Energy Independence: Can the U.S. Finally Get it Right?

Many Americans had not thought much about “energy independence” until the Arab Oil embargo of 1973 caused significant increases in gasoline prices and shortages in supply. Long lines at gas stations were a “wake up call” to people who suddenly had to plan family trips around the availability of gasoline. Fortunately the Carter administration got involved and promised to reduce our dependence on foreign oil by increasing fuel efficiency and reducing energy consumption. In 1977, the president, wearing a warm sweater at the podium to make his point, promoted the idea of turning down thermostats and turning off lights: “Because we are now running out of gas and oil, we must prepare quickly for . . . change, to strict conservation and to the use of coal and permanent renewable energy sources, like solar power.”

Every president since Carter has promised to focus on energy independence, energy efficiency, and renewable resources, and we have made some gains. Take automobile fuel efficiency, for example. Since Congress established the Corporate Average Fuel Economy (CAFE) to reduce energy consumption by increasing the fuel economy of cars and light trucks, efficiency has increased—from 18.0 miles per gallon in 1978 to 27.5 mpg in 2009.1

In addition, we have built more fuel-efficient power plants and homes, increased energy conservation, and demonstrated new energy and renewable technologies. At the same time, however, we have increased the size of our homes, increased the number of cars in our driveways, added flat-screen TVs, and electrified everything from pepper grinders to picture frames. As a result, after a decrease in energy consumption in the early 1980s, oil imports steadily increased from 1983 to 2006 (Figure 1).

Figure 1
 
Manufactured Goods from Abroad

In addition to oil, the United States has been importing more and more foreign manufactured products, at first mostly from Japan, Korea, and Europe. Americans fell in love with Toyotas, BMWs, and Datsuns; cheap TVs, stereos, radios, and CD players; and a host of new toys and electronic gadgets produced in other countries. People talked about “buying American,” but mostly they continued to buy cheap products from abroad.

Buying foreign products has had two energy-related impacts. First, as we imported more and more finished products, we needed less and less domestic manufacturing. As a result, huge numbers of manufacturing jobs were shipped overseas, and many U.S. plants were shuttered, particularly in the automobile and textile industries. Second, in addition to cars, appliances, and electronics, U.S. utilities bought foreign-made transformers, motors, wire, insulators, electronic components, and many other products necessary to the generation and transmission of electricity. Thus, we were not only losing the energy independence battle, but were also becoming dependent on foreign countries for the parts and systems that run our energy and electricity companies.

Figure 2

Figure 2 shows a 10-fold increase in imported liquid-filled transformers (more than 10,000 kilovolt amperes) between 1996 and 2008. As our dependence on foreign transformers has increased, domestic capacity for manufacturing them has decreased. This is not an insurmountable problem for small transformers, which can be easily stockpiled. However, because large power transformers typically take more than a year to build, the United States has almost lost the ability to respond quickly to multiple transformer failures.

Lagging Energy Policy

During the 1990s, U.S. energy policy lagged behind the policies of several other countries. Although a few states established renewable portfolio standards, there was no consistent federal policy. The federal government provided tax credits for renewable resources, but the Production Tax Credit (PTC) for wind energy lapsed in 2000, 2002, and again in 2004, creating financial and planning headaches for wind developers.

Even after the government got serious about developing renewable resources, we did not have a consistent policy that could attract new domestic manufacturing. From a global perspective, the United States was competing with other countries for locating new manufacturing facilities. International companies could invest capital in the United States to build new wind turbine plants, or they could invest in countries with long-term energy policies that practically guaranteed a return on their investment. The choice was obvious, and it was easy to track the growth of renewable resources around the world.

Wind energy production for electric power generation in the United States increased from 22 trillion BTUs in 1990 to 57 trillion BTUs in 2000 to 514 trillion BTUs in 2008 (EIA, 2008). Thus most of the increase occurred in just the last few years. Even with that growth, however, wind energy still represents less than 1 percent of U.S. electricity generation. During that same period, countries with more consistent energy policies have seen enormous growth. Figure 3 shows the incredible increase in wind energy in Spain, Germany, and Denmark.

Figure 3
 
The Situation Today

The United States finally appears to be approaching enough critical mass to move toward greater energy independence. First, concerns about global warming and carbon emissions have generated fresh interest in renewable resources, such as geothermal, wind, and solar. Second, plug-in hybrid electric vehicles (PHEVs) will soon provide a real opportunity for the transportation sector to move away from oil consumption to electricity. And, finally the passage of the Energy Policy Act of 2005 and the Energy Independence and Security Act of 2007 signaled movement toward a comprehensive, long-term energy policy.

According to Renewenergy (2008):

With just three short years of policy stability since the production tax credit [PTC] was extended in the Energy Policy Act of 2005, the wind industry has managed to turn the offshoring tides, bringing manufacturing activity back to the U.S. Historically, wind industry manufacturing has been dominated by such European countries as Germany, Denmark, and Spain, which export more than 50% of their manufacturing output. Prior to 2005 the U.S. drew minimal interest as a manufacturing location from the global wind industry thanks to policy instability, forcing the U.S. to import 70% or more of the major components for wind turbines destined for this market.

After three uninterrupted years of the PTC, though, by the end of 2008, the U.S. will be approaching domestic manufacturing capacity for components of approximately 50% of what’s needed to meet demand levels (Box 1). Wind industry manufacturing facilities have surged from a very small base prior to 2005 to well over 100 facilities today. Other than U.S.-based General Electric, none of the seven largest global U.S. wind turbine manufacturers had plants in the U.S. prior to 2005. Today, six of the seven top global turbine producers now have at least one manufacturing facility located in the U.S.

                                                                                                                 

BOX 1  
Production Tax Credit-Related Jobs

Little Rock, Arkansas:  Polymarin Composites and Wind Water Technologies (WWT) announced October 8 that it will invest $20 million to transform the former Levi Building into a combined wind turbine blade and nacelle manufacturing facility, creating 830 new jobs with an average wage of $15/hour.  General Wesley Clark is a principal of WWT’s parent company, EWT.

Muncie, Indiana:  Brevini USA, the U.S. subsidiary of an Italian wind turbine manufacturer announced this week plans for a new facility to make gearboxes.  Brevini will invest more than $60 million to retrofit an existing 60,000-square-foot building and add 150,000 square-feet of manufacturing space at the site in 2010.   The facility will create about 450 permanent local jobs with annual pay averaging more than $46,000.

Faribault, MinnesotaMoventas, a Finland-based gearbox manufacturer, will build a 75,000-square-foot North American assembly and distribution facility using the Faribault-based Met-Con construction company. The plant, announced by Moventas in September, is set to open in October 2009 with 90 workers. Employment is expected to rise to 335.

Newton, IowaTPI Composites opened its 316,000-square-foot wind turbine blade manufacturing facility in September. The newly-built plant replaces a former Maytag facility that was closed in 2006, causing huge job losses in Newton.  At full capacity, TPI Iowa plans to employ 500.

Source: American Wind Energy Association, 2008.

                                                                                                                    

 The Energy Independence and Security Act of 2007 devoted an entire section (Title XIII) to the smart grid, which will add real-time monitoring, analysis, control, and communications to existing electricity generation and delivery systems.2 In addition, the smart grid will improve electrical efficiency and reliability and enable consumers to decide when and how much electricity they consume.

The smart grid will include every part of the electrical system, from the largest power plants to the transmission and distribution systems to the smallest home appliances. According to the U.S. Department of Energy (DOE), the smart grid will encompass consumer participation, power generation and storage, new products and services, power quality, optimal asset utilization, the capability to anticipate and respond to system disturbances, and the ability to operate against physical and cyber attacks.

Jumpstarting Manufacturing

The American Recovery and Reinvestment Act (ARRA) of 2009 has provided the stimulus to jumpstart new investments in the smart grid, renewable resources, electric vehicles, energy storage, and energy efficiency.3 Stimulus funds are being used to build manufacturing facilities as well as to create jobs.

President Obama announced $2.3 billion in tax credits for 183 ventures to build advanced batteries, wind turbines, and other so-called “clean energy technologies” nationwide, including projects in New York, Texas, and California. The tax credits, which are funded by the $787 billion economic stimulus package enacted in February 2009, are designed to defray up to 30 percent of the cost of new investments in manufacturing facilities to produce clean energy products.

Solar Power

The United States is also expanding its solar manufacturing capabilities. “‘In fact, cell and solar panel manufacturing capacity is likely to grow roughly 50 percent annually between 2008 and 2012,’ said Shyam Mehta, senior analyst at GTM Research. The U.S. market demand for solar panels could grow from 342 megawatts in 2008 to 2.13 gigawatts in 2012” (cited in Wang, 2009).

There are opportunities for solar jobs in many states. According to Pennsylvania Governor Edward Rendell, “A thin-film solar panel producer will open a manufacturing facility in Philadelphia’s Navy Yard, creating 400 jobs and leveraging hundreds of millions of dollars of private investment.” Dr. Panos Ninios, president of Heliosphera US, said that this “investment will allow the company to address what we believe will be the largest solar market in the world” (Solarbuzz, 2009).

Similar projects are underway in other states, including Tennessee, where more than $2 billion in capital investment has been made and more than a thousand jobs have been created; Goodyear, Arizona (500 jobs); Freemont, California; Albuquerque, New Mexico (500 jobs); Circleville, Ohio; and Williamsburg County, South Carolina (200 jobs) (Solarbuzz, 2010). According to Monique Hanis of the Solar Energy Industry Association, “The U.S. solar industry added about 18,000 jobs last year, almost doubling total employment to about 40,000” (Martin and Efstathiou, 2010).

A Critical Gap in Transmission

The expansion of the wind and solar industries, coupled with the prospect that consumers will have the capability of controlling their electric bills, have generated optimism for energy independence. However, one of the most serious problems that must be overcome is the lack of infrastructure (i.e., transmission lines) to deliver power from renewable resources (such as wind and solar farms) to population centers (i.e., load centers).

Figure 4
 

As Figure 4 shows, the prime areas for wind resources are located far from population centers, and new transmission lines will require significant investment. Even T. Boone Pickens, a major proponent and investor in wind power, has indicated that his wind project in the Texas Panhandle will not be feasible until transmission issues have been addressed.

The chairman of the Federal Energy Regulatory Commission (FERC), Jon Wellinghoff, noted that “FERC is taking action to encourage transmission investment” via the Energy Policy Act of 2005, FERC Order No. 890 in 2007, and FERC’s 2009 Strategic Plan. “. . . these actions are important, but much more will be needed to achieve a significant expansion of renewable energy resources in our supply portfolio” (Hsieh, 2010).

The Need for Power Transformers

A critical component of the transmission grid is power transformers, which are used to step-up the electrical output voltages of generating plants (including wind farms and solar generators) to very high voltages (230 kilovolts [kV], 500 kV, and even higher), for transmission to distribution centers. In simple terms, as transmission voltage increases, efficiency also increases, and the size of the conductor decreases. Once electrical energy has been transmitted to its destination, the power must be stepped-down through another power transformer to a lower voltage for distribution to neighborhoods, industrial plants, office buildings, and other users.

Power transformers are critical to transmitting electrical energy over long distances, not only for U.S. energy independence, but also for improving energy efficiency and reducing the nation’s carbon footprint. Unfortunately, as shown in Figure 2, the United States has been importing more and more power transformers every year.

The tide may now be turning, however, because DOE has devoted a portion of ARRA funds to supporting the transformer industry. More than $1.3 million was awarded to Cooper Power Systems to produce high-efficiency transformers in Texas and Wisconsin. In addition, Waukesha Electric Systems, also in Wisconsin, was awarded $12.4 million to “expand an existing plant to produce very large, high-voltage power transformers. The company anticipates that more than 80 percent of them will be used to help bring renewable energy to distant load centers” (DOE, 2010).

Conclusion

In this author’s opinion, the United States can get energy independence right, if we can muster the political will. Momentum is building in several important areas including: renewed interest in using solar and wind power to generate electricity, advances in batteries and PHEVs, leadership in smart grid standards and interoperability, and efforts to address global warming and carbon emissions.

Energy independence will require continued financial incentives for the development of renewable resources, federal intervention in transmission siting decisions, leadership on smart grid architecture and standards, and continued incentives to expand energy-related manufacturing in the United States.

References

American Wind Energy Association. 2008. Wind Energy Industry Creates Jobs, Shines As Growing Bright Spot In The Midst Of Faltering Economy. Available online at http://www.awea.org/newsroom/releases/Wind_Industry_Creates_Jobs_10Oct08.html.

DOE (U.S. Department of Energy). 2010. President Obama Awards $2.3 Billion for New Clean-Tech Manufacturing Jobs. White House Press Release January 8. Available online at http://www.whitehouse.gov/the-press-office/president-obama-awards-23-billion-new-clean-tech-manufacturing-jobs.

EIA (Energy Information Administration). 2008. Annual Energy Review 2008, Table 10.2c: Renewable Energy Consumption: Electric Power Sector. Available online at http://www.eia.doe.gov/emeu/aer/pdf/pages/sec10_9.pdf.

EIA. 2009a. International Energy Statistics: Total Net Electricity Generation and Wind Electricity Generation. Available online at http://tonto.eia.doe.gov/cfapps/ipdbproject/IEDIndex3.cfm.

EIA. 2009b. Table 5.1, Petroleum Overview, 1949–2008. Available online at http://www.eia.doe.gov/emeu/aer/petro.html.

Hsieh, E. 2010. Interview with J. Wellinghoff. Electroindustry 15(1): 7–11.

Hagerman, G., and G. Hart. 2008. Pickens Plan Plus: “Adding Value to the Vision.” July 21. Available online at http://www.oceanenergy.org/.

Martin, C., and J. Efstathiou Jr. 2010. China’s Labor Edge Overpowers Obama’s ‘Green’ Jobs Initiative. Business Week, Feb. 4, 2010. Available online at http://www.businessweek.com/news/2010-02-04/china-s-labor-edge-overpowers-obama-s-green-jobs-initiatives.html.

Renewenergy. 2008. Rediscovery of U.S. Wind Manufacturing. Available online at http://renewenergy.wordpress.com/2008/06/11/rediscovery-of-us-wind-manufacturing/.

Solarbuzz. 2009. Philadelphia, PA, USA: Heliosphera to Open Thin Film Manufacturing Plant in Philadelphia. Available online at http://www.solarbuzz.com/news/NewsNAMA198.htm.

Solarbuzz. 2010. St. Louis, MO, USA: Confluence Solar Announces $200M Solar Manufacturing Facility. Available online at http://www.solarbuzz.com/news/NewsNAMA207.htm.

U.S. International Trade Commission. 2009. U.S. Imports for Consumption. Available online at http://dataweb.usitc.gov/scripts/user_set.asp.

Wang, U. 2009. Analyst: Boom Time Ahead for U.S. Solar Manufacturing. Available online at http://seekingalpha.com/article/148969-analyst-boom-time-ahead-for-u-s-solar-manufacturing.

 

FOOTNOTES

 1 See http://www.nhtsa.dot.gov/portal/fueleconomy.jsp.

 2 Available online at http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110_cong_bills&docid=f:h6enr.txt.pdf.

3 Available online at http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h1enr.pdf.

 

 

About the Author: John F. Caskey is senior industry director at the National Electrical Manufacturers Association, Washington, D.C.