A Chinese wind farm in Texas. Photo via Thewere42
Despite the fact that $80 billion dollars was allocated towards stimulating the US renewable energy sector in last year's stimulus bill, mere millions have been directed towards wind projects. Stateside manufacturing of wind turbine parts is dismally low. And, most strikingly of all, it appears that Japanese, Chinese, and European companies are investing more vigorously in wind projects on American soil than American companies are. As a result, it seems that the US is fast losing an opportunity to become a leader in an industry that may come to define coming decades--and losing jobs and wealth in the process. A recent article by energy research analyst Shaun Randol of Global Association of Risk Professionals, a risk management firm, details the lack of domestic investment in American wind power. There are deemed to be three primary factors leading to the lending malaise on wind power: "frozen credit lines, regulatory and legislative uncertainty, and risk aversion to new projects. Each, though seeming to be relatively obvious, is pretty accurate.
Frozen Credit, Frozen Wind Projects
This one applies across the board: small business are having trouble getting loans right now (not exactly a news flash), and wind power companies are no exception. But Randol points out that while American banks and investment firms are keeping their pocketbooks sealed, foreign ones are jumping at the opportunity to get in on the ground floor:
Billions of investment dollars are floating around, yet someone like Tom Carnahan of Missouri could not get a single American bank to invest in his $240 million, 150-megawatt wind farm project. Instead, European and Japanese banks stepped up to the plate. In October, Renewable Energy Group and Cielo Wind Power announced a joint venture agreement with the Chinese Shenyang Power Group to construct a 600 megawatt wind farm in Texas. On November 6th, AES Corporation announced that China Investment Corporation (CIC) was purchasing a fifteen percent stake in the company for $1.58 billion.All this amounts to the fact that some 84% of $1 billion US energy grants have gone to foreign companies--because they're the ones actually getting the ball rolling.
While this is a good thing in that it means more net wind power projects in the region, the US economy would benefit from the jobs and revenue such projects create. Jobs in the US wind power sector jumped from 35K to 85K between 2007 and 2008, showing the capacity for rapid expansion is there. And Iberdrola SA, the Spanish wind power firm that's one of the largest investors in US wind, employs only 800 people in the US.
Image via GARP
Low investment in US wind power means the US manufactures fewer of its wind turbine parts domestically, which means fewer jobs created in the US. See the graph above. It should be pretty clear by now that we're losing out on an important opportunity to create jobs, stimulate innovation, and become more active in the burgeoning industry. But to do so, we're going to need more support from stimulus funding, and more cooperation from the banks.
As Randol notes
Wind power, one part of a multifaceted energy generation future, shows no sign of slowing down--indeed the sector is growing rapidly. Illiquidity, unfortunately, is putting the brakes on its promising future. Despite the known risks (below), banks should ease up and start doling out cash for these hungry wind projects.I couldn't agree more.