US Wind Power Industry To Be Given A Serious Boost By Cap And Trade Bill

“The answer, my friend, is blowing in the wind/The answer is blowing in the wind…” - Bob Dylan

OK, so Dylan posed questions like “How many times can a man turn his eyes, and pretend he just doesn’t see? And how many times must the cannon ball fly?” — not “How can the U.S. reduce carbon emissions and its reliance of imported oil while creating domestic jobs?” Still, the answer is more appropriate to those questions than the ones he posed.

Unfortunately, it looks like the U.S. will not be the leader in this important new industry. Europe is off to a big head start, with Germany and the Scandinavian countries relying for several years on wind and solar to meet most of their incremental electric power needs.

Now China is coming on strong. An article in yesterday’s New York Times points out the huge scale of wind power investment going on in China. Even as T. Boone Pickens is putting his plans for a 4,000 megawatt wind farm in Texas on hold, the Chinese are in the process of building six wind farms each with between 10,000 and 20,000 megawatts of capacity.

At one level, this is a very promising development. It shows that China is taking serious steps to reduce the growth of its CO2 emissions, now the largest in the world. At the recent G-8 summit, the leaders of the developed world adopted some non-binding goals to reduce CO2 emissions by 13% by 2020 and by 87% by 2050. The aim was to hold the global rise in temperature to no more than two degrees Celsius (about 3.7 degrees F).

Those goals are a start, but if China and India don’t play ball, the U.S., Europe and Japan could cut CO2 emissions to zero and still not stop the rise in temperatures. Thus news that China is starting to be serious about meeting a bigger part of its insatiable demand for more power through renewable sources is very good news. However, keep in mind that these wind farms are in addition to the coal-fired generators that have been coming on line at a pace of almost one per week (each at about 1,000 mega watts). Even at this scale, the wind power developments will only slow, not stop the rise in China’s CO2 output.

However, the scale of that investment, along with some protectionist local content rules (which is mostly what the article focuses on) means that Chinese firms are developing the scale to eventual dominate this vital emerging industry. The article mentions two U.S. suppliers that will benefit short term by making the materials used in manufacturing wind turbines, PPG (PPG), which makes protective coatings and fiberglass for the turbine blades, and Zoltek (ZOLT) which makes carbon fiber for the support struts.

However, it looks like the Chinese are trying to develop the capacity to make those materials on their own. Given a protected market, the Chinese could develop the scale to make them very serious competitors over the medium to long term.

The Cap and Trade bill that was recently passed by the House of Representatives does contain incentives that will give a serious boost to the U.S. wind power industry. This would benefit not just PPG and Zoltek, but also GE (GE), which is the biggest domestic maker of wind turbines.

This is a business where economies of scale should matter a great deal. Wind will be a big part of the world’s future energy solutions. It is vital that the U.S. be a major player in this industry, but if we drag our feet on installing large amounts of wind power domestically, it is likely that the opportunity will be lost.

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