SE Michigan Wind Power

While it isn't the sole occupant of a one-state recession any longer, Michigan is still in the midst of a painful economic transition. But into what should the state's economy be evolving?

While great strides are being made in biotech, IT and other knowledge-based industries, manufacturing is being looked at as an old-world system that, much like a hospice patient, requires care and attention, but will never be cured.

But what if there was a way to connect one of the hottest global economies to the Great Lake State's old-fashioned industrial know-how? That's exactly what an increasing number of companies, government entities and utilities are asking about wind energy. "There are a lot of potential jobs to be created throughout the entire value chain," says Dan Radomski, NextEnergy's director of market development and the co-chairman of the Michigan Wind Manufacturing Group. "From raw materials all the way to installation."

He's not fibbing, folks. In fact, according to Environment Michigan and the Pacific Northwest Laboratory, a fully harnessed wind industry could result in up to 50,000 Michigan jobs, ranging from construction to assembly to engineering to research.

The combination of wind energy's perfect meld into Michigan's existing manufacturing and engineering infrastructure, combined with the state's top fifteen national ranking in wind generation capacity means the Mitten's future might very well be blowing in the wind.

Growing potential, shrinking concerns

The global appetite for wind energy is on the rise. The $23 billion market grew 23% from 2006 to 2007. Despite lagging behind Europe in terms of production capacity, the United States stands as the fastest growing global market; it increased 45% between 2006 and 2007 to $3.7 billion, a number expected to double by 2010 and increase twenty-fold by 2020, according to the Department of Energy.

And there are those who believe Michigan can be ready to handle the demand. The state is already ranked fourth in the nation in terms of the number companies best poised to manufacture wind turbine components.Furthermore, Michigan's capacity to generate wind power ranks fourteenth nationally and second in the region -- it's the windiest state east of the Mississippi.

Larry Kauffman, an energy efficiency expert at DTE Energy, points out that while there is 60,000 megawatts of potential wind energy to be had only 3,000 megawatts are currently under production. "Shame on us for not tapping into this free renewable resource," he says.

So what's the hold-up? There have been three main concerns opponents raise when it comes to wind energy: birds, noise and aesthetics.

Blades are thinner and slower than they used to be, which helps birds see them, diminishing the possibility of flying into blades. But avian migration problems require site feasibility studies. "A major bird migration path would not be an ideal site," says Radomski.

He also acknowledges that noise can be an issue but again points out that careful attention to location should preempt most complaints. "All of these things need to be studied, feasibility has to be done to make sure a site has community support," he says. "But the same issues would exist with putting up a coal plant, but [a wind farm] is not generating any air pollutants. It's pretty obvious what type of power generation is the better choice."

As to concerns about appearance, some people look at turbines as engineering marvels or even works of art, while others find them hideous. Radomski wonders how attractive opponents find power lines, substations and coal plants. 
"Michigan is going to have to put a new generation of power supply on-line," he says. "Do you want that to be from renewable sources or fossil-fueled polluting factories?"

Climbing up the ladder

So what exactly is this value chain of companies that Radomski is talking about? It begins with suppliers of raw materials and manufactured components, like steel or fiberglass --a major part of any wind turbine. Gougeon Brothers, located near Saginaw, has grown its wind business by developing an epoxy composite that is used to join together different parts of turbine blades. 

Then, of course, there's design and development, where companies like Three-M Tool in Walled Lake have experienced significant growth thanks to the wind power industry. In January, the company received a five-year contract from California-based Clipper Windpower to produce mechanical turbine components. Three-M just ordered $5 million worth of new equipment to speed up the process and is currently building a new plant in Wixom. Tellingly, only 50% of their revenue stream can now be considered automotive-related; that number once stood at 90%.

Another piece of the puzzle are the components that are exclusively specific to wind turbines. The shining star in this category is Ann Arbor-based Danotek, renown for developing permanent magnet (PM) generators that increase the overall efficiency of a turbine while also reducing its maintenance costs. The generator is a key part of the turbine because it converts the mechanical energy generated by the turbine's propeller into electrical energy. PM's generators are variable speed, which enables the wind to be harvested at lower wind speeds, maximizing potential energy production.

Unfortunately Danotek is seeing 70% of its technology produced overseas. CEO Dan Gizaw hopes things will change. "Michigan is perfectly located in terms of workforce, transportation and also wind capacity," he says. "But a lot needs to be done to bring these manufacturers here."

Its ironic that the missing rung on the wind power ladder is manufacturing. There is not one wind-specific company, like Clipper, that has a manufacturing facility in state. To borrow an automotive analogy, this would be similar to saying that Visteon, American Axle, ArvinMeritor and Delphi were operating in Michigan, but not Ford, General Motors or Chrysler.

But with the next slot on the supply chain, construction and installation, Michigan companies are again well-placed. "Walbridge Aldinger installs wind turbine farms, they do the construction and the project siting," says Radomski. "They have offices, staff and talent right here in downtown Detroit."

Which leaves only the top rungs on the ladder -bulk consumers, like utility companies. DTE Energy launched its optional renewable energy program, Green Currents, in 2007 with hopes to sign up 4,000 customers. Interest has exceeded expectation with nearly 8,000 households and businesses currently enrolled. They are now shooting for 15,000 -- which will put them in the top ten such programs in the country.

The money the Green Currents program is generating is earmarked for renewable energy sources. In the realm of wind, they've invested in two farms: Heritage Sustainable Energy L.L.C., which is building turbines on a 6,500-acre site near Cadillac, will generate 5 megawatts of electricity and Harvest Windfarm, near Pigeon, will generate fifty. DTE is also conducting a feasibility study in Michigan's 'Thumb' area --deemed the best area in the state for wind-- to see if they can generate 600 megawatts of wind power

RPS for OEM

There's no getting around the hole in Michigan's wind power value chain map: OEM  (original equipment manufacturer) wind turbine companies. The state has yet to attract a single company. Why is that?

It comes down to another three-letter acronym: RPS, or renewable portfolio standard. Twenty-three states have passed into legislation that a specific amount of its energy must come from renewable sources. Michigan is not one of them. Industry insiders consider the RPS an essential piece of a state's economic development portfolio when it comes to alternative energy. "You're not going to put a church in a state that doesn't believe in religion," says Radomski.

It's a moment of pessism for someone who sees great possibilities for Michigan. "We're still experiencing growth, but who knows what it could be?" Radomski asks. "We've already lost out on a handful of [OEM facilities]. We issued a competitive proposal -- with an RPS, could we have landed those facilities and those jobs?"

Danotek's Gizaw agrees, calling out a need for competitive incentives and abatements as well as access to capital. "The state needs to specifically focus on renewable energy enterprises, especially for manufacturers," he says. "Like there has been a lot of focus on the automotive industry for many many years -- it's important now to diversify."