Section 1603

November 20, 2009 at 10:57am

In recent days, questions have been raised about the application of the Section 1603 renewable energy Recovery Act program to projects in which some of the wind turbine components are made overseas. This is an important issue and one I’d like to respond to here.

First, I want to make clear our goal with this program: ensuring America leads the world in creating jobs in manufacturing the parts that go into wind farms -- not just the wind farms built here, but those built in other countries too. But manufacturers will not build plants here and grow their production capacity here unless there is domestic demand; and, until recently, that was not the case. The Section 1603 incentives in the Recovery Act do more than jump start the production of wind power; they provide the precondition to jump start the manufacturing of the key components in the US.

The most important point is this: every dollar awarded through this program helps put Americans to work. The program’s benefits flow only to renewable energy projects installed in the United States. All of the wind turbine installation jobs are created here in America. Wind projects also have immediate and sustained local economic benefits in the form of royalty payments to landowners and tax revenues to local governments.

At the same time the number of renewable energy projects is growing domestically, so are the manufacturing facilities to build this domestic capacity– thanks to incentives like the 1603 program According to the American Wind Energy Association, more than 53 percent of the value of the turbine parts installed under this program are American-made. By comparison, only 25 – 30 percent of a wind turbine’s 8,000 parts were made in America just a few years ago. And all of the turbine manufacturers in the funded projects have manufacturing facilities employing American workers. Reports that 84 percent of the benefits of the program go to foreign manufacturers are simply not accurate.

The 1603 program has helped unlock frozen capital markets for renewables, which had stalled U.S. wind project financing after the 2008 financial crisis. The results are clear: investments in renewable energy nearly doubled in the six months after the President signed the Recovery Act. Continuation of this program is important to both continued investment in domestic manufacturing capacity and to meeting President Obama’s goal of doubling U.S. renewable energy generating capacity by 2012.

Beyond the demand for wind projects created by the 1603 program, the Recovery Act and DOE are making a range of other investments to accelerate development of domestic wind manufacturing:

• The Section 48C program provides up to $2.3 billion of tax credits for investments in manufacturing of clean energy products, including wind. Announcements of these selections will be made in the coming months.
• The Section 1703 and 1705 loan guarantee programs are able to provide loan guarantees to support, among other things, wind manufacturing investments. Already, one U.S. wind manufacturer, Nordic Windpower, an innovative manufacturer of two-pronged wind turbines, has received a conditional commitment for a loan guarantee.
• $70 million in grant funding is being made available for two facilities to test and certify the large turbines and blades that manufacturers will need to make for the next generation of wind turbines, including for offshore projects.

Through this portfolio of investments, we are creating a domestic market for renewable energy projects while bolstering our manufacturing capability. We know this strategy works. For example, strong incentives in Denmark have made wind power a larger percentage of that country’s electricity supply than any other nation; that robust domestic market has also made Denmark a world leader in wind turbine manufacturing. Meanwhile, the United States has, for too long, taken the opposite approach – letting leadership in technologies we pioneered, like modern solar cells, slip overseas.

Finally, I would like to clarify other points that have been raised about a specific wind project. The 1603 program is a tax program that is available to all qualifying entities; it is not a discretionary grant program administered by the Department of Energy. Additionally, the Texas project that has been discussed in the press has not yet submitted any application; if such an application is received, it will be carefully reviewed.

I’d like to thank those who have weighed in on such a critical issue. I share your goal of restoring American leadership in clean energy manufacturing, and look forward to working with you to maintain the short-term incentives and establish the long-term policies needed to make this goal a reality.