June 16, 2008

In Country's Center, A Gale of Clean Energy Opportunity
Iowa Grows A Renewable Energy Sector

By Keith Schneider
Apollo News Service

One of the most noticeable features on Newton, Iowa’s Web site is a map of the Newton Union Cemetery. For a time over the last two years, the map seemed a fitting metaphor for the town of 16,000, which lies 35 miles east of Des Moines.

After all, the Whirlpool Corporation in 2006 purchased, and a year later closed the Maytag Corporation's offices and plants in Newton, putting 1,800 people out of work and ending a century-old legacy of washing machine manufacturing. Newton stood at the edge of its own economic grave, one more Midwest town unable to move from the hard-muscle industrial 20th century to the energy-efficient, high-tech 21st.

Newton’s agony, fortunately, did not last long. First came TPI Composites, of Warren, Rhode Island, which is building a 316,000-square-foot, $56 million factory to make blades for General Electric Energy’s wind turbines, the most popular in the world. The company promises to develop 500 jobs by 2010.

Then in April, Trinity Structural Towers, a unit of Dallas-based Trinity Industries, announced it would invest $21 million to transform a portion of Maytag’s 1949 factory building to produce wind turbine towers for the Midwest’s surging wind industry. The company is recruiting 140 workers for the new plant at the city’s northern edge. Construction is underway; the first towers will be shipped early next year.

"These are exciting times in the wind industry, and we are very pleased to expand our operations in Newton," said Mark W. Stiles, Trinity Industries senior vice president, on the day the announcement was made. "Our new location in Iowa puts our company in the perfect position to serve a market with outstanding growth potential."

Wind Wealth Around the Nation
Newton’s ability to recruit two new wind manufacturing plants reflects the rising gale of new economic development in the Midwest, and in other regions learning how to plug into the wind. “Communities across Iowa that have experienced real economic challenges, like Keokuk, Fort Madison and Newton, have recently seen a new rebirth by tapping into our booming wind industry,” said Iowa’s Democratic Governor, Chet Culver, at the start of a two-day wind-energy conference in late April in Des Moines. “While each of these cities is in the process of adding hundreds of new wind-generation manufacturing jobs, this is only the beginning of what is possible.”

New wind generating facilities also were opened or announced in 2007 in Arkansas, Colorado, Illinois, Iowa, North Carolina, New York, Oklahoma, South Dakota, Texas and Wisconsin. When manufacturing begins, the facilities are expected to create more than 6,000 permanent, well-paying jobs, according to the American Wind Energy Association.

Policy and Investment
Newton, Iowa’s ability to bypass the familiar tale of a Midwest city facing economic ruin owes a lot, said state authorities, to effective public policy and a nimble state government that anticipated trends in the clean-energy sector, capital markets, and manufacturing technology. Iowa is one of the 26 states that established a Renewable Portfolio Standard to provide wind generating companies a ready market for their products.

Rural towns across America are experiencing similar results as a result of laws that generate renewable energy markets. In upstate New York, for example, Noble Environmental Power, a four-year-old Connecticut company, is building a 600-turbine, $3 billion wind farm that will generate more than 1,000 megawatts of electricity, according to the company.

This spring, Noble began generating power from its first project—188 windmills in three New York communities, capable of generating 282 megawatts of electricity, enough power for 100,000 homes The $564 million project, which will eliminate 590,000 tons of greenhouse gas emissions annually, was financed by GE Energy Financial Services, one of the biggest investors in wind power nationally and globally.

Edward Rendell, the Democratic governor of Pennsylvania, announced in March that the alternative and renewable energy sectors invested $1 billion and created 3,500 new, good-paying, skilled jobs in his state. He added that Pennsylvania’s unemployment rate has been below the national average in each of the last 13 months.

In April, Ohio passed legislation that calls for electric utilities to significantly increase their use of renewable energy such as wind and solar power over the next 17 years. The legislation is expected to prompt 5,000 MW to 7,000 MW of new wind energy installations, investments valued at $10 billion to $14 billion, according to wind energy economists.

T. Boone Pickens, the Texas oil billionaire, recently announced his plan to spend $10 billion on 2,500 windmills powering a 150,000-acre wind farm in the Texas Panhandle.

The steady growth in wind manufacturing and generation, however, is bypassing windy states that are not approving new public policy. The most noteworthy example is Michigan, which has yet to approve a renewable energy law, and a result has been a weak market for electricity generated from wind.

That is not the case in Iowa. In 1983, Iowa enacted its alternative energy law to require utilities to generate a small portion of their power from clean energy sources. Twenty-five other states have since enacted renewable energy statutes.

Wind Equipment Companies Settle in Iowa
It took almost a decade for Iowa’s pioneering RPS law to begin affecting the state’s energy mix and economy.
In 1992, Minnesota Power built Iowa’s first commercial wind turbine—a tiny, .25 megawatt machine in Spirit Lake, according to AWEA. In the 16 years since, Iowa has built the nation’s third-largest wind generating sector, capable of producing 1,300 megawatts, behind only Texas and California. Iowa also has one of the largest wind turbine and parts manufacturing industries. More than 1,800 new industrial jobs are already tied to the wind industry in Iowa, according to the state Department of Economic Development, and hundreds more jobs are on the way.

Acciona Windpower, a unit of the Spanish renewable energy company, built a $27 million, 200,000 square foot wind turbine plant in West Branch, Iowa last year that employs 110 people. The network of suppliers in the United States for the plant, which produces 250 turbines annually, will employ another 1,300 people, said Acciona executives.

Siemens Power Generation opened a wind turbine blade manufacturing plant in Fort Madison, Iowa in 2007 and earlier this year said it would spend $33 million more to enlarge the plant, which will soon employ 533 people earning an average of $17.14 an hour, according to company executives.

Other big names in the wind energy production industry that have settled in Iowa are Clipper Wind Power in Cedar Rapids, and Hendrick Industries in Koekuk. As of November 2007, 9.5 percent of Iowa’s electricity was produced from renewable sources.

Governor Culver, in an address to the Legislature earlier this year, encouraged lawmakers to adopt a new renewable portfolio standard in Iowa, setting a goal to generate 25 percent of Iowa's electricity from renewable sources by the year 2025.

"As governor, my goal is to take full advantage of Iowa’s natural resources, along with our incredible manufacturing base and work force, to make Iowa the renewable energy capital of the nation," said Governor Culver.

Whether Iowa can achieve that goal is far from clear, but the geography and opportunity of the clean energy sector is vast, according to market analysts.

The United States is now the largest market in the world for wind turbines. During the first quarter of 2008 alone, utilities and developers invested $3 billion in equipment to generate 1,400 more megawatts of wind power in the U.S., according to venture capital analysts. In the last 15 months, 17 new wind manufacturing plants were built in the U.S., representing an investment of $500 million and employing 4,000 people, according to the American Wind Energy Association. Roughly half of all the components in the new wind generating equipment installed in the U.S. now are made in America, up from 30 percent in 2006.

Big Money Moving Into the Sector
Wall Street has certainly begun to pay attention as big money moves into the renewable energy sector. Along with GE Financial Services, which announced in 2007 that it would invest $4 billion in renewable energy by 2010, in the United States and overseas, other players include Citigroup, Goldman Sachs, and JPMorgan Chase.

Clean Edge, a data research firm, New Energy Finance, and Nth Power jointly issued a study earlier this year that found the clean energy sector is one of the premier growth industries in the United States and globally. Among the other findings in that report and several others:

• Venture capitalists invested $625 million in the first quarter of 2008 in "clean tech"— alternative energy, pollution control equipment, recycling, and conservation—according to PricewaterhouseCoopers and the National Venture Capital Association. That is fourth in total venture capital investment during the period, behind life sciences ($2.3 billion), biotech ($1.27 billion), and software ($1.26 billion).
• Revenue worldwide for production of solar photovoltaics, wind, biofuel, and fuel cells in 2007 was $77.3 billion, up from $55 billion in 2006, or a 40 percent increase.
• Revenues for biofuel sales worldwide are projected to reach $81.1 billion by 2017, $83.4 billion for wind by 2017, and $74 billion for solar photovoltaics by 2017. That adds up to $238 billion by 2017, or triple the value of the market in 2007.

As the first decade of the 21st century approaches its close, Newton is perched for more growth. With the arrival of TPI and Trinity Industries, the town is accumulating a critical mass of suppliers that is likely to encourage more wind companies to settle there.

"As the wind industry continues to grow, we face an ever-increasing demand for reliable and efficient wind turbines," said Victor Abate, vice president-renewables for GE Energy, TPI’s main customer.

And though wages for production jobs at the TPI plant –$12.25 to $13.40 per hour, plus benefits—are lower than the former $19 an hour jobs at Whirlpool, residents and city officials said they were pleased to recruit TPI and Trinity to their town. Trinity says it will pay $17 and more an hour.

Trinity, in fact, is a Wall Street darling: Its stock price has climbed 40 percent this year, in part because of the expanding market for its wind turbine towers. Trinity has a $1.6 billion backlog of orders for the towers it will make in Newton, up from a $200 million backlog last year, according to its first quarter 2008 financial earnings report.

And that map of the cemetery on the Newton Web site? It’s again seen as helpful for burying people, and no longer a symbol for interring an entire town.

Keith Schneider, a nationally known writer and producer, is the director of communications at the Apollo Alliance. A version of this article appeared earlier this month on www.mlui.org, the Web site of the Michigan Land Use Institute, which Keith founded in 1995 and served as executive director, and in other senior positions until last August. Reach him keith@apolloalliance.org.

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For more information

Venture Capital Report

Clean Edge Clean Energy Trends

American Wind Energy Association

Iowa Governor Chet Culver on Renewable Energy

Newton Iowa Web site