Vestas's Global Cutbacks Fuel Concern In Marlborough
In mid-November, Gov. Deval Patrick joined local officials and representatives from international wind turbine company Vestas to ceremoniously shovel the first pile of dirt at the company’s new $16-million research, development and engineering complex in Marlborough. The company received a $1.6-million tax break for the facility, which was set to house 66 new jobs.
Fast forward about two months and some of the wind has been taken out of the sails of that announcement.
Vestas, which is headquartered in Denmark but has manufacturing facilities in the United States, recently announced plans to lay off about 10 percent of its global workforce, close a factory in Europe and restructure the firm.
Still On The Table
As of now, Vestas still plans to expand in Marlborough, but that could change, company officials said. Last summer, the company said it had about 20,000 international employees, including about 3,000 in the U.S., most of them in Colorado and Oregon.
The layoff announcement, though, is the latest sign of volatility in the clean energy industry, coming just months after Marlborough-based Evergreen Solar filed for Chapter 11 bankruptcy protection, after it had received government support. Evergreen received more than $40 million in tax incentives, grants and lease agreements related to its Devens manufacturing plant, state officials have said, which some have called for Evergreen to pay back.
AMSC, formerly American Superconductor, had issues when its main Chinese customer backed out of orders it had placed and refused to pay for shipments it received. Then there’s the national example of Solyndra, the California solar manufacturer that has been under heavy criticism since it received a federal loan guarantee, then scaled back its U.S. operations.
Local officials and green energy experts don’t believe the same kind of thing will happen with Vestas. The clean technology industry is changing so quickly that there will inevitably be ups and downs, said William Osbourn, founder and managing partner of The Green Energy Fund, a Brookline-based private equity firm specializing in green investments, including a couple in Central Massachusetts.
Industry Growing Pains
“This is an emergent industry; all of these clean energy industries are going to go through a little rough and tumble,” Osbourn said.
Wind energy, he said, is a proven technology that will be around for the long haul. There just might be some hiccups along the way.
Vestas may have a case of the hiccups.
The layoff announcement is the company’s third in three years, and there could be more. A federal domestic wind energy Production Tax Credit (PTC) is slated to expire at the end of this year and Vestas said if it’s not extended, an additional 1,600 U.S. jobs could be cut. The credit gives owners of wind turbines a 2.1-cent-per-kilowatt-hour tax break once the system is up and running.
The PTC has been around for decades and, every few years, politicians in Washington threaten to cut it. This year, it appears that may actually happen. In prior years when the PTC expired for a year, there had been a drop in wind turbine installations, according to Ellen Carey, spokesperson for the American Wind Energy Association, a trade group of more than 400 wind turbine and parts manufacturers in 43 states.
“Extending the PTC is the industry’s No. 1 policy priority,” Carey said. “Vestas’s decision illustrates the effect this credit can have on businesses, the supply chain and manufacturing jobs. It’s crucial that it is kept in place.”
Carey said wind turbines take so long to build that the industry is already feeling the effects of the PTC’s planned expiration. If a property owner, she said, were to decide he or she wanted a wind turbine built, it would likely take more than 12 months to complete the process, if not longer. That means fewer orders for turbines this year given the PTC’s expected expiration.
Nonetheless, locals officials remain optimistic.
Marlborough Mayor Arthur Vigeant said the community has protections in place. City officials supplied Vestas a tax increment financing (TIF) plan worth more than $1.6 million as one of the incentives for the company to build.
Vigeant said Vestas only gets that tax break if the facility is constructed and the jobs are added. If Vestas only creates some of the jobs it promised, it will only get a part of the TIF, he said.
Plus, Vigeant said, once the building is constructed, it will increase the property’s value, which will lead to additional tax revenue for the city.
Vigeant though, is an optimist.
Vestas’s Marlborough facility is for research, development and engineering, not manufacturing and production of turbines, which the mayor said could insulate the Marlborough location from cuts.
“I think the company will do well here,” Vigeant said. “I expect to be at a Vestas ribbon cutting next year.”
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