Wind energy: Boom sputters as industry tax credit is set to expire

Congress has so far not extended the tax credit for wind energy, resulting in the layoffs of thousands of workers. Communities that a few years ago were elated to attract a promising new industry are left wondering what will the future bring.

By , Correspondent

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    The sun rises behind windmills at a wind farm in Palm Springs, California in 2011.
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Alex Derr had a new house and a son on the way when he landed a coveted job building massive fiberglass wind-turbine blades at a new factory in Fort Madison, Iowa. With well-paid work in a growing industry, he seemed to have it made.

“Having a new family, I thought it was great,” says Mr. Derr, who is in his 20s. “I thought I was getting hired for a career.”

But his career in the wind industry came to an abrupt and premature end in October, when the plant where he worked, owned by Siemens Energy, a German company, let go most of its more than 700 workers. Similar layoffs have affected thousands of workers in communities across the United States. The reason: the impending expiration of a federal tax credit for wind energy.

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Despite pleas from wind-industry advocates and politicians in important wind-energy states, Congress has so far not extended the tax credit beyond the end of the year. So on the eve of its demise, workers who thought they had snagged a dream job now find themselves once again looking for employment. Communities that a few years ago were elated to attract a promising new industry are left wondering what will the future bring.

“It was a big gut check for us,” says Fort Madison’s mayor, Brad Randolph. “It was like, two steps forward, one step back.”

The federal tax credit has helped to buoy American wind energy since 1992 and, more recently, to spawn a small but growing manufacturing sector. Uncertainty over its future now threatens 37,000 jobs, according to the American Wind Energy Association, a trade group. Some of these are held by the 30,000 workers employed in more than 500 manufacturing facilities, from big plants that assemble large wind-turbine components to smaller suppliers providing gearboxes, bolts, and other parts.

The cuts in the wind industry have concluded a strange year of both glut and dearth for the industry and its workers. With the tax credit scheduled to expire, wind-energy developers have been racing to complete new projects. By the end of this month, in fact, they are set to have installed more than twice the new capacity that had been expected at the start of the year, according to the US Energy Information Administration. Half this new capacity is expected to come on line this month.

For workers, this has meant going from too much work to too little. At the Siemens factory in Fort Madison, employees worked seven days a week for much of the spring and summer, rushing to complete orders. “We worked ridiculous hours,” says Derr, who was working overtime until a week before his job disappeared.

In Colorado, Martha Wyrsch, president of Vestas-American Wind Technology Inc. until recently, described 2012 as the firm’s “busiest year ever,” supplying turbines to more than 20 new wind farms. Still, the parent company, Vestas Wind Systems in Denmark, let go hundreds of workers at four manufacturing plants in Colorado that build and assemble wind turbines.

These layoffs, plus the relocation of some workers, reduced the Vestas workforce from more than 1,700 to about 1,100. Earlier this month, the company also announced it would cut the hours of its remaining workers from 40 to 32 hours a week, beginning next month.

The year’s swings reflect earlier ups and downs in an industry. Over the past two decades, wind energy has grown substantially, thanks in part to technological advances. Total US capacity has risen from less than 1.5 gigawatts in 1992 to 47 gigawatts at the end of 2011. But this rise has been vulnerable to uncertainty over the federal tax credit, which now stands at 2.2 cents per kilowatt-hour produced.

Congress has renewed the credit 10 times since it was first offered in 1992. But three times it has allowed the credit to expire before renewing it, resulting in a sharp though temporary drop in new wind development. The American Wind Energy Association insists that the industry still needs the credit, although earlier this month it proposed phasing the credit out over the next seven years.

For workers, the wind industry has offered the kind of well-paying blue-collar jobs that are growing increasingly scarce in American manufacturing. Two-and-a-half years ago, Jerry Limbeck found “a pretty decent job” making turbine blades at the Vestas plant in Windsor, Colo. When Vestas let him go in October, he was earning $18 an hour, plus benefits. It will be hard to find a job like that again, Mr. Limbeck says.

“There are a lot of little jobs, anywhere from $7- to $10-an-hour jobs, around the holidays,” he says. “As far as a good career, I don’t think there’s too many. I haven’t found them yet.”

The lull in the wind industry is also a blow to communities that had fought hard to attract companies, often competing fiercely against other communities in other states and triumphing only after granting generous tax breaks and other amenities.

“We were kind of shocked,” says David Razo, mayor of Hutchinson, Kan., where Siemens has laid off half a workforce of 300 at a factory making nacelles, the part of the wind turbine that contains the generator. “It took an awful lot” to get Siemens to come to Hutchinson, Mr. Razo says, including extending a railroad spur to the plant.

For Fort Madison, a town of 11,000 that sits on a wide bend of the Mississippi River in southeastern Iowa, the opening of a Siemens plant in 2005 could not have come at a better time. A pen factory that had operated in the city since the beginning of the 20th century had shut down, with a loss of 200 to 300 jobs. Not long after, 500 more jobs disappeared when a company that made trailers for tractor-trailer rigs closed.

Tim Gobble, executive director of Fort Madison Partners, an economic development group, recalls “the excitement that something new was coming after four years of nothing.” The excitement only grew as the Siemens plant expanded faster than local officials expected, quickly becoming the city’s largest employer.

Now the same officials are trying to find new jobs for Siemens workers. Last month, Iowa Workforce Development held a job fair for them at a Comfort Inn in Fort Madison.

“They have to make a decision,” says William Stuflick, regional manager of the agency. “‘Do I take a job that pays less an hour, or hold out and wait for something better?’”

William Davis, who lives a few miles downriver in Warsaw, Ill., and retired from Siemens in October, says the poor local economy added to his co-workers’s distress at losing their jobs. Lee County, long one of Iowa’s most economically depressed counties, has a jobless rate of 7.9 percent, a full three points above the state average. Mr. Davis says he doesn’t know any workers who have found new jobs, “except at temp agencies.”

Some workers who lost jobs in wind manufacturing hope to get them back once the industry recovers. “I can’t see wind energy just going by the wayside,” says Limbeck in Colorado.

Derr isn’t thinking that way. He signed a separation agreement with Siemens, closed out his 401(k), and has been filling out applications. He’s looking again for that “career” job.

“I could get a job for eight bucks an hour, driving a delivery van around town, but that’s not going to pay my bills,” he says. At the same time, he adds, “I’d hate to guess how many people are looking for jobs around here.”

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