The recent spate of wind industry layoffs could have significant long-term ramifications for research and development (R&D) and the quest to lower the cost of wind energy.
With the production tax credit (PTC) set to expire on Dec. 31, several manufacturers in the wind energy supply chain - such as Vestas, Clipper Windpower and DMI Industries - have cut production staff in advance of what is expected to be a less-than-robust 2013. All told, the PTC is responsible for approximately 1,500 direct and indirect wind industry job losses since the beginning of the year.
While most suppliers pegged the layoffs on the uncertainty surrounding the PTC, it may be years before the full impact of the job losses is fully understood.
"The main impact [of the job losses] is a loss of skill sets that can take a long time to attain - both for our manufacturing efforts and those that supply us," explains David Flitterman, chairman of North American business at Gamesa Corp., which, in July, issued furloughs to 92 employees at its Fairless Hills, Pa.-based nacelle plant and 73 workers at its Ebensburg, Pa.-based blade facility.
It takes considerable time and effort to build a workforce with the highly specialized skills necessary to manufacture components such as nacelles and blades, Flitterman notes. In fact, when Gamesa first opened its U.S. blade and nacelle plants in 2006, it took the company over six months to build its manufacturing team. In some cases, employees needed re-training in component manufacturing.
"The uncertainty has led some talented people with transferable skills to leave the wind industry and go to other industries," Flitterman explains, adding that the company is worried it might not get those skill sets back.
To ensure such institutional knowledge does not walk out the door, Gamesa plans to call back an undisclosed number of affected employees in about 10 weeks.
Gamesa is not alone; other companies in the wind energy supply chain, such as Dallas-based Trinity Structural Towers, have reallocated resources.
Citing a slowdown in the wind energy market, Trinity noted in its earnings report last month that its plans to reposition resources away from wind turbine tower manufacturing toward the production of railcars.
Most of the job reductions will be manufacturing positions, predicts Dan Shreve, director and partner at MAKE Consulting.
A specialty set of welders, for example, is not easily replaceable, he says. Therefore, companies are doing their best to try to keep their employees by reapplying the workers to different market segments. Otherwise, "companies run the risk of not getting the employees back," Shreve says.
Pedro Guillen - a partner at Kinetik Partners, an advisory firm based in Detroit and Barcelona, Spain - agrees. The impact is especially problematic for skilled laborers who work on the composites side of the industry, such as in blade manufacturing, he says. In fact, it can take companies 12 to 24 months to hire and train composite workers, according to Guillen.
He says the layoffs have created a downward slide that extends to R&D, and some manufacturers - such as Vestas and Gamesa - have shelved or slowed their R&D plans for 2013 and beyond.
Gamesa's Flitterman corroborates Guillen’s observation, and notes that the R&D efforts would have significantly benefited the industry.
"We have delayed some research and development and capacity expansion enhancements for 2013 that would have helped us drive down the cost of wind energy," Flitterman says.
The job cuts could not have come at a worse time, Guillen says, noting that the wind industry was making advancements in lowering the cost of wind energy through technological achievement. In fact, the full impact of job cuts on R&D may take years to fully comprehend, he adds.