Wind turbine company's woes mirror that of the industry

In southwestern Minnesota, Suzlon Energy says it plans to cut its workforce in half at the company's wind energy plant in Pipestone.

The 160 layoffs come in what is shaping up to be a very rough year for the industry. The nation's credit problems have hit wind energy companies hard.

Suzlon says it will cut 70 jobs by August, and another 90 by the end of September.

Pipestone Mayor Laurie Ness says the only silver lining in the announcement is that Suzlon plans to keep the plant open.

"We're hoping this is going to be a temporary fix for them and that things will turn around," says Ness. "And maybe next year be able to be back up to speed."

It's the second major economic blow to the southwest Minnesota city in less than a year. Last fall a boat company closed in Pipestone, costing the city more than 200 jobs.

Suzlon spokesman Mike Aabram says the layoffs at the wind energy company are caused by difficult economic conditions brought on by the recession.

"The entire sector has been hit by the downturn, so some companies just can't get the credit right now," said Aabram.

Since last year's credit collapse, it's been difficult for wind companies to get financing to put up new electricity generating turbines. That's hurt sales worldwide for Suzlon, which is headquartered in India.

At its Pipestone plant, the company makes fiberglass blades for the wind machines. Each blade is more than 100 feet long and weighs seven tons or more.

Renewable energy consultant Martin Pasqualini with CP Energy Group says money is tight throughout the wind industry. He says some of the biggest financial backers of the wind energy industry were also some of the biggest firms to collapse in the credit crisis.

"Lehman had been a tax equity investor. AIG had an ambitious program in place to do large scale investing when they virtually came unwound. We also effectively lost Wachovia," said Pasqualini.

Wachovia struggled and was eventually purchased by Wells Fargo. The financial sector's problems meant plans for many wind farms were shelved.

Pasqualini says he expects construction this year of new wind turbines to fall significantly.

"It's probably going to be about 50 percent of last year's installed capacity," said Pasqualini.

That falling demand hurts any company which builds wind turbines, like Suzlon.

Another blade manufacturer, LM Glasfiber, has also cut workers. A company in Fargo that builds wind turbine support towers has laid off more than 100 workers. Plans for a new wind energy gearbox factory in southeast Minnesota are on hold.

For Suzlon, there's an added problem beyond the credit crunch. Some companies are questioning the quality of the Suzlon wind blades. Last year Suzlon replaced about 1,200 blades after cracks were found in some of them. In the most serious incident, a blade snapped off a wind turbine in Illinois.

Martin Pasqualini says that quality issue makes it more difficult for Suzlon to sell blades, hurting the company's ability to keep the Pipestone plant at full capacity.

He says with too much production capacity now in the wind industry, buyers can be choosy. He says they're more likely to buy blades from companies with the best reputations.

"If they're choosing between a project which has, for instance, GE turbine technology versus Suzlon, in this environment they almost by default will go to the path of least resistance, or the safest path, which would be the GE wind turbine," said Pasqualini. The pain in the wind industry is not universal, however. Xcel Energy says plans for two major wind farms its construction are moving ahead.

Pasqualini says there's a good chance the wind industry will bounce back next year. The reason? Federal stimulus money.

The final decisions on how to spend the funds are being made now, and it's expected the dollars will begin flowing for renewable energy projects in the second half of this year.

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