Pipestone wind-turbine factory idled; 110 layoffs

Published 8:43 am Tuesday, November 2, 2010

McClatchy—Tribune Information Services

Wind-turbine maker Suzlon Group will idle its Pipestone, Minn., plant, putting 110 workers out of jobs, because the once-booming U.S. wind energy market has lost headway.

The layoffs, to take effect Dec. 29, were announced Monday, the same day Suzlon, the world’s No. 3 wind energy company, reported a 70 percent drop in U.S. wind turbine installations for the first half of the year. It follows other industry reports of a deep downturn in the U.S. wind market.

Email newsletter signup

Suzlon, headquartered in India, invested $8.5 million four years ago to open its first U.S. blade-making factory in the heart of southwestern Minnesota’s wind-power alley. The company took advantage of government offers of free land and JOBZ tax breaks. Factory employment, once at 500 workers, had declined to 143 before Monday’s layoff announcement.

Pipestone Mayor Laurie Ness said company officials informed the city the factory had no orders and that 33 workers would retool operations in the hope of future orders. She said the company has been developing a larger blade for a new, more powerful generation of turbines.

“We are disappointed about the challenges Suzlon is facing, but we are not giving up on their viability in the future,” said Dan McElroy, commissioner of the state Department of Employment and Economic Development (DEED), which approved the subsidy deals. “We are hopeful that they will solve their problems and can rehire employees once the economy improves.”

State officials said a worker dislocation team from the state agency was headed to Pipestone to tell workers about unemployment compensation benefits, job-search assistance and training programs. Most of the factory jobs paid $11 to $12 an hour, according to JOBZ disclosure forms.

Suzlon officials in Pipestone did not return repeated calls for comment, and the plant shutdown was not mentioned by corporate executives during an early morning conference call with investment analysts.

Wind loses its steam

After four years of rapid growth, the U.S. wind-power industry expects to install about half as much generating capacity as it did last year, a trade group reported Friday.

“It is a great concern that we don’t have demand by utilities for these wind projects going forward,” said Denise Bode, CEO of the American Wind Energy Association (AWEA), which reported that the third quarter was the industry’s slowest in three years.

The top two manufacturers, Vestas and GE, also have reported gloomy U.S. sales. Keith Sherin, GE’s chief financial officer, told investment analysts last month that the U.S. wind market “has really collapsed.” Vestas, based in Denmark, said it is closing five factories in Europe.

AWEA, the industry trade group, said year-to-date wind installations in the United States dropped 72 percent to 1,634 megawatts — the lowest since 2006. The group projected 5,000 megawatts will be installed this year, down from nearly 10,000 last year. One megawatt is roughly the power consumed by 250 to 300 homes.

Minnesota still has 10 wind farms under construction. But across the nation, wind’s share of new generating capacity is 13 percent this year — a decline from 40 percent over the past two years. Bode said coal’s share of new electricity generation increased last year, a trend that “is really a wrong direction.”

Wind energy industry officials blame the declining U.S. wind market on the lack of a federal renewable-energy mandate on electric utilities. Many states, including Minnesota, have mandated such goals. The wind industry is lobbying for a federal law requiring 15 percent of the nation’s power to come from renewable energy.

Natural gas prices blamed

Suzlon, in its second-quarter statement, partly blamed the U.S. market troubles on low natural gas prices, which make gas generation a cheaper alternative for some utilities. Natural gas prices have fallen about 70 percent from their peak in July 2008. Suzlon said a federal renewable standard, if passed, will “provide strong impetus for future growth.”

For the full year, Suzlon said new installations in the United States are likely to decline by 25 percent to 45 percent from last year. The company said the wind market remains strong in India, Asia and South Africa.

GE, which has the second-largest share of the wind turbine market, recently reported deliveries down by a third this year to 616 units, and new orders down another 15 percent. Unlike Suzlon, which didn’t make a profit in the latest quarter, GE said its wind business remains profitable.

Jim Bjork, vice president of Moventas Service North America, said his Finland-based wind company has delayed moving its North American headquarters to Faribault, Minn., and opening a production plant there. The project, which has been discussed with local officials since 2008, is on hold because of the wind-power market, he said.

Demand for energy is down, making it harder for wind farm developers to obtain power purchase agreements with utilities, which have other choices including coal and natural gas, he said. Financing wind farms also has gotten harder, he said.

Ness, the Pipestone mayor, said the layoffs are the latest economic shock to the city of 4,280 people, which lost a boat builder in 2008 and had an earlier round of Suzlon job losses last year.

“Our city has been hit several times,” said Ness. “Something this size can be very devastating. We are disappointed. … I still think that wind energy has long-term potential benefits. It fits this community well. We are sitting in a high wind area. Wind blows here all the time.”