Watch out, Wal-Mart–Wind Manufacturing is the New Kid on the Block in Arkansas

Watch out, Wal-Mart. When it comes to the Arkansas economy, there’s a new kid on the block: wind energy manufacturing. “Since we’ve targeted wind, we’ve had five manufacturers locate in the state, and they’ve invested a total of $370 million and created about 2,900 jobs,” said Scott Hardin of the Arkansas Economic Development Commission.

Although Arkansas is not known for being particularly windy, it is surrounded by six of the top 20 states for untapped wind power, Texas being the largest. It has a good road system for transporting finished wind components, as well as a strong manufacturing workforce.

The first wind manufacturer to locate in Arkansas was LM Glasfiber, a Danish company that is the world’s leading independent supplier of rotor blades for wind turbines. LM Glasfiber announced its plans to build a wind turbine blade plant in Little Rock in July 2007, and the first blades emerged from the facility a mere seven months later, in February 2008.

“Arkansas was chosen because it is ideally located to serve some of the areas that see the largest growth in wind energy installations, has excellent logistics and has a well-qualified workforce,” said Shannon Wetherbee of LM Glasfiber. The company has 350 employees in Little Rock, down from more than 500, because of layoffs necessitated by the recession.

Other wind manufacturers that have located to Arkansas are Mitsubishi, which has a wind turbine manufacturing plant slated for construction in Fort Smith in 2011; Polymarin Composites, which already opened a blade manufacturing operation in Little Rock; and Wind Water Technology, which builds nacelles for the Polymarin Composites blades and is sharing a facility with Polymarin.

The latest company to announce plans for Arkansas is Nordex USA, a subsidiary of the German company Nordex, a world leader in the multi-megawatt range of wind turbines. Nordex received a $22.1 million Advanced Energy Manufacturing 48c tax credit, funded by the American Recovery and Reinvestment Act, to build its first wind turbine manufacturing facility in Jonesboro. Nordex broke ground on the Jonesboro facility in September 2009 and plans to be up and running by July 2010. The company will hire and train some 700 employees by 2014. The average wage will be $17 - $17.50 per hour, and workers will be offered health insurance.

Assembling wind turbines is no simple matter. The turbines include more than 3,000 components, explained Nordex USA Vice President of Production Joe Brenner. “It is a daunting task,” Brenner said. “The size is a 2.5 megawatt turbine, which is a substantial size. The blade span is the length of a football field. The nacelle, or the wind turbine unit that’s mounted up on the tower section, is the size of a school bus—over 31 feet long. One of our turbines can power over 700 homes.”

Nordex chose Arkansas for one of its North American manufacturing facilities because of its central location, strong infrastructure, good workforce, and the promise of a workforce development partnership with Arkansas State University. ASU has a new program called megatronics, which merges electrical and mechanical skill sets. This program will be offered at ASU’s Jonesboro campus and will provide the type of skills that Nordex workers will need.

Another major factor is influencing wind manufacturers to locate their facilities in Arkansas. The state has an aggressive economic development program designed to recruit these companies. The program includes a marketing campaign; visits by Governor Mike Beebe to Europe to woo suppliers of wind components; the opening of Arkansas economic development offices in Japan and China; and relationships with existing wind companies in Arkansas that are helping build the state’s reputation with other wind manufacturers.

“We really view the international market as an opportunity,” said Hardin. “Certainly these companies are creating jobs for Arkansas and making a very substantial investment in the state. We also continue to recruit just as hard here at home.”

In addition to outreach and marketing, Arkansas offers financial incentives to companies that locate facilities there. These include a sales tax exemption for wind manufacturers and a state income tax credit for job creation based on the company’s payroll. The governor also has a “quick action closing fund” of $50 million that he can use in a competitive situation to convince a company to choose Arkansas over a competing state.

There has been a debate recently about competition between states for renewable energy companies and the possibility that companies might pit states against each other for their own economic benefit. This can be averted when states target their financial incentives to companies that pay higher than average wages, provide benefits like health insurance and pension plans, and source a certain percentage of their components locally or regionally.

“Not all manufacturing firms are created equal,” said Joel Rogers of the Center on Wisconsin Strategy, who has written recommendations for how states can create an economic development screening system that prioritizes particular companies. “For example, some manufacturing firms pay family-supporting wages and benefits, add to your average world-competitiveness, don’t pollute the environment, and buy many of their inputs locally. Others provide poor worker compensation, reduce your average productivity, generate environmental damage, and source most of their inputs from elsewhere. All else equal, the former firms add to your tax base and future growth, while the latter drags down both.”

In Arkansas, the state’s economic development commission targets industries that tend to pay higher than average wages. Additionally, the state requires that in order to qualify for some of its performance-based incentives, the company must pay at least a minimum average wage.

Another controversial issue is that of state subsidies going to foreign companies. But Brenner of Nordex USA argues that because European firms are currently the technological leaders in wind energy, it is desirable to attract European and other foreign firms to the U.S., where they can pass on their expertise to American workers and businesspeople. “The most successful companies in the world are in Europe, so for us to succeed, we must integrate them into our business model here in the United States,” Brenner said.

Nordex USA plans to start out sourcing some of its wind turbine components from abroad and some of its larger components, such as the towers and blades, domestically. But the company hopes in the next several years to be able to source the majority of its components from U.S. suppliers.

Brenner, whose background is in contract manufacturing, believes that wind energy has the potential to create a resurgence in manufacturing in America. “I believe it will definitely revive manufacturing,” he said. “It’s linked to casting, machining, forging, and metal fabrication. There are fiberglass composites that need to be molded and formed. There are hydraulic systems, and a large variety of mechanical and wiring devices. I would say it touches literally dozens of different industries that can grow and be part of the wind industry.”

If Arkansas’ low unemployment rate—7.6 percent as compared to the national unemployment rate of 10.2 percent—is any indication of what wind manufacturing can do for a state’s economic future, then Brenner’s prediction may be a winning one.

For more information:

Arkansas Economic Development Commission

Nordex USA