Friday, October 30, 2009

John Carney and DelaWind

I wrote back in May about former Lt. Gov. John Carney's involvement in a project called DelaWind, which was formed to build wind towers for Bluewater Wind and other wind power projects. With some trying to stoke some controversy over Carney’s role in the venture, I thought it would be useful to take a closer look.
DelaWind was started by a firm called Transformative Technologies (TT), which Carney joined after leaving office. TT, which is privately held, designs, manages and invests in projects like industrial waste heat recovery. TT's chairman, Dennis O’Brien has been involved in the steel industry for years.
TT had approached Evraz Claymont Steel about buying the plant, but the parties couldn’t agree to a price. But the idea of using steel from the plant to build wind towers is very much alive.
Amer Industrial Technologies, Inc.,
an Edgemoor steel fabricating company, has taken a 95 percent stake in DelaWind, leaving TT with just five percent. Amer fabricates specialized components like heat exchangers for nuclear plants, which requires far greater tolerances than steel towers. Evraz Claymont Steel has agreed to supply the steel for building the towers.
The idea makes logistical sense. Both Amer and Claymont Steel are located along the Delaware River, just a few miles apart. It makes economic sense for at least part of the Bluewater Wind project to be manufactured here in Delaware, a point Jack Markell made in his state of the state speech in April:
Let’s work to ensure that the Claymont Steel Mill produces the steel for the windmill towers and foundations, not just for Delaware, but other projects as well.
Gearing up to build the towers will require capital. DelaWind filed an application for roughly $6 million in tax credits under the 48C Advanced Energy Manufacturing Industrial Tax Credit program created by the American Recovery and Reinvestment Act (ARRA) and administered by the Department of Energy. Credits are being awarded on a competitive basis using technical criteria including job creation, reductions in air emissions, potential for technological innovation and commercial deployment, and project time. A decision on this competitive application is expected by December 16.
DelaWind also filed an application with Delaware Economic Development Office (DEDO) for $350,000 in financing. I am told that the request is expected to go before the Emerging Technology Pre Venture Fund Board pending a decision on the federal tax credit application.
Some Republicans have tried to make John Carney’s involvement in this project an issue.
Ron Williams mentioned the controversy, and Dave Burris weighed in with a headline calling it a “sweetheart deal,” and quoting State Senator Joe Booth who characterized it as “thinly veiled political pay back.”
I don't see much that is objectionable in this project. DelaWind didn't need John Carney's name to get the attention of state government. DEDO would roll out the welcome mat for this proposal whether or not his name was associated with it.

Carney plans to wrap up his involvement with DelaWind early next year to run for Congress. He played an crucial role in getting the Bluewater Wind project through the General Assembly, and is working hard to see to it that a significant portion of the project is fabricated here in Delaware. I don't know anyone who wouldn't like to see Delaware steel workers play a significant role in building this historic project. But it's one thing to say it would great to do this in Delaware, and another to put a credible enterprise together, which is what Carney and his colleagues have done.


Anonymous Edmund Dohnert said...

While it would be a very good thing if the steel towers for local offshore wind farms could be furnished by a Delaware company, this is hardly going to be a huge economic benefit, at least not initially. Why? The steel towers are but a relatively small fraction of the total installed cost of a wind turbine.

A few numbers: a very rough calculation tells me that the steel portion of the tower of a moderately large wind turbine probably weight roughly 150 tons, give or take. So, if we build 200 such towers, that would call for 30,000 tons of fabricated steel, probably over a period of several years.

If the towers are built according to typical construction practices, the plant would probably furnish cylindrical sections, which would then be welded together in a horizontal position at the wind farm staging area, and finally shipped out to the site on a special construction barge. Or the steel compnay could just provide rolled plates that would be made into cylinders at the staging area by the erector contractor itself.

I don't know how much it costs to fabricate moderate size carbon steel cylindrical sections these days, but it is a simple shape, so I doubt it is all that expensive. I don't think a figure of $500 per ton (including the steel itself) would be out of line. Hence, we might be talking about something like $15 million worth of business over a several year period. Nothing to sneeze at, but not exactly a windfall for Delaware, either.

5:06 PM, October 30, 2009  
Anonymous Anonymous said...

BWW was sold to Delaware as a project that wouldn't cost tax payers any money until the wind farm was generating electricity. Now it may cost us $350,000.

It was also supposed to be "off the shelf technology" but it looks like now we're going to pay to teach an untested, upstart company how to make parts that already exist in abundance.

7:02 PM, October 30, 2009  
Blogger Tom Noyes said...

I don't know if your estimate of the tonnage needed is on target. But your estimate of $500/ton is clearly off. A ton of rolled plate steel cost $604/ton in July, and that does not include any fabricating costs.

As for the second comment, the Bluewater Wind project was also sold as an opportunity to create jobs in a new industry. $350,000 is probably no more than about 2 percent of the capital needed for DelaWind, so the risk and return to the state is likely to be pretty reasonable.

As for calling DelaWind "an untested, upstart company," you glossed over the point that Amer--an established steel fabricating company--owns 95 percent of DelaWind.

7:35 PM, October 30, 2009  
Anonymous Edmund Dohnert said...

My estimate of tonnage for a tower for a wind turbine is probably conservative on the high side, as I suspect they could be made quite a bit lighter.

Well anyway, $500 per ton versus $650 per ton is not all that far off after all. Even if you used $1,000 per ton, we're still not talking about a really huge amount of money spread over several years.

My main point, though, was that the making of plate steel towers isn't even remotely high-tech and is essentially a commodity steel product. The fact is that practically anybody with steel rolling capability within a reasonable transportation radius of Delaware could supply the same stuff. Nothing unique at all about it.

So, if and when wind turbines are actually going to be built at offshore Delaware (I'm not holding my breath), the procurement of the steel towers is going to be open to competitive bid, and this nascent Delaware company is going to be just another competitor.

Just to show you what we're up against, there was a blurb in today's New Journal about a Chinese company slated to supply 250 wind turbines for a wind farm in Texas. Nice .... so much for buying domestic! Essentially, making wind turbines is an exercise in relatively low-level heavy manufacturing. Practically anybody above a Third World country can do it. So, it is not clear to me how Delaware offers any unique advantage in that regard, other than lower transportation costs (something which can be far outweighed by substantially reduced overseas labor costs).

It is indeed an uphill battle to rebuild Delaware's manufacturing base.

8:00 PM, October 30, 2009  
Blogger Nancy Willing said...

Thanks for the factual coverage. Williams certainly left everyone 'twisting' in the wind.

8:00 PM, October 30, 2009  
Blogger Tom Noyes said...

The economics of importing turbines is very different from fabricating towers. The relative cost of transportation and handling point to an advantage to fabricating and assembling the towers close to the project.

8:09 PM, October 30, 2009  
Anonymous Anonymous said...

As for the second comment, the Bluewater Wind project was also sold as an opportunity to create jobs in a new industry. $350,000 is probably no more than about 2 percent of the capital needed for DelaWind, so the risk and return to the state is likely to be pretty reasonable.

Whether or not the $350,000 is "reasonable" does not change the fact that now the wind project is costing Delaware taxpayers money before it has generated one KWH of electricity. This is not the same wind farm project that so many Delawareans stood up for, no matter how you try to spin it.

12:44 PM, November 01, 2009  
Blogger Tom Noyes said...

I do not agree with the comment that "the wind project is costing Delaware taxpayers money before it has generated one KWH of electricity."

The proposed financing is for DelaWind, not Bluewater. These are two different companies.

Bluewater can and will build the project whether the towers are fabricated in Delaware or elsewhere. The proposed $350,000 in financing would not go to Bluewater, but to DelaWind to create jobs in Delaware.

12:53 PM, November 02, 2009  
Anonymous Edmund Dohnert said...

I am becoming increasingly of the opinion that the Delaware Economic Development Office is actually more of a vehicle for funneling money to the business ventures of the politically well-connected than it is about creating jobs.

While nowhere nearly as blatant and surreal as the $50,000 going to one of our state senator's neighbors to build a prototype of a french fry vending machine, the $350,000 going to this thing called DelaWind still looks pretty dubious to me.

There are hundreds of existing small businesses in Delaware already struggling to keep their heads above water and struggling to keep their employees who are far far more deserving of such largess.

I've sadly come to the conclusion that the DEDO is a joke, and a very bad one at that.

5:29 PM, November 02, 2009  
Anonymous Anonymous said...

Latecomer here... A note about Amer Industrial Technologies. If this company is allowed to assist in manufacturing components of this project under the guise of creating more jobs for tax credits, then some serious researh needs to be done as to how this company has historically shuffled employees in and out of employment in order to avoid having to pay benefits. Historically an unsafe place to work evident by any google search and by comments of former employees. Their practices as an employer are borderline unethical. It would only benefit this project to allow an american company to fabricate the turbines, but one with strong ethical standards and practices, and one that will treat their employees as an asset, not a liability.

8:56 AM, December 10, 2010  

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