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By Joe Boomgaard | MiBiz
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WEST MICHIGAN — Lansing lawmakers should be poised to revisit legislation governing offshore wind energy if all goes as planned and the governor gives it the green light.

“It’s a secret,” but the legislature should move on the legislation this fall, said Patty Birkholz, former state senator and current director of the office of the Great Lakes. When Birkholz was in the State Senate last year, she had been working on a package of bills that would have helped define the process for developing offshore wind farms in Michigan.

“The legislation has been vetted again and we’ve made some minor changes, but it’s ready to go when the governor decides,” Birkholz told an audience at the “Great Lakes Transportation Summit: Multimodal Solutions for the Wind Industry” event sponsored by The Right Place Inc. in conjunction with the American Wind Energy Association, Rockford Bergé and the Michigan Economic Development Corp. “Governor Snyder says he wants relentless positive action. … We have a lot of opportunities in front of us.”

Brad Lystra, manager of state campaigns for AWEA, said wind energy activity this year is eclipsing what took place in 2010, a year in which the economy caught up with the industry and the number of installations for wind projects declined. The industry group’s data show that about 7,000-8,000 megawatts of wind turbine projects will be under construction in 2011.

Importantly, as the turbines become more efficient in producing electricity and as the domestic supply chain develops, the cost is also coming down. “The technology is constantly improving,” Lystra said, noting taller towers and better gearboxes were opening more opportunities to develop wind projects outside the “traditional wind corridor.”

The advances have meant the overall cost of wind power generation is coming down. When Michigan signed into law its renewable portfolio standard in 2008, the Michigan Public Service Commission predicted prices for wind generation would be around 15 cents per kilowatt hour, said Greg Northrup, president of the West Michigan Strategic Alliance and emcee of the event. Northrup took notice when Lystra said recent power purchase agreements across the Midwest had utilities buying wind power for 5-6 cents per kilowatt hour.

“If you don’t think wind is here for the long haul, that says it’s here to play,” Northrup said. “And guess what — wind is sustainable, gas is not.”

Lystra said wind and gas have been the most competitive generating sources over the past few years, noting that 35 percent of all the new generation capacity since 2007 has been wind energy.

“You can’t predict the cost of gas five to 10 years from now, but we do know the cost of wind 10 years from now and that provides a long-term hedge against any fuel price volatility,” Lystra said.

As the American supply chain for wind energy has developed over the past decade, the amount of domestic content has steadily increased. Today, more than 60 percent of the turbine parts are sourced from within the U.S.

“It’s a unique industry because of its size. In-sourcing is a good model for the wind industry,” Lystra said.

But even though the wind industry in general is maturing, it still faces many hurdles. Sally Chope, logistics and transportation manager with wind turbine manufacturer Siemens, outlined a challenging landscape OEMs face just in getting their products into the field.

The company uses a special 19-axle trailer to haul turbine parts across the country, but the regulations differ from state to state. For example, the company can’t use that rig in several states like Washington and California. Plus California has stringent rules in how the oversized parts must be accompanied with a highway patrol escort. Permits also vary greatly by state, as do lead times to get the permits.

Chope said new technological advances in the turbines also contribute their share of challenges. Siemens just introduced a new longer blade option for its turbines, but the blades won’t fit on the trains the company used in the past to transport blades across the country. As a result, it cost the company $1.2 million to reconfigure its “blade train” to accommodate the new product sizes. She said that as nacelles get larger, they’re also getting heavier — to the point where they can no longer be transported by rail.

Whenever possible, the company prefers to offload parts shipped by vessel directly onto rail cars, but the number of ports with the required depth, sufficient egress for unloading the parts and enough storage area — that also are connected to rail lines — is very limited.

“We should be using (Chope’s list of infrastructure and permitting challenges) as a benchmark,” Northrup told MiBiz. “We need to be careful with our infrastructure and be sure we’re not going to live in the past but anticipate the future.”

The speakers at the event said Michigan’s opportunities in wind energy are a result of the region’s manufacturing capabilities, strong workforce and commercial ports. AWEA’s Lystra said the state has a ways to go to reach 1,400 megawatts of installed wind generation capacity as would be required to meet its 10 percent renewable portfolio standard by 2015.

“Ninety percent of renewable energy (projects) are built in states with an RPS. … If you had an opportunity to strengthen (the state’s RPS), the market would be boosted significantly,” Lystra said.

But with opportunities come many challenges in growing the industry. However, some of those challenges could spell opportunity. For example, if the state were to develop laws for offshore wind, federal law under the Jones Act would require that American-made vessels and American crews had to be used to haul cargo from one domestic port to another, explained Christopher Abel, partner in the maritime law and government contracts group at Troutman Sanders LLP in Virginia.

Moreover, size limitations at the various locks on the lakes would almost force offshore wind installation ships and crane barges — as well as many of the larger turbine parts — to be built in the Great Lakes region. It takes time to build that capacity, but it would mean jobs for the region.

The good news is that many ports have the available draft and space necessary for future wind turbine manufacturing, storage and assembly, said Juan López-Dóriga Escalante, logistics manager at Rockford Bergé, who noted that Muskegon in West Michigan would be suitable for the industry.

“There is significant capacity in Michigan for the manufacture and assembly of turbines, including foundational components,” Escalante said.