Wind Energy: The Chicken or the Egg? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
H
uman nature says we don’t like things that are different. We like what we know, what is com- fortable and what we can predict. We often will stick with the familiar even when something different can produce a better outcome.
I was reminded of this when reading our feature article
about the U.S. wind turbine industry, “Manufacturing Wind Energy” on p. 37. The article discusses the struggle of wind turbine casting suppliers in the U.S. Despite re- cord turbine installations in the U.S. in 2009 (10,000 MW of capacity), this group saw little to no orders after sig- nificant activity in years prior. Wind turbine casting buyers
provide three main reasons for this lack of activity among U.S. casting suppliers—excess in- ventory, lack of supply capacity and lack of capability. The U.S. suppliers agree to some extent with the inventory concern, but they say price, not capac- ity or capability, is the other reason some cast wind turbine components are sourced to low-cost offshore suppliers. While two independent sources referenced in the feature article point to offshore sourcing as a problem, I want to focus on the two issues of capacity and capability because they relate to the human tendency to favor the familiar. U.S. capacity and capability to produce cast wind tur-
bine components exist in abundance. Several firms have been meeting all the necessary criteria repeatedly and at high volumes for years. One metalcaster purchased a mothballed facility in the last several years to ensure excess capacity for large ductile iron castings. The problem is several of the wind turbine OEMs sub- scribe to the European supply chain model, which favors facilities dedicated solely to the production of wind turbine components. Several of the wind turbine market experts
with which I have spoken say this model is the best way to create the most efficient U.S. supply chain for wind turbines. But this is not how the U.S. casting supply base is set up—the U.S. supply base favors job shops. Thus far, the com- mitment to orders from wind turbine manufacturers hasn’t been sufficient to justify investment in dedicated wind turbine casting supply, nor has our government made the necessary tax
May/June 2010
credits permanent. As a result, we have the chicken and the egg conundrum. Buyers won’t commit to the U.S. supply chain without dedicated facilities, and U.S. casting suppliers won’t dedicate supply without committed purchases. My question is, why do we have to follow the Euro-
For component suppliers, diversity in the customer base is a key to financial security, as it ensures the business against the whims of any one market.
pean supply model? For component suppliers, diversity in the customer base is a key to financial security, as it ensures the business against the whims of any one mar- ket. This diverse supplier model works in industries like construction, mining, oil, farming and several other major casting consuming industries. The industries with dedi- cated casting suppliers—like automotive and railroad—are the industries with struggling supply bases. Look at the casting groups tied to auto- motive customers in the last 10 years—Intermet (bankrupt and being broken up), Hayes Lemmerz (bankrupt and out of casting except wheels), Alcoa (out of automotive cast- ing except wheels) and Cita- tion (bankrupt and merged with Grede). One of the keys to a success- ful OEM is a healthy and strong
supply base. In the U.S., the successful suppliers usually are diverse. Whether or not you are in the wind turbine industry, you as buyers must adapt to your surroundings and decide the best way to proceed based on the circumstances before you. If your supply base has succeeded with job shops, maybe it should continue that way. Why try to fit a square peg in a round hole?
eDitOrial
Alfred Spada, Publisher/Editor-in-Chief
If you have any comments about this editorial or any other item that appears in Metal Casting Design & Purchasing, email me at
aspada@afsinc.org.
Metal Casting Design & PurChasing 7
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