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Capitalizing on the Growing U.S. Wind Energy Market

  • Nordex began as a family-owned company in 1985 in Denmark and incorporated in the United States in 1998.
  • The company’s manufacturing plant in Jonesboro, Arkansas employs 90 people serving the demand for wind energy in the United States and throughout North and South America.
  • The plant produces nacelles, the giant housing that contains the generator, gearbox, drive train and brake assembly of a wind turbine, weighing approximately 135 tons when fully assembled.

The Need for a Local Manufacturing Base

Wind turbine manufacturer Nordex was founded in Denmark in 1985 as a family-owned business and has since grown to include offices and subsidiaries in 26 countries, including Nordex USA with headquarters in Chicago, IL. The American subsidiary incorporated in the United States in December 1998 with an initial sales and service presence, and until 2001 it fulfilled small contracts from across the country amounting to 47 turbines. Still, the company found it difficult to serve North America due to policy uncertainty in the United States, which created boom and bust years for wind power, and instead decided to focus on the more established and stable European wind market. But in 2008, after greater stability and scale had returned to the U.S. market, Nordex made the decision to reenter the North American market with plans to build a plant in the United States to produce nacelles for its 2.5 MW class wind turbines. The nacelle is the “heart” of a wind turbine, housing the generator, gearbox, drive train and brake assembly, and sits high atop the tower.

To fully appreciate the value of local manufacturing capability, one needs to see a nacelle up close – including the drive train and hub, it is nearly 50 feet long, 12 ½ feet high, and weighs close to 270,000 pounds. At this size, transportation (and the associated costs) is no small matter.

Nordex USA President & CEO Ralf Sigrist said there were several locations considered before choosing Jonesboro, Arkansas, as the new home of the company’s manufacturing facility. The most important criterion in the selection process was a central location which would allow easier distribution of the cumbersome nacelles to wind farms across the country. Other criteria included proximity to interstate highways, a major airport, rail access, and a community college or university in the area that offered technical degrees in areas such as mechanical and electrical engineering. Sigrist said the main reason Jonesboro was chosen from among the three finalist locations was “certainly the great support the community showed, and their great eagerness to help us out. They were just very receptive and knowledgeable about the industry.”

 

The Rise of Wind Power

As of mid-2011, 31 states had passed mandatory renewable energy portfolio standards (RPS) requiring a growing percentage of the electricity sold by utilities to come from renewable or alternative energy sources. Another eight states had set voluntary renewable energy goals.1 To meet RPS targets, many utilities are turning to wind energy because it is one of the most cost-effective sources of renewable energy generation. Once a wind farm is constructed, utilities can also lock in energy prices for 20 to 30 years because the “fuel” is free.

In part due to the demand created by these RPS mandates as well as the favorable economics of wind power, there has been a recent boom in the U.S. wind energy market. In 2010, the United States was second only to China in terms of its total installed wind power capacity and the amount of wind power capacity added that year.2 This comes after leading the world in annual wind power capacity additions from 2005 until 2009.3 Overall, wind power has been one of the fastest growing sources of new power generation in the United States, accounting for 35 percent of all new generating capacity additions over the past 4 years, second only to natural gas.4 As a result, wind generation in the United States has increased from about 6 billion kWh in 2000 to about 95 billion kWh in 2010, enough to power about 8.7 million households.5

In addition to these factors, Federal tax policy – in particular the Production Tax Credit (PTC) – has been particularly effective in driving the growth of the U.S. wind energy industry. However, the market has suffered from the on-again, off-again nature of the policy, which has been allowed to expire several times since its original enactment as a part of the Energy Policy Act of 1992. It is currently set to expire again at the end of 2012. In order for wind energy to continue growing, the U.S. wind industry requires a more consistent federal energy policy, such as a PTC that is not regularly at risk of expiration. “The current environment in the U.S., with basically no federal regulations, and no certainty going forward on what the policies will be from a tax and a regulatory perspective beyond 2012,” said Sigrist, creates a difficult market to navigate and is having a chilling effect on both investment and job creation.

 

“Arkansas, Here We Come”

Nordex USA selected the Jonesboro, Arkansas, site in October 2008, and broke ground in the summer of 2009. The plant’s employees were hired in early 2010 and sent to train in the company’s German training academy for 5 months. By the summer of 2010 the plant’s construction had been completed, equipment was being installed, and component suppliers had been identified. The second week of October 2010 marked the official start of production of Nordex’s nacelles in the United States.

Over 90 people currently work at Nordex's plant in Jonesboro, producing 86 turbines this year, each of which is capable of meeting the annual electricity needs of about 750 American homes. Sigrist said the plant was still in the growth stages and would eventually ramp up to employ 180 to 220 people, producing 300 nacelles annually, or about 750 MW. Depending on market conditions, the plant could also run a 3-shift operation that would produce up to 750 nacelles per year.

 

The Ripple Effects of Wind Turbine Manufacturing

Sigrist is focused on making Nordex USA into one of the top 4 or 5 wind turbine manufacturers in the U.S. market, which will bring economic benefits to Jonesboro and beyond. The impact on the local economy will be significant in terms of direct job creation – the company’s employees earn about 30 to 50 percent more than typical positions in the area. Additionally, Nordex supplier Beckmann-Volmer, which manufacturers steel components for nacelles, decided in 2010 to co-locate and build their own production facility in nearby Osceola, Arkansas, investing $10 million and creating 200 additional jobs in doing so. Nordex has also chosen to build their supply chain using U.S. vendors whenever possible. So far, Sigrist said they have localized about 50 percent of the nacelle in terms of value by buying from suppliers across the country. The additional 50 percent is still shipped in from Europe, due only to the fact that those parts are not yet manufactured anywhere in the United States. Perhaps, if Nordex (and others) are successful at growing their U.S. operations, that will change.

Oct 2011

Endnotes

1. Pew Center on Global Climate Change, “Renewable & Alternative Energy Portfolio Standards,” August 2011, http://www.pewclimate.org/what_s_being_done/in_the_states/rps.cfm (September 16, 2011).

2. Global Wind Energy Council, “Global Wind Report: Annual Market Update 2010,” April 2011, http://www.gwec.net/index.php?id=180 (September 16, 2011).

3. U.S. Department of Energy, Energy Efficiency & Renewable Energy, “2009 Wind Technologies Market Report,” p. iii, August 2010, http://www.nrel.gov/docs/fy10osti/48666.pdf (September 16, 2011).

4. American Wind Energy Association, “Industry Statistics,” http://www.awea.org/learnabout/industry_stats/index.cfm (September 16, 2011).

5. U.S. Energy Information Administration, “Wind Explained: Electricity Generation from Wind,” July 2011, http://www.eia.gov/energyexplained/index.cfm?page=wind_electricity_generation (September 16, 2011).