By Chris Meehan | Dec 07, 2015
Publicly traded (NASDAQ: VWS)
Employees: 4,000 in Colorado (more than 20,000 worldwide)
It was a very good year for Vestas' massive wind tower manufacturing facility in Pueblo.
The plant is operating at 100 percent production capacity, making roughly 1,100 wind turbine towers annually to support Vestas' wind projects in North America.
"We're qualified to build 48 different tower styles," explains Tony Knopp, vice president of Vestas Towers Americas in Pueblo. "Our designers build to the needs of the customers. It's really based on tweaking it to be perfect for the tower site."
In 2015, Vestas has brought more than 200,000 tons of steel into its 13-million-square-foot manufacturing facility in Pueblo from North Carolina, Iowa and South Korea. Crews take the raw steel slabs and roll, bevel, shape, weld, and sculpt them into into 65-ton, 100-foot sections. These are later assembled into towers that often top out at about 300 feet tall.
Pieces are painted and finished in other buildings on the campus. That includes the installation of ladders, lifts for tall masts, and other components. On a given day, nearly 600 made-to-order sections dot the 300-acre landscape.
If it sounds behemoth, it is. Vestas is the largest wind turbine manufacturer in the world, larger than competitors like Siemens and GE. The Danish company has grown quickly and it began looking to establish manufacturing in the U.S. in 2005 to meet demand in North America.
Vestas didn't decide on Pueblo for the tower manufacturing plant until September 2008 and Knopp came on the next year after stints at Schlage and GM. "I've been here long enough to hire the staff and start the factory," he asserts. It opened the doors in 2010.
The company also located its North American turbine blade manufacturing in Brighton and Windsor and its nacelle manufacturing -- the guts of a wind turbine including the gearing, generator, and other equipment -- in Brighton.
The company chose Colorado and Pueblo for a number of reasons. Among them its five generations of steel workers and Pueblo Community College. "Pueblo Community College has been an effective partner from the beginning," Knopp says. "It helped train the initial Vestas workforce and provided training programs until the company could offer its own." Colorado also provided a business-friendly environment for the company, he adds.
There was another important factor in choosing Colorado: location. "Transportation costs are so expensive for the nacelles, the blades, and the towers so we wanted to get in the region where the wind resource was greatest," Knopp explains. That region, he says, stretches from Texas to North Dakota.
Vestas now has roughly 4,000 employees in Colorado and 800 in Pueblo, including 300 welders. The company also supports many downstream manufacturing jobs locally as it sources equipment from numerous in-state companies. "Here in Colorado, we're doing work with a company called Aluwind out of Castle Rock," Knopp says. "We're buying components from them." A Denver company, Walker Component Group, builds the electrical kits, including the lighting and wiring for the towers. Vestas is also purchasing from Pueblo's O'Neal Manufacturing.
Vestas has been catalytic for Pueblo's manufacturing economy, says Jeffrey Shaw, vice president of Pueblo Economic Development Corp. "They've been a great addition to Pueblo. Not only are they here, they’re excelling even more strongly than we thought."
"For each strong manufacturing job, there are two or three other jobs created," Shaw claims. "I think it's strengthened everyone and all manufacturers here. It's been a great citizen manufacturer. They’ve shared their expertise. Certainly it's improved our workforce."
To this end, Pueblo Community College has trained 1,247 Vestas employees at a cost of $712,167. As these employees earn an average hourly rate of $21.51, the annual return on that modest investment is north of $50 million a year, says President Patty Erjavec. "This clearly demonstrates the importance of the jobs Vestas has brought to the community and the importance of the partnership between PCC and our business and industry partners," she adds.
And that industry is booming. In October 2015, the American Wind Energy Association (AWEA) reported record high development numbers for wind power with nearly 3,600 megawatts of wind turbines already installed across the U.S. in 2015 and more than $20 billion and 13,250 megawatts of wind projects currently under development.
"Every year, our payback is getting better," Knopp says. "We're getting more competitive. That's through better technologies that we're putting into our products. The technology that was in the market or being sold 10 years ago has vastly changed. We're using better engineered materials and better designs that are making us more efficient. Those also include the control features of wind power."
Towers are getting taller and generators more efficient. "The way we're getting taller is how we design the tower to distribute the load to use less materials," Knopp explains. "The thing about a tower is it's so expensive because of the material content. The development has been toward reducing its cost by changing the material content."
Orders remain strong heading into 2016. Knopp attributes it to a couple of things better paybacks and the looming deadline for the Production Tax Credit (PTC), which is spurring developers and utilities to beat construction deadlines for eligibility.
The PTC affords project owners a $0.023 tax credit per kilowatt-hour produced by wind turbines, usually for a period of 10 years. It technically ended on Dec. 31, 2014, but under the IRS's continuous construction clauses, certain new projects can qualify for the credit until Jan. 1, 2017.
And Knopp is looking to diversify beyond wind. Case in point: When the PTC lapsed in 2012, AWEA estimated orders for projects in the wind industry fell by 92 percent. "In 2012, we were kind of surprised," he says. "We have better strategies in place today to meet the demands of wind projects and if they're not there, we'll consider other options. My responsibility is to keep this facility working."
Those options include producing towers for other leading wind turbine manufacturers, but Knopp can't disclose which ones under confidentiality clauses. But there are other options. "When Vestas slowed down in 2012, I marketed work for this facility. We have great welding and construction capability. If wind were to slow down, I'd look at another business." He doesn't know exactly what that would be at this point, but says: "It needs to be big. It would make sense to build tanks or rail cars."
It could also produce towers for international markets, which could be a boon for Colorado's manufacturing exports. "So far demand has been such that we don't need to go outside North America," Knopp says. "We haven't shipped anything outside the continent. That is something I'd like to do -- to see if we could compete by going south."