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Case Study: The World In Motion Wind Turbine Company, 20081 - page 5 / 11

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is building a blade factory in Windsor, Colorado. In addition, a contract blade manufacturer for GE is opening a new facility in Aberdeen, SD. GE produces their turbines in California and Georgia. LM Glasfiber, the Danish firm leading the world in turbine blade manufacturing, has one blade facility in Grand Forks, ND, and is adding a larger capacity facility in Little Rock, AR. Mitsubishi produces blades in Mexico, in a joint venture with TPI Composites. Gamesa produces its own blades in Pennsylvania and uses LM Glasfiber blades, too. New competitor Clipper assembles their turbines, less blades and towers, in Cedar Rapids, IA. For towers, there are many domestic choices and overseas capacity to tap into. Some domestic tower producers include Ameron, DMI Industries, and Tower Tech.

WIM assembles its turbine components in Omaha, NE, and contracts for blades and towers to be delivered to the project sites. Shipping for a 51-meter blade that weighs 15 metric tons is costly, giving an advantage to domestic production, but there are plenty of low-cost international producers, too, if you can figure out how to cheaply ship something more than 165 feet long and rigid (http://scmr.uark.edu/research/WhitePapers/SCMR-WP025-1007.pdf ). Towers are just as awkward to ship. For turbines of the size that WIM produces, the best match is a tower at least 80 meters tall. The base of these have a diameter of 4.8 meters (15.4 feet) and are 36 meters (120 feet) tall and weigh 70 tons.

Competitive Environment: The Economics of Wind, a Big Business

Jackson Brown’s purchasing staff sometimes has to scrounge up what component capacity they can find on the spot market. The turbine manufacturers could sell as many turbines as they can build as long as the Production Tax Credit (PTC)—a tax credit currently equal to $0.02/kWH and indexed to inflation—continues to be in effect in the U.S. The problem is that the current PTC is set to expire at the end of 2008. Unless the PTC is renewed by Congress and the President early in 2008, there will be a disruption in orders for components, since many components have a lead time of several months. Investment in global capacity is constrained by the uncertainty in the Federal Tax Laws of the U.S. (see p. 10 of http://www.ieawind.org/wnd_info/KWEA_pdf/NWTC_WindTechApp.pdf ). This has the follow-on effect of discouraging long-term investment on the part of capital-intensive suppliers. Components like blades and towers are more labor and handling-intensive; bearings and gearboxes are in capital-intensive industries, with products similar to the booming mining industries. The suppliers of bearings and gearboxes feared that the notoriously cyclical mining industry could tank at the same time that the PTC may no longer be giving added incentives to the wind industry, so they hesitated and did not increase capacity greatly. For Kaydon Bearings of the U.S. (http://www.kaydonbearings.com/wind_energy.php ) or SKF of Sweden http://www.skf.com/files/289708.pdf ) to make the large capital investment to keep up with the demand of the wind industry, they would need to be motivated to take a large risk at a time when many think the U.S. economy is nearing a recession. Nacelle (enclosure) castings are in the

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