Siemens Wind Sees Prairie Power Potential

Siemens Wind Sees Prairie Power Potential

This article orginally appeared in the Topeka Capital-Journal. The Capital-Journal maintained control over all editorial decisions.

BRANDE, DENMARK — The blades of a single wind turbine spin above the Siemens Energy Sector Wind Power Division production facility in this town of 7,000 in central Denmark.

The turbine is a relic from before Siemens acquired its Danish maker, Bonus Energy, in 2004. Producing one megawatt of electricity, it is smaller than any of the turbines Siemens now produces commercially, which bottom out at 2.3 megawatts.

“This is a monument; this is more like a statue,” Siemens visit coordinator Michael Bjerre Stokholm Pedersen told a recent guest. “But it’s still producing energy.”

Enough energy, in fact, to provide 17 to 20 percent of the electricity needed at the 450,000-square meter Brande complex. Workers there can assemble a 3.2 megawatt turbine in about four hours and a giant, 6-megawatt offshore wind turbine with 75-meter blades in about a week.

The turbine spinning above the Brande facility is a reminder of how far the wind industry has come in a single decade.

Bonus had about 850 employees when it was acquired, and Pedersen says Siemens Wind now has 3,000 in Brande alone and about 10,000 worldwide, including several hundred at a plant that opened in Hutchinson in 2010.

As of 2012, Denmark gleaned about 30 percent of its electricity supply from wind. By 2020, when Kansas utilities will be required to get 20 percent of their electricity from all renewable sources, the Danish government plans for its nation to get 50 percent from wind alone.

In Denmark, wind power has proved a recession-proof boom industry that has changed both the physical landscape and the economic landscape of towns like Brande. But the Kansas plant has been subject to fits and starts, expansions and layoffs that Siemens Wind officials say are driven by the uncertainty of “will-they-or-won’t they” government policies.

Those officials, including Siemens Wind CEO Markus Tacke, are watching what state legislators do with Kansas' embattled “Renewable Portfolio Standards” (RPS) that require Kansas utilities to glean 20 percent of their electricity from renewable sources by 2020.

But the Hutchinson facility produces nacelles for wind turbines that ship throughout the United States, so the greater driver of demand is a federal wind production tax credit that Congress has gone back and forth on for years.

“There is somewhat of a boom-bust cycle in the U.S. that makes it difficult to keep a stable supply chain and create learning effects in the supply chain,” Tacke said. “I think that’s certainly where government policies come in. In the interests of the overall industry let’s make sure there’s a continuous pipeline and then we can discuss, of course, how big should be the pipeline. But No. 1, it should be a continuous pipeline so you don’t need to downsize or 'rightsize' and then you hire again. This is all effort, it’s not good for the people themselves, it’s not good for the companies and it doesn’t help you bring costs down, so it’s not good for the industry.”


Why Kansas?

In his seventh floor office overlooking Hamburg, Germany, Tacke explained why Kansas was chosen as the site to produce the nacelles that sit atop the wind turbine towers and house the generator components used to turn wind into electricity.

“Hutchinson was chosen as it was a unique location in the U.S.,” Tacke said. “It’s in the heart of the wind resources, so it’s in the heart of the wind market.”

Jan Kjaersgaard, CEO of Siemens Onshore Wind division, ran the company’s U.S. operations until 2011 and was based in Orlando, Fla., when the Hutchinson nacelle plant opened in 2009.

Not only is Kansas itself a good market for wind turbines, Kjaersgaard explained during an interview in his Brande office, Hutchinson is located close to railways and highways that help ship the company’s cumbersome product to other turbine-hungry states like California and Texas.

Along with a blade factory in Fort Washington, Iowa, the Hutchinson plant became a production hub that Kjaersgaard said has proved itself.

“We’re happy to be there,” Kjaersgaard said. “We have a very good workforce, very loyal. We’ve seen at both facilities very high efficiencies, very high morale, so I would say we are very happy.”

Kjaersgaard announced this week he will be leaving Siemens to become CEO of Denmark's Bladt Industries in November.

Other companies that aren’t producing the turbines themselves in Kansas are investing in wind farms in the state that create turbine maintenance jobs and increase property values while they produce energy.

According to the Kansas Energy Information Network, Kansas has gone from one wind farm to 21 in the past decade, with three more under construction and another three with power purchase agreements signed, waiting to begin construction.

The power of Kansas wind has drawn interest from companies in about a dozen other states and some, like Siemens, from other countries. BP Alternative Energy and Renewable Energy Systems are based in the United Kingdom, EDP Renewables is from Portugal, Iberdrola Renewable Energies is from Spain and juwi Wind is from Germany.

According to the group Wind Works for Kansas, wind energy has brought 13,000 jobs and $7 billion in investment into the state since 2004. Kansas now has more than 1,700 turbines creating almost 3,000 megawatts of electricity.

But Wind Works for Kansas believes there’s far more potential still blowing in the prairie winds.

Tacke said that for Siemens and others in the industry, that potential relies on demand for wind power, which has fluctuated widely in recent years due to federal government indecisiveness.


Boom and bust in Hutchinson

In a hallway of the Brande facility there is a picture from November 2010 of Siemens employees standing in front of the first nacelle produced in Hutchinson.

Most are wearing blue hard hats, but Claus Ungstrup, the plant manager who moved from Denmark to get the operation off the ground, wears a black one shaped like a cowboy hat — a gift from his Kansas co-workers.

At its peak the plant had about 400 employees, but that number hasn’t held steady.

The federal production tax credit was first enacted in 1992 and in 1999 it began a cycle of lapse and temporary, one- or two-year extensions that has continued to the present day.

After a two-year lapse, President Barack Obama extended the tax credit again in a 2009 stimulus package. It was providing about 2.3 cents for every kilowatt-hour of power produced, but was slated to expire again at the end of 2012. Wind companies rushed to get more projects in before the expiration, creating a brief boom in which Kansas wind capacity nearly doubled. But investors predicted a steep drop in demand once the credit expired.

Siemens announced in September 2012 that it was laying off 146 Hutchinson workers, and by the end of the year the plant was down to 152 employees.

Then a seemingly deadlocked Congress came together on a deal to avert a self-imposed “fiscal cliff” budget crisis late on Jan. 1, 2013, and the wind tax credit — included in the deal — was suddenly back on.

By February orders were coming in and Siemens was re-hiring employees.

The credit expired again at the beginning of 2014 but some ongoing projects were grandfathered in and Siemens has continued to restore its workforce.

A North Dakota wind energy producer’s order in February for 64 3.0-megawatt turbines using Siemens’ direct-drive gearbox technology added another 30 jobs in Hutchinson to bring the plant up to 360.

Republican Gov. Sam Brownback has publicly supported the federal tax credit in the past, but recently said he would favor phasing it out over several years. Kansas Congressman Tim Huelskamp, who represents Hutchinson and is one of the U.S. House of Representatives’ most conservative members, has opposed extending the credit, arguing the wind industry is mature enough to stand without the subsidy.

Kjaersgaard said a lame-duck Congress may pass another temporary extension in December, after the elections, but if it is again for only one year, its benefit will be limited.

“Then you need to complete (projects) by the next year,” Kjaersgaard said, “and the product needs to get financing and be installed, commission started on, then eventually it becomes basically, some years, six to eight months from go-ahead until you need to start installing to be ready by year end on a big contract.”

Tacke said it would be better to have enough regulatory certainty to allow for “mid-range” business planning, rather than a system in which demand is pent up at times while investors and companies try to guess when to build based on when the next tax credit extension will come.

Tacke said businesses knowingly take on long-term risk, but hope for more predictability than a year-to-year market swing.

“We have taken some risks, all the industry have taken some risks,” Tacke said. “We have seen some OEMs (original equipment manufacturers) moving out of the U.S. We said we will stay, we want to stay, we’re an American company. But only a midterm sustainable view helps to sustain those investments.”

In Kansas, Siemens has testified against repealing the 20 percent renewable energy by 2020 mandate and Kjaersgaard said it will continue to do so, even if an RPS repeal after five years wouldn’t have quite the same boom-bust effect as the federal tax credit roller coaster.

“A five-year planning horizon is fine, but we still would support Kansas maintaining an RPS in place,” Kjaersgaard said.

Kjaersgaard said the state-by-state Renewable Portfolio Standards are a factor in wind investment, though some states’ standards are “kind of soft.”

“The tougher the penalties are, the more they’re driving behavior,” Kjaersgaard said.

Tacke said the entire wind industry needs to explain to lawmakers that wind is still a young energy source that needs support to compete with legacy sources like coal and oil that are also receiving government support. But given the innovations that have made it possible to produce more wind energy at lower costs, wind won’t need that support much longer, he said.

“I think it’s appreciated, it’s necessary but the industry will become independent — onshore (wind) within a decade,” Tacke said. “We monitor (subsidies), we appreciate them, but certainly we strive to also be an industry independent of subsidies.”


The future

In the Danish port city of Aalborg, Albert Holkenberg recently led a visitor into a Siemens production facility where employees were manufacturing the company’s new 75-meter blades for offshore wind turbines.

The blades ran almost the entire length of the hanger-like building and, at first glance, looked like the fuselage of a commercial jetliner.

Holkenberg explained how a process of vacuum injection of epoxy and hardener allows Siemens to make the giant blades in one piece, which increases efficiency and decreases maintenance because “a glue connection is a weak point in the windmill.”

“That is what gave us the world’s best blade,” Holkenberg said. “Definitely.”

Holkenberg, short, white-haired and energetic, has seen his share of wind turbine blades.

An engineer that Bonus Energy plucked off the Aalborg shipyards in 1998, Holkenberg is now director of special projects at the plant. He is charged with telling the story of how Siemens, in 10 years, went from the 1-megawatt producing turbine that graces the Brande facility to the 6-megawatt offshore turbines with single blades longer than the entire diameter of the 1-megawatt predecessor.

Hutchinson won’t be the nacelle producer for such blades because they are simply too large to be shipped overland.

As Siemens moves to take advantage of the offshore wind potential on the United States’ Eastern Seaboard, the turbines will be shipped from Aalborg across the Atlantic Ocean.

But demand for onshore wind turbines has also increased as they have grown in size and efficiency.

Siemens has shipped products from the Hutchinson plant as far north as Canada and as far south as Chile and Argentina. Orders from north of the border and from some Central American countries were expected, Kjaersgaard said. South America was a happy surprise.

“The initial plan was not shipping out of the continent,” Kjaersgaard said.

In addition to making larger turbines, Siemens has also made leaps forward in efficiency with the direct-drive turbines like the ones Hutchinson is shipping to North Dakota.

Pedersen, the tour guide in Brande, explained that the direct drive system removed the turbine’s gearbox, thereby creating a nacelle that is smaller, lighter and requires less maintenance.

“A quantum leap was made here — in weight, in dimensions, in complexity,” Pedersen said.

Siemens officials say the direct drive system is what all wind turbines will use in the future, and predict heavy market demand.

With each such innovation, wind power becomes more competitive with fossil fuels, especially in places with a steady supply of wind. Kjaersgaard said there is more innovations to come.

“I don’t think it will taper off,” Kjaersgaard said. “I’ve been in this business for 13 years. It was always the case year over year the manufacturers improved the performance of the products and whenever you improve the performance you bring down the costs of energy.”

Kjaersgaard said Siemens foresees a day when wind and natural gas are the two biggest energy sources in the United States.

Burning gas has the advantage of providing a steady stream of energy, while wind is intermittent. But Tacke said that may be mitigated in the future, with innovations that allow generators to capture and store energy when the wind blows hard, and then release it during downtime.

“If somebody comes up with a good idea on storage, it will be a game-changer,” Tacke said.

Meanwhile, Tacke said he believes the workforce at Hutchinson has stabilized and Siemens hopes to grow there, as well as draw in some of its suppliers, like kk-electronic, a Danish company that opened an office and distribution center in Lenexa in February.

As more wind jobs come to Kansas, the state will become more invested in wind, which Tacke said was another reason the company decided to put its plant in Hutchinson.

“Not only that you optimize your logistics effort in that regard, because you minimize transport,” Tacke said, “but also you get the commitment of the people, if they see where the products go and what they can do for society.”


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