Last week the American wind industry got a bit more turbulent after Siemens announced plans to lay off 615 workers in its plants in Iowa, Kansas, and Florida. Siemens is not alone – similar cuts, as the New York Times reported, are happening throughout the American wind sector - almost 1,700 employees have received pink slips industry-wide.
There are various reasons for these layoffs, from low natural gas prices to slow growth in energy demand because of the recession. Yet, the main reason seems to be the uncertainty about the extension of the wind production tax credit, which is supposed to expire by the end of this year.
These unfortunate layoffs don’t come as a surprise, as it was quite clear for a while that Congress doesn’t support the extension of the tax credit, even for the short-term. “Without an extension this industry is going to be in real trouble. The job cuts are coming pretty quick, depending on where you are in the supply chain,” Steven Lockard, CEO of TPI Composites, a maker of wind turbine blades told Bloomberg back in June.
These layoffs are bad news first and foremost for the employees that are sent home, but in addition they’re also bad news for the American economy. Here are four reasons why:
1. It’s Congress, stupid! – While most of the media focused on Mitt Romney’s position on the tax credit (“He will allow the wind credit to expire, end the stimulus boondoggles, and create a level playing field on which all sources of energy can compete on their merits”), I believe it doesn’t really matter. Chances are, after the election, we’ll find ourselves with a Democrat President that favors the extension of the tax credit and a Republican-led House that opposes it. In other words – gridlock. So the question should be really not why Mitt Romney opposes the tax credit, but if there’s any chance the House of Representatives will support it.
Now here is the interesting part – not only that these layoffs happen in states that are far from being traditional blue (Kansas, Iowa and Florida), but 75 percent of the wind turbine capacity in the U.S. is installed in congressional districts held by the GOP, according to Red State Jobs. This means that Republicans should really have a good incentive to find a way to get it done. It also means that if Congress can’t do what's supposed to be in everyone’s interest, we’re really in trouble.
2. And the winner is…China – Earlier this month Rachel Kyte of the World Bank warned at the CDP global teleconference that the U.S. will fall further and further behind China in terms of competitiveness. What happens now in the American wind industry is a perfect example of that – analysts, according to Recharge, “forecast U.S. turbine installations could reach 12GW this year but plunge to between 1.5GW and 3GW in 2013, as developers freeze projects and orders to await a decision by Congress.” At the same time, China, which surpassed the U.S. earlier this year to become the world’s leader in installed wind power generating capacity, is expected to generate more than 100 GW in 2015.
If Washington hasn't noticed, this is a race, and the U.S. is losing it. The cost of such a loss could be much greater than the couple of billions saved by not extending the tax break.
3. Oil companies have no shame when it comes to subsidies – One might think oil companies would keep it quiet in a debate that is basically about subsidizing an energy sector. After all, while the tax break costs, according to the Times, about $1 billion a year, this is small money comparing to the subsidies to the oil industry receives. According to Politifact Ohio, “the nonpartisan taxpayer watchdog group Taxpayers for Common Sense estimates the U.S. tax code currently contains about $5 billion in yearly tax breaks that are exclusive to the oil and gas industry, and says the industry also benefits from an extra $5.5 billion worth of general business tax provisions that companies in other industries also claim.”
Yet, it didn’t stop the big oil companies to ask for justice. “Big Wind has had extension after extension after extension,” Benjamin Cole, a spokesman for the American Energy Alliance, a group partly financed by oil interests told the Times. “The government shouldn’t be continuing to prop up industries that never seem to be able to get off their training wheels.” In Yiddish there’s a word for such claim – it’s called Chutzpah.
4. Bridge to nowhere – while many still see natural gas as a “bridge fuel,” it’s important to note that one of the reasons for the layoffs is the cheap price of gas, which makes wind energy less competitive. This is not the first time we've heard about the possible consequences of cheap natural gas, but with more states considering and approving fracking it’s probably not going to be the last time, either. This is probably not going to change until the externalities of fossil fuel will be fully internalized, which is sadly not going to happen anytime soon.
Raz Godelnik is the co-founder of Eco-Libris, a green company working to green up the book industry in the digital age. He is an adjunct faculty at the University of Delaware’s Business School, CUNY SPS and the New School, teaching courses in green business, sustainable design and new product development.
Raz Godelnik is an Assistant Professor and the Co-Director of the MS in Strategic Design & Management program at Parsons School of Design in New York. Currently, his research projects focus on the impact of the sharing economy on traditional business, the sharing economy and cities’ resilience, the future of design thinking, and the integration of sustainability into Millennials’ lifestyles. Raz is the co-founder of two green startups – Hemper Jeans and Eco-Libris and holds an MBA from Tel Aviv University.