Report says China is squeezing U.S. firms out of its massive wind-power market

12:00 AM CDT on Thursday, March 18, 2010
By JIM LANDERS / The Dallas Morning News jlanders@dallasnews.com
WASHINGTON – U.S. companies are getting squeezed out of the big Chinese wind-power market even as Dallas investors are bringing Chinese firms here via a big wind farm in Texas, according to a new industry report.
"They've used every measure you could possibly think of to enhance production of renewable energy equipment in China," said report author Alan Wolff of the trade law firm Dewey & LeBoeuf LLP.
U.S. Trade Representative Ron Kirk won a pledge from the Chinese last fall to drop rules giving preference to Chinese makers of wind-power equipment. But Kirk's office hasn't seen any evidence that the pledge has been carried out, said spokeswoman Carol Guthrie.
Meanwhile, Chinese manufacturers are entering the U.S. wind market under a joint venture led by Dallas investor Cappy McGarr.
McGarr's U.S. Renewable Energy Group, with Cielo Wind Power LP of Austin and China's Shenyang Power Group, is planning a $1.5 billion, 600-megawatt wind farm on 36,000 acres in West Texas.
Several U.S. senators have complained that the West Texas project would use hundreds of millions of dollars in U.S. economic stimulus funds for wind turbines built in China. They introduced a bill this month that would halt federal funding of renewable energy projects until "buy American" requirements are written into law.
McGarr's Chinese partners announced plans last week to build a wind turbine factory in Nevada, and McGarr says most of the jobs for the West Texas project will be American.
"A minimum of 70 percent of each wind turbine in the ... project, including the massive towers and blades, will be wholly manufactured in the United States and made entirely of American steel," McGarr said.
Dewey & LeBoeuf's report on China's renewable energy equipment market was done for a U.S. industry group, the National Foreign Trade Council, where concern about China's market restrictions and treatment of foreign firms is growing.
"If you're not operating under a rule-of-law country, if you have no place to adjudicate, and there are places where the country has stacked the deck against you, you may look for somewhere else" to do business, said trade council president Bill Reinsch.
Some wind power advocates are urging everyone to calm down and are particularly concerned about the Senate "Buy American" bill.
"This proposal would torpedo one of the most successful job creation efforts of the Recovery Act [the economic stimulus program], which has already preserved half of the 85,000 American jobs in the U.S. wind industry," said Denise Bode, president of the American Wind Energy Association.
"Rather than adopt policies that will kill American jobs, Congress should enact policies that will create jobs by encouraging manufacturers to invest in U.S. plants," she said.
Six years ago, foreign wind turbine manufacturers held 82 percent of the Chinese market, but they now have a 10 percent share, according to the Dewey & LeBoeuf study.
Because of off-and-on incentives for wind power in the United States, foreign manufacturers have dominated here as well, says the American Wind Energy Association. Even so, the United States is the largest wind-power producer, with Texas leading the states in wind-generated electricity.
Once a national market evolves, equipment suppliers tend to build manufacturing plants closer to wind farms to avoid shipping expenses for the large machines, said Lutz Weischer, a research analyst with the Washington-based World Resources Institute.
"Putting a moratorium on wind projects could have the unintended consequence of making your market less stable and slowing the growth in employment," he said.
Citing Chinese press reports, Weischer also argued that China is living up to its pledge to drop local content rules for wind energy equipment. GE, the largest U.S.-based wind turbine company, reached a deal in January to sell 88 turbines to three smaller Chinese wind farms.
Wolff said he and his colleagues found no evidence that China is reopening its market. In August, the Chinese announced they would build a series of enormous wind farms, each designed to generate 20 times as much electricity as McGarr's West Texas project, with preferences for local equipment manufacturers.
"Some of those projects will reportedly have [wind turbine] towers 30 stories high. They're building them in valleys, in deserts; they're really taking advantage of their resource," said Dewey & LeBoeuf attorney Tom Howell.
Foreign manufacturers haven't won any of the equipment contracts for those jobs or any others developed by the Chinese central government since 2005, Howell said.
Sen. Sherrod Brown, D-Ohio, is one of the sponsors of legislation that would add "Buy American" requirements for wind projects built with government stimulus funding.
"We cannot sit idly by while China races to the forefront of clean energy production at the expense of U.S. manufacturing, U.S. jobs and U.S. energy independence," he said.
By choosing to build a turbine factory in Nevada, the Chinese at the very least may have slowed Brown's bill. The turbine plant provides an economic boost to Nevada, where Senate Majority Leader Harry Reid is facing a tough re-election challenge later this year.