Archive Hosted by the AFL-CIO

Minnesota's Winds of Progress

July 15, 2009 By Nathan Paine, Minnesota 2020 Fellow

Download full report  (pdf)

 

EXECUTIVE SUMMARY

When placed in the most optimal location, with the proper investment, research and development, wind farms can create thousands of jobs, revive the economic base of many Minnesota communities hit hard by the recession and help the United States become more energy independent. Already, Minnesota is among the leading states for wind energy, with about 1800 Mega Watts of installed capacity, enough to power up to 450,000 homes, according to Alliant Energy.  Only Texas, Iowa and California rank ahead of Minnesota when it comes to installed capacity so far.

Since 2005, Minnesota has been dramatically increasing its wind capacity, growing by about 31 percent every year. This is due in large part to federal subsidies known as production tax credits (PTC).


Minnesota is in a good position to capitalize on this advantage for several reasons, including the state legislature's mandate that utilities purchase or generate 25 percent of their power from renewable resources by 2025 (30 percent by 2020 for Xcel Energy).

This Renewable Energy Standard (RES) has the potential to increase the state's wind power capacity by about 4,000 MW (1 million homes), which would create up to 2,200 new jobs during the 17-year construction phase and more than 900 sustained jobs during the wind farms lifetime operations. These numbers would only grow as the state reached beyond the 25 percent minimum RES.
Construction of 4,058 MW of wind power would pump nearly $9 billion into Minnesota's economy over a 17 year period. Operation costs would propel another $1.5 billion annually into Minnesota's towns.

A good portion of the jobs created would be in the manufacturing sector, an industry hit especially hard during this economic slowdown. Employment in fabricated metal production-a key component of wind turbines-fell by 10 percent since the start of the recession. These lower skilled jobs are also less venerable to outsourcing in wind production because of the high cost associated with transporting wind blades and other heavy components.

Minnesota is also positioned well when it comes to the number of industries already producing components necessary for wind production. The state ranks 13th in the number of workers already in related industries and 14th in the number of actual companies engaged in related manufacturing processes. Duluth-based Northstar Aerospace, an airplane parts manufacturer, had to lay off most of its 115 workers when its main customer, Cirrus Design, cut production. In last few weeks, Northstar hired back about 20 workers after branching out to make parts for wind generation manufacturers.


Impacts of the Financial Crisis on the Wind Industry
The development of the wind industry in Minnesota has the potential to revive the state's manufacturing sector. However, the economic downturn is also causing problems for wind production because it has made it difficult for the wind industry to access capital.

Most wind projects are financed by strategic and institutional investors with the capability to efficiently use the production tax credit (PTC) to offset earnings. However, the economic recession has reduced the pool of investors with sufficient earnings to efficiently utilize the PTC. The credit crisis has also reduced the debt financing available for wind projects. This all means that there will be an imbalance between the supply of wind projects seeking financing and the demand from financial institutions. Essentially, the credit crisis has put the brakes on the development of many wind projects.

Outlook for 2009 and Beyond Still Positive
Minnesota's wind industry will experience slower growth because the economic recession has reduced the financing available for wind projects. However, in February 2009, Congress passed the American Recovery and Reinvestment Act (ARRA), which includes several provisions to aid development of wind energy, such as:

  • a 3-year extension of the Production Tax Credit (PTC) beyond 2009;
  • an option to elect a 30 percent Investment Tax Credit (ITC) in place of the PTC. This credit can then be converted into a grant for projects beginning construction or starting operation in 2009 or 2010;
  • a new $6 billion Department of Energy (DOE) renewable energy loan guarantee program.

It is expected that the wind industry will experience strong growth in 2010 and 2011, because the ARRA requires companies to begin construction prior to 2011 to take advantage of these energy subsidies. It is also expected that the loosening of the credit markets will improve access to project financing by 2010. The cash grant in lieu of the tax credit will be an important source of financing for wind projects unable to secure tax equity.

Key Findings

  • 4058 megawatts of additional wind capacity has the potential to energize Minnesota's economy.
o100 percent local ownership of wind projects is estimated to have an annual impact that is almost three times greater than corporate-owned projects.

o Under the baseline scenario, the construction of wind projects to meet the RES requirement is estimated to create 2,222 new jobs over the next 17 years. 1,422 are estimated to be created in the turbine supply chain, and 190 new jobs are expected to be created in the construction sector and project development related services.

o Most of these jobs can't be outsourced because of the on-site work that is needed and high transportation costs associated with shipping components.

o Under the baseline scenario, RES requirement is estimated to add 922 jobs during the operations period of wind farm. These jobs include field technicians, administration, and management.

 

  • Promoting the wind industry will increase demand for displaced workers in the hard-hit manufacturing sector. This report finds that about 60 percent of the direct employment and 70 percent of the direct and indirect employment in the wind industry is in manufacturing.

o Of the direct jobs created in the manufacturing sector, 20 percent are benchwork occupations. This category includes occupations in assembly and inspection.

o 31 percent of the direct jobs created in the manufacturing sector are machine trades occupation. These include metalworking (sheet and bar rolling occupations and fabricating machine occupations) and metal machining occupations.

o 45 percent of the direct jobs created in the manufacturing sector are structural work occupations. Structural work occupations include welders and cutters.
  • 1000 megawatts of additional wind capacity has the potential to energize Minnesota's economy.

o100 percent local ownership of wind projects is estimated to have an annual impact that is almost two times greater than corporate-owned projects.

Recommendations

  • Minnesota's short-term goal should be to localize wind turbine manufacturing and attract foreign wind energy companies. Developing new, in-state, wind energy companies is a longer-term goal.
  • Provide assistance to Minnesota companies in meeting the aggressive certification and standardization requirements of wind turbine manufacturers.
  • Promote partnerships and joint venture enterprises between Minnesota companies and more advanced foreign wind energy companies. These partnerships would allow for technology transfer and give Minnesota companies opportunities to gain experience in the wind turbine manufacturing sector.
  • Increase workforce training to increase use of local labor during the construction and operating periods of the wind project. Establish workforce training centers to train wind technicians.
  • Promoting the wind industry will increase labor market demand for displaced workers in the hard-hit manufacturing sector. This report finds that about 88 percent of the direct and indirect employment in the wind industry is in turbine supply chain.

Recommendations for the short term

  • Minnesota's short-term goal should be to localize existing wind turbine manufacturing and attract foreign wind energy companies.
  • Provide assistance to Minnesota companies in meeting the aggressive certification and standardization requirements of wind turbine manufacturers.
  • Increase workforce training to increase use of local labor during the construction and operating periods of the wind project.
o Establish more workforce training centers to train wind technicians. Riverland Community College in Albert Lea and Minnesota West Community & Technical College in Canby are currently the only two wind technician training centers in Minnesota.

Recommendations for the long term

  • Use Minnesota's existing knowledge base and localization advantages to develop new, in-state, wind energy companies (e.g. Northstar Aerospace)
  • Promote partnerships and joint venture enterprises between Minnesota companies and more advanced foreign wind energy companies. These partnerships would allow for technology transfer and give Minnesota companies opportunities to gain experience in the wind turbine manufacturing sector.

website metrics



Thanks for participating! Commenting on this conversation is now closed.