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The green supply chain
The "domestic" green job argument turns out to be weak
By Stephanie I. Cohen
Last Update: 11:29 AM ET Nov 17, 2009
NEW YORK (MarketWatch) -- Promises of green job security may be a thing of the past.
A major selling point for the green jobs movement has been the near guarantee that renewable energy and green tech sector jobs will be tied to U.S. soil -- wind farm technicians and solar panel installers in China or India can't service turbines in Iowa and roofs in California.
The resulting theology of the green energy movement is that investments in alternative energy will yield millions of new U.S. jobs that cannot be shipped overseas.
But Sen. Charles Schumer's, D-N.Y., recent irritation over a proposed Texas wind project eligible to receive hundreds of millions of dollars in stimulus funding has shown just how erroneous this thinking is.
The $1.5 billion wind farm would span 36,000 acres and generate enough electricity to power 135,000 to 180,000 American homes annually. Big investments in renewable energy and wind turbines hardly sound controversial. But the problem, for Schumer, is that the project -- a joint venture between China's Shenyang Power Group, Texas-based Cielo Wind Power, and the U.S. Renewable Energy Group -- will yield more job creation in China than the U.S.
"I'm all for investing in clean energy, but we should be investing in the United States, not China," Schumer said in a statement. "The goal of the stimulus was to spur job creation here, not overseas. This project should not receive a dime of stimulus funds unless it relies on U.S.-manufactured products."
Under the American Recovery & Reinvestment Act of 2009, the Energy Department can distribute cash grants equal to 30% of a company's investment in a new renewable energy project. This would enable Texas-based Cielo to tap around $450 million in federal grants.
The Obama administration intends to make more than $30 billion in federal loan guarantees authority available for the "rapid deployment" of renewable energy projects and related manufacturing projects that employ advanced energy technologies able to avoid, reduce or sequester greenhouse gas emissions.
The Energy Department's solicitation for project proposals explicitly says "foreign ownership or sponsorship" of a project "is permissible" so long as the project is located in one of the fifty states, the District of Columbia or a U.S. territory. Companies are also free to pick their own suppliers, though the number of domestic jobs created by each project is taken into consideration.
Domestic Job (In)security
But now Schumer wants Energy Secretary Steven Chu to block funds to projects unless they use "high-value components," including wind turbines, built in the United States.
The Texas wind project anticipates relying on 240 wind turbines built by A-Power Energy Generation Systems Ltd. APWR, a shareholder of Shenyang Power Group based in China. A-Power plans to build these turbines at a facility in Shenyang, China.
"Our U.S. wind industry, including companies located in my state, is fully capable of providing these and other high-value components, and U.S. wind farms financed with stimulus money should be buying American-built turbines and parts," Schumer said in his letter to Chu.
Schumer said the manufacturing of these turbines would create 2,000 to 3,000 jobs in China, though A-Power contends that the number is closer to 800 jobs. U.S. Renewable Energy Group claims the wind farm would create 330 jobs in the United States, 300 construction jobs and 30 in operations and maintenance. Energy Department officials argue that the wind power supply chain is a little more evenly divided, with about 50% of jobs going to installation and related jobs.
Schumer's argument also essentially denies the global nature of green industries, particularly the wind sector. The top wind companies in the world are spread out across Denmark, Spain, Germany, India, the U.S., China and elsewhere. China's top three wind turbine manufacturers -- Sinovel, Dongfang and Goldwind -- together accounted for just 11.5% of the global wind turbine market in 2008.
Schumer's concern was prompted by a report released by American University's Investigative Reporting Workshop charging that 84% of the $1.05 billion in clean-energy grants distributed by the U.S. government since Sept. 1 has been delivered to foreign wind companies like Spain's Iberdrola S.A., Germany's E.on Climate & Renewables, Japan's Eurus, and Portugal's Horizon-EDPR. All of these firms, however, have U.S. subsidiaries vying for stimulus funding, not uncommon in the global marketplace.
China's (Solar) Bull Market
Schumer is right about China's race to -- and ability -- to become a wind power manufacturing base. "China is fast emerging as one of our main rivals in the race to build the technology that can help us achieve energy independence," he noted. "We should not be giving China a head start in this race at our own country's expense."
According to the joint venture agreement reached by the companies, the U.S. based partners in the Texas project turned to Shenyang for turbines because commercial banks in China will finance the$1.5 billion required for the project through SPG.
SPG is a local alliance of companies based in Shenyang that was formed in June of this year by A-Power, a Chinese manufacturer of wind turbines and the lead investor in SPG. Chinese government reports also indicate that Shenyang Ruida Investment Co. (the investment arm of the Shenyang government will also put up a portion of the $147 million in capital for SPG.
"China is fast emerging as one of our main rivals in the race to build the technology that can help us achieve energy independence."
Sen. Charles Schumer, D., N.Y.
China is vying to become a major player in the renewable energy sector especially in wind power. China's installed wind power capacity has doubled annually for the past four years and growth of installed wind power capacity in China for 2009 will be the highest in the world, surpassing the U.S., according to an October analyst report from KGI.
This demand has been fed by more than 70 Chinese wind manufacturers, 20 of which entered the Chinese market in 2008 alone, according to an October report from Taifook Research. Growth has been so significant that the government is now concerned with overcapacity in the wind sector and has begun imposing regulations to moderate growth while Chinese suppliers look for overseas customers.
"[I]n order to minimize the risk of concentrating on the domestic market, Chinese suppliers are diversifying into exports, with an eye on Europe (replacement demand) and the US," the KGI report said.
Renewable energy production vs. new green jobs
The Texas wind farm debate raises the possibility that American hopes for carbon-free green energy and green jobs may come into conflict. This is, at least partly, because the stimulus package has dual aims: job preservation or creation, and boosting investment in energy infrastructure quickly.
The American University report focused on the fact that of the $1.05 billion in cash grants given for the installation of 1,763 megawatts of capacity, roughly 1,566 would be installed in the U.S. by foreign companies. The Texas-China venture is slated to add 600-megawatts of wind generation.
The addition of 1,763 megawatts of installed capacity on U.S. soil will grow the wind sector, which remains a sliver of the renewable energy pie in America.
Green job advocates are party to blame for the sudden concern over green job security. American have been fed an almost constant stream of potential green job numbers with promises of hometown positions.
While some green jobs will certainly need to remain American-based, many others in green sales and marketing, research and development, and especially manufacturing will have no home field guarantee.
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