Will Biden fix weaknesses in US onshore wind?

This month, Siemens Gamesa will stop making onshore turbines in the US.

The firm said in May it is ‘hibernating’ its two factories in the Midwest due to supply chain problems and slowing demand. As the third-largest turbine maker in US onshore wind – after GE Renewable Energy and Vestas – this is a major shift for the market because it removes competition.

This decision may also make it easier for rivals such as Goldwind, Nordex and Senvion to increase their foothold in the US.

But this isn’t really a story about Siemens Gamesa. It's about the weaknesses that the US federal government knows are present in the onshore wind supply chain, and the Biden administration’s apparent unwillingness to address them.

We have seen the Biden administration act on the offshore wind supply chain.

Last month, it formed a partnership with 11 states on the east coast to accelerate growth of the offshore wind supply chain. It also announced that the partnership will expand to include states on the west coast and by the Gulf of Mexico as the sector grows. This is great news for offshore wind developers and investors that want joined-up supply chains.

Solar has been a high priority too.

Last month, the White House announced a plan to accelerate the expansion of solar by waiving tariffs on solar panels from four nations in Southeast Asia for two years; and invoked the Defense Production Act to increase investment in the production of US solar panels. That act covers building insulation, heat pumps, green fuels and grid infrastructure – but, crucially, not wind turbines.

It is tempting to regard onshore wind as an afterthought in Biden’s plans. We will see wind turbine makers benefit from measures that help renewables, like the halving of fees that the federal government charges to build wind and solar farms on federal land; and the creation of five offices of the Bureau of Land Management to speed up the approval of new wind and solar projects.

However, dedicated action for onshore wind has been in short supply. This is despite supply chain warnings from the Department of Energy (DoE).

Critical assessment

In February, the DoE released an in-depth assessment about the health of the US wind supply chain. It identified six vulnerabilities in onshore wind today:

• Lack of demand certainty limiting supply chain investments.
• Foreign competitors with low labour costs undercutting US firms.
• Larger onshore components adding strain to logistics networks.
• Need for investment in factories to cope with turbine innovations.
• Shortages of vital rare earth materials and commodity price risks.
• Hundreds of thousands of new workers will need to be trained.

The report also warned about four vulnerabilities that would become more prevalent over the next ten years:

• Achieving a balance of US content and global supply chains.
• Vulnerabilities will be increased as installation targets grow.
• High labour costs in the US could hamper US companies.
• Modular components could erode manufacturers and jobs.

That is ten important challenges, so why the lack of major support so far?

One reason is likely that the Biden administration hasn’t seen the challenges in the onshore wind sector as being as pressing as in solar, where the market has been paralysed, or offshore wind, where it wants to start a new industry.

But the analysis also hints that it may see the solutions as too difficult.

For example, the federal government could make long-term commitments to support US onshore wind by extending mechanisms like the production tax credit. Providing that sort of long-term certainty could give manufacturers the confidence to invest in new facilities, but it could also reduce the urgency for developers to build now if they know they will still have PTC support after 2023. That would further stifle current order volumes.

Meanwhile, there is no quick fix to the fact that key raw materials and turbine parts are being mined and produced respectively outside the US. With Biden claiming that onshore wind will be a cornerstone of his plan to achieve a clean energy mix, his administration will not be able to avoid these problems forever.

Those Siemens Gamesa facilities may stay shuttered for some time.