Market Forces and Policy Drivers
Policy Drivers and Supply Chain
Wind power is one of the most cost-effective new sources of electricity generation in the U.S. New wind power plants can be permitted and built much more quickly than can a conventional power plant. In addition, wind power plants are attractive because they
eliminate fuel price risk;
produce no carbon dioxide or air pollutant emissions;
do not require water, mining, drilling, or transportation of fuel; and
do not generate radioactive or other hazardous or polluting waste.
New opportunities for the U.S. wind energy industry supply chain and manufacturing sector will be primarily driven by a steady and growing market as well as the trend of increasing domestic content in turbines. Domestic content—that is, the amount of components manufactured in the U.S. for wind turbines ultimately deployed here—has grown from 25 percent in 2005 to around 50 percent in 2009, even while the market quadrupled in size.
However, 50 percent is not an end target but simply a benchmark in a trend that should continue. The trend towards greater domestic content is expected to continue in coming years. In strong, regional markets throughout the world, the dominant model for turbine manufacturing is the development of regional supply chains to support increasingly local turbine and tier-one (e.g., towers and blades) manufacturing. For the turbine producers (also known as original equipment manufacturers, or OEMs) the drive to increase domestic content is necessary to decrease costs and increase competitiveness. Domestic supply chains are better able to meet the needs of OEMs because local sourcing lowers transportation costs, decreases currency risk and increases just-in-time availability.
Provisions of The Recovery Act have been critical to maintaining the momentum of the wind industry in 2009 and 2010. In the American Reinvestment and Recovery Act, the 1603 treasury program allowed project development to continue in a poor economic market, and the Section 48C program provided the first dedicated tax credit for new clean energy manufacturing. However, the long-term market outlook is crucial to investment in domestic manufacturing, and without a strong market enabled by long-term and stable policy support, the U.S. risks losing the opportunity for new manufacturing jobs. The best policy to promote manufacturing investment and ensure long-term jobs in the wind industry is a Renewable Electricity Standard (RES), which would set hard targets for renewable energy generation. Dozens of countries around the world, including the entire European Union and China, have used the RES to attract new renewable energy industries and manufacturing.
An RES would be the first policy in the U.S. to create a long-term, stable market that would be free of the boom and bust cycles that have characterized the wind industry here thus far. In addition to getting wind farms built, the RES would create a stable environment for members of the supply chain to make investments in new domestic manufacturing capabilities.
In a June 2010 report, AWEA, the Blue Green Alliance and the United Steelworkers identified nine specific policy areas necessary to foster domestic manufacturing, with the first and foremost being the National RES. The report found that the U.S. must
1. establish a National RES of 25 percent by 2025,
2. pass comprehensive climate and energy legislation that puts a cap on greenhouse gas (GHG) emissions,
3. extend and strengthen the 1603 program,
4. extend and strengthen the advanced energy manufacturing tax credit,
5. utilize loan guarantee programs for commercial manufacturing of clean energy,
6. pass the IMPACT Act to provide funding for new manufacturing,
7. pass the Renewable Energy Market Access Program to promote export opportunities,
8. fund the Green Jobs Act at $125 million annually, and
9. build a transmission grid infrastructure that meets the demand of a Clean Energy Economy.