developers and the administration are strongly pushing for the state to develop capabilities in the wind energy supply chain, NextEra’s DiDonato said. A 100-megawatt wind farm typically employs 12-15 full-time people at the developer’s company like NextEra, he said.
“The jobs don’t come from the developer, they come from the ancillary needed support services,” DiDonato said, noting Iowa “built an infrastructure around wind,” successfully lured Clipper Windpower to build a manufacturing facility, and now has more than 1,000 jobs in the industry. “(Iowa) has more than 2,000 megawatts installed and they have a relatively small load. If you apply that to Michigan, you can understand why the governor talks about 20-or-more thousand jobs in wind. (Michigan) could have the same opportunities with the right policies.”
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