The renewable energy revolution President Obama wants to jump-start with stimulus money might be coming. But it's going to take a while.
While Congress and Obama moved quickly to pass the stimulus legislation, corporate planning for the future is more measured. Any increase in green energy must overcome business and regulatory obstacles.
And businesses dominating the renewable energy arena are based outside the United States. Those companies will need to add or expand U.S. manufacturing before incentives in the stimulus package result in jobs for American workers.
"How real are the green jobs? Of course they'll be some, but how real are they?" said David Garman, President George W. Bush's Energy Department undersecretary from 2004 to 2007 and before that assistant secretary for renewables and energy efficiency. "It's something that we're just going to have to learn by doing."
The stimulus package offers a bevy of benefits to power companies making green energy. There are tax incentives, loan guarantees and direct payments. Companies can choose between grants and a 30 percent tax credit for investments in manufacturing facilities. There are also tax credits based on the amount of energy generated for wind, geothermal energy, biomass and other types of renewable power.
Those create new financial security. But several barriers are likely to stall the process. There is a lack of clarity in stimulus provisions, companies said, particularly those dealing with "Buy American" requirements. Corporate leaders fear a lack of highly skilled workers, and industry experts say rules at the state and local levels can take years to overcome.
"There are a lot of institutional barriers that can't be addressed at the national level," Garman said. Building a power line can take 12 years, he said, when you include the decade sometimes needed to receive permits.
Building a geothermal plant takes an average of three to five years, said Karl Gawell, executive director of the Geothermal Energy Association, a trade group for 120 companies.
Manufacturing plants might increase production in a year, said Deborah Wince-Smith, president of the Council on Competitiveness, a group of chief executives, university presidents and labor leaders focused on corporate competitiveness.
Though a year might be short in political time, it is "not short when people are out of work in a global recession," Wince-Smith said.
The political climate around green energy has shifted, however, a factor companies say is crucial to investment and planning decisions. Spending money now seems less of a risk with the stimulus incentives and other moves that businesses believe the Obama administration will make in support of green power.
"For the first time in a long time there are some financial incentives to attract manufacturing in the U.S.," said Roger Efird, president of Suntech America, a subsidiary of the world's largest solar power company, which is based in China.
Suntech is among companies planning to expand partly because of stimulus incentives, Efird said. The company makes its solar panels in China and ships them to the United States at an added cost of $15 per panel. But it anticipates that within a year it will be manufacturing those solar panels in the United States.
"It really doesn't make any sense logically to build this stuff on one continent and ship it to another," Efird said.
Conergy Inc., a Germany-based solar company with a U.S. office in Denver, anticipates adding workers despite the recession, said Anthony Fotopoulos, chief financial and operating officer of Conergy Americas. The company now employs 118 people.
Wait and see
Others are waiting to see how any U.S. economic recovery plays out.
Suzlon Wind Energy Corp., based in India, manufactures blades in Minnesota. It is holding off on any U.S. expansion, having just added manufacturing capacity in India, China and Europe.
Before much expansion can occur, companies said they need clarity on the Buy American requirements in the stimulus. The language limits stimulus spending to American-made products, with some generous exceptions.
One of those exceptions probably will allow waivers for businesses located in 26 countries. But until the White House clarifies the language, foreign-based companies say it is nebulous enough that they are nervous.
The goal of buying American is problematic in the renewable power business because so many companies are foreign.
The largest producer of wind, based on installed capacity, is General Electric Co., a U.S. company. The second-biggest, Vestas, is based in Denmark. The No. 3 player, Siemens Wind Power, also is based in Denmark; its parent, Siemens AG, is German. Gamesa, in fourth place, is a Spanish company.
U.S. companies fare better in the geothermal energy market. California-based Calpine Corp. is the largest. The No. 2 company, Ormat Technologies, is a subsidiary of an Israeli company. No. 3, Terra-Gen Power LLC, and No. 4, MidAmerican Energy Co., are U.S.-based.
Foreign-based businesses are eligible for tax incentives when they pay taxes on U.S.-earned income, the National Association of Manufacturers said.
Companies based abroad say they will be creating U.S.-based jobs.
"The whole concept, I think, of foreign-owned is a misnomer," said Kevin Hazel, vice president of supply-chain management in the Americas for Siemens Wind Power U.S. "Siemens, with 85,000 employees [in the United States], are we foreign-owned? Or are we employing and adding to the economy here?"
Seimens just opened a wind blade factory in Iowa, a plant that now employees 360 people.
Of the top 10 manufacturers of wind turbines, seven have manufacturing facilities in the United States, said Julie Clendenin, spokeswoman for the American Wind Energy Association. Beyond that, she said, there are hundreds of U.S.-based companies creating components that go into the turbines.
But meeting the stimulus bills' goal for accelerating green power would not be possible using just U.S.-based companies and American-made products. Because European and Asian companies increased their green energy use over the last few decades, production shifted to those countries.
"We'd all prefer that money to go to U.S. companies, but at the moment, that's just not possible," said Sasha Mackler, research director for the National Commission on Energy Policy, a bipartisan panel of business, labor and environmental representatives acting as advisers to policymakers.
Business watchers believe that will start to change as the industry expands.
State mandates spur U.S. renewable industry
Solar, wind and geothermal already have seen big growth in the last two years. That came largely as a result of 29 states that now have mandates requiring utilities to generate a portion of their power from renewable sources.
A national standard is likely to become law soon, congressional observers said. President Obama supports it, and there are enough votes in Congress to pass it. That will give renewable businesses additional security.
The wind industry last year added 8,300 megawatts of capacity, enough to power almost 2 million homes, Clendenin said. In 2007 and 2008, wind companies added more than 70 new manufacturing facilities and created 85,000 jobs.
"The stimulus will go a long way toward maintain momentum through the recession," Clendenin said.
Geothermal companies between August 2008 and this month saw a 25 percent increase in projects under development. Those projects added 5,500 megawatts of power, enough to power about 5.5 million energy-efficient homes.
The geothermal industry has not projected how many jobs stimulus spending could create. But it anticipates doubling or tripling in size in the next three to five years.
"In the near term, we're seeing double-digit growth that's compounding itself," said Gawell with the Geothermal Energy Association.
If the stimulus does as it is intended and creates jobs, there may not be the right kind of workers immediately available to fill them, said Mackler with the National Commission on Energy Policy.
The power sector's work force is generally older, with the average age in the mid-50s, Mackler said. Over the next decade, those people will begin to retire. Projections for replacement workers show that those learning the needed skills are really just enough to take the jobs of those retiring, he said. There may not be enough people to fill additional new jobs.
"That's going to require a whole new set of workers with different skills," Mackler said. "There's going to be a huge demand for workers."
Training to work as a journeyman electrician takes five to six years, he said, counting both trade school and apprenticeship time.
The lack of workers could restrain the country's ability to ramp up use of renewable power, Mackler said.
Others say they do not anticipate problems finding workers. When Siemens opened its wind blade factory, it had 3,000 people apply for the initial 250 jobs, Hazel said.
Workers who have lost jobs in traditional manufacturing plants also could fill in some of the gaps, industry experts said, while construction workers displaced by the real estate downtown could work on solar projects.
The stimulus package includes $500 million to prepare workers for green energy jobs, money the Department of Labor will provide to training programs. But some corporate leaders worry about what they describe as a long-standing gap between business demands and the training provided through state- and city-run programs. Those programs normally receive federal money.
Currently, those programs do not offer much training for green jobs, said Wince-Smith with the Council on Competitiveness.
"We have not done as good of a job in the U.S. as we should have in linking training to job need," Wince-Smith said.
This story was corrected at 3:30 p.m. EST Friday, March 6.
Like what you see?
We thought you might.
Start a free trial now.