Green energy grants are a boon for foreign companies, some with San Diego connections

by Brooke Williams and Kevin Crowe | inewsource

This story was originally published February 8, 2010.

A wind turbine farm

San Diego-based Cannon Power Group used more than half its $19 million stimulus grant to buy turbines from Siemens, a German-owned company, but it said the expansion of its wind farm in Washington created more than 300 local jobs, including between 20 and 30 permanent positions. Photo by Bruce Forster Photography.

Of the more than $2 billion the federal government has given out to boost the economy and create green energy jobs, more than three-quarters has gone to foreign-owned companies that dominate the global wind power industry.

This latest finding by the Investigative Reporting Workshop, a nonprofit at American University in Washington, D.C., is illustrated clearly in San Diego County, where about a dozen commercial wind developers have offices.

  • La Jolla is headquarters for Eurus Energy America, the subsidiary of a Japanese firm that received $91 million in federal stimulus money for a wind farm in western Texas. It plans to apply for more money to fund a wind project in Oregon. RES Americas, a British-owned company in Colorado, was the general contractor.
  • enXco, a French-owned firm with American headquarters in Escondido, has received $69.5 million in stimulus money for its wind farm in northwest Indiana. It installed 53 German-made turbines at the site. enXco also is operating the Texas wind farm for Eurus.
  • A-Power Energy Generation Systems, a Chinese-owned company that might get federal grants through a consortium building a wind farm in western Texas, lists a vacant office in downtown San Diego as its business and mailing address on recent filings to the Securities and Exchange Commission.
  • Cannon Power Group of San Diego has received $19 million to expand a wind farm east of Portland in Washington. The company spent about half that money overseas to pay for wind turbines it said it couldn’t get stateside.

The Reporting Workshop’s initial analysis of wind energy grants was released in October and outraged some lawmakers. Senator Charles Schumer, D-N.Y., cited the group’s report—and news that $450 million in stimulus money might go to a group installing Chinese-made wind turbines in Texas—when he asked the secretary of energy to deny federal financing to firms that use foreign-made turbines.

American wind companies are receiving stimulus grants, but some such as Cannon Power spend much of that money abroad because few companies here manufacture turbines.

San Diego-based Cannon Power Group used more than half its $19 million stimulus grant to buy turbines from Siemens, a German-owned company, but it said the expansion of its wind farm in Washington created more than 300 local jobs, including between 20 and 30 permanent positions.
Photo by Bruce Forster Photography

Mark Anderson, chief executive officer of Eurus Energy America, a subsidiary of Tokyo-based Eurus Energy Holdings Corp, said his company would not have been able to move forward with other projects without the guarantee of stimulus money.

Eurus received $91 million in grants for the Bull Creek Wind Farm in Texas. It has the capacity to power about 48,000 homes a year.

Now Eurus is building a wind farm in Oregon. The company plans to seek green grants for that project, Anderson said.

“We plan to put more and more money into the United States,” he said.

New foreign incentives

Large American-owned companies—those with substantial tax liabilities—had an advantage prior to the American Recovery and Reinvestment Act of 2009, Anderson said, because they could more easily utilize tax credits the federal government offered. Foreign-owned companies, on the other hand, needed U.S. partners to benefit from the tax credits.

Now the playing field is more level. Just like domestic companies, foreign companies can receive direct payment in the form stimulus grants upon completion of a wind project.

“In case that the ultimate project investor is the foreign company, they might prefer the cash grant…because of no local tax capacity,” said Masayuki Ito, executive vice president of Oak Creek Energy Systems, an Escondido-based subsidiary to a Japanese firm.

Oak Creek Energy is part of a joint venture building a wind farm in central Illinois, but the company hasn’t applied for stimulus grants because it hasn’t yet determined whether the grants or tax credits will be more beneficial, Ito said.

A-Power, based in northeast China, is part of a group building a wind farm in western Texas using turbines it is manufacturing in China. This is the project that affronted Schumer after the group announced plans to collect $450 million in stimulus grants even though the project would create dozens of jobs in the U.S. compared to thousands in China.

In a letter, Schumer asked U.S. Department of Energy Secretary Steven Chu to reject requests for stimulus grants from companies that purchase key components abroad.

“In all due respect I remind the secretary there is a four letter word associated with the stimulus — J-O-B-S,” Schumer told ABC News who interviewed him in coordination with this story. “Very few jobs here, lots of jobs in China. That is not what I intended or any other legislator who voted for the stimulus intended.”

Chu responded on Facebook: “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.”

In SEC filings this year, A-Power Energy Generation Systems lists a suite in a high-rise in downtown San Diego as its “business” and “mailing” address. However, the suite door is locked, and a building manager said A-Power is not a tenant.

When reached on his cell phone, Chief Operating Officer John Lin said he did not have time to answer questions.

Jobs at home – and overseas

Eurus Energy America employs 20 people in San Diego, Anderson said, and has assets worth hundreds of millions.

Its Texas project created between 300 and 400 local jobs for construction, including 10 for operation, and is benefiting the economy through property taxes and land leases, Anderson said. For the project, Eurus purchased Mitsubishi turbines, which are manufactured abroad.

enXco, the French-owned firm based in Escondido, also went abroad to purchase turbines from German manufacturer REpower. A spokesman for the company said the project created more than 200 construction jobs as well as a dozen permanent jobs. It has the capacity to power about 29,000 homes per year.

“The vast majority of turbine manufacturers are foreign,” said Gary Hardke, president of Cannon Power Group, a renewable energy company located near Torrey Pines.

Hardke said his company had no choice but to go abroad to buy parts for its wind farm in Klickitat County, Wash., because two main U.S. manufacturers, GE Energy and Clipper Windpower, did not make the size turbine Cannon wanted or were sold out.

Cannon bought the turbines—made up mostly of blades, towers and nacelles (the part in the middle that houses components such as the rotor and generator)—from Siemens, a German company that also was the main contractor. Siemens hired local crane companies to erect the turbines on a 26-mile stretch of rural land.

In all, Hardke estimated, more than 50 percent of the stimulus grant went to Siemens.

“I appreciate that cosmetically it doesn’t look good, but the reality is… the grants (must) go into the project costs.”

Hardke couldn’t confirm the country of origin for all of the turbine parts. He determined the nacelles came from Denmark and some of the towers were made in the U.S., while others were made in China. A company spokesman said the construction team couldn’t say whether all the blades came from a Siemens blade fabrication plant in the U.S.

To be sure, many companies buy parts abroad. In 2006, nearly 21 percent of materials for all American industries were purchased overseas, according to the Bureau of Economic Analysis, a federal statistical agency.

Cannon is expecting $151 million more in stimulus grants to expand the Washington wind farm and hopes all the parts will come from the U.S.

Local benefits

Hardke pointed to a variety of ways the stimulus cash will do what lawmakers intended—boost the local economy. To lease the land, for instance, Cannon pays about $3 million a year to about 40 individual land owners.

The project is in a county where nearly 20 percent of residents earn less than the poverty level, according to a 2009 U.S. Census release. It created more than 300 jobs for construction, Hardke said, and 20 to 30 permanent positions to operate the farm.

“There isn’t a family in Klickitat that doesn’t know someone employed by the project,” he said. Cannon also pays about $2 million a year in property taxes on the turbines, he said.

“The ongoing economic development benefit in rural America is really significant,” Hardke said. The “icing on the cake,” he said—”clean energy (and) really significantly helping the environment.”

Hardke said the main reason this federal stimulus money is going abroad is that Europe has supported renewable energy industries for years. He said he wants to see a long-term policy to support and encourage growth of the wind industry in the U.S.

“The great irony to me is that our wind resources in the United States are the best in the world,” Harke said. “Times ten.”

This story was reported by the Watchdog Institute in collaboration with the Investigative Reporting Workshop at American University in Washington, D.C., ABC World News, and the local ABC affiliate KGTV/Channel 10. A version of this story was published in The San Diego Union-Tribune.

To read the workshop’s full investigation into wind power funding, go to: http://investigativereportingworkshop.org/

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