Mitsubishi Heavy Industries (MHI) will not open its first wind turbine factory in the US if the government does not renew a critical subsidy.
In 2009, the Japanese company revealed plans for a $100m nacelle manufacturing plant in Arkansas to support demand in its main market. It was scheduled to have opened earlier this year.
However, turbine sales are certain to plummet if Washington does not renew the production tax credit (PTC), which is due to expire at the end of the year.
“We need a market to operate our factory. Right now, the market is not so good. We have a site but cannot operate it,” says Yoshinori Ueda, assistant general manager of MHI’s wind turbine business. “If we have the PTC, we will go ahead.”
MHI has a 10% share of the US market and “several hundred megawatts” of orders in hand, according to Ueda. These include a 49MW contract with AES for a project in Palm Springs, California, signed last March, and a deal to supply 84 of its 2.4MW turbines to a Duke Energy wind farm in Texas, announced in October.
But it needs new orders to sustain a local factory, says Ueda.
MHI’s business in the US has also been hurt by a patent dispute with GE, and the strong yen. But future growth of the American market is the biggest challenge, Ueda claims.
“This is a very serious problem. We have about 10% of the market. But if the market shrinks, we will get wiped away.”
MHI is not the first to warn of the impact of the PTC expiry. Vestas has said it will cut jobs in the US if the government does not renew the subsidy.
MHI has built up turbine sales in the US by leveraging its reputation in the traditional power business. Large electricity companies like to work with established suppliers such as GE, Siemens and MHI, says Ueda.
“If our turbines cause problems, they know we will fix them. We have to protect our name because of our other businesses, and that creates a kind of trust.”
This will also be an advantage in the group’s next target, the UK offshore sector, where Ueda believes that MHI’s financial resources should give it an edge.
“The hurdles to get into this sector are very high and only a few companies will make it. Look at Clipper. They couldn’t afford this large investment. We can.”
MHI also hopes to see growing sales at home, after the introduction of a new feed-in tariff in July. But with cumbersome environmental laws set to drag out installation time for Japanese wind projects, the company may have to play a waiting game.
“Mitsubishi has a long-term vision. Wind power is very attractive for us,” says Ueda. “We’re in the power business and we need a full range of options, from nuclear to geothermal and wind. One or two years of shrinking business [in turbine sales] is nothing. We’re waiting for a large market.”
MHI also wants to increase its technology transfer to China. It licensed rights to its 1MW machine to Chinese turbine maker Ningxia Yinxing Energy in 2007, and in 2010 upgraded its 2.4MW model to 2.5MW to meet the requirements of the Chinese market.
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