Living Economics

Farming the Wind
China is tapping US economic stimulus fund to build wind farms in the US.

In November 2009, China's A-Power Energy Generation Systems Ltd. and the U.S. Renewable Energy Group announced plans to build a wind turbine production factory in the United States.

The plant would employ roughly 1,000 U.S. workers and produce 1,100 megawatts of turbines annually for projects in the Americas. The turbines would be built with technology licensed by A-Power and mechanical components sourced from U.S. manufacturers.

News of the factory came less than a month after Cielo Wind Power LP, an Austin, Texas-based wind energy developer, announced plans to build a 600-megawatt wind farm south of the Texas Panhandle with the same partners.

The 36,000-acre wind farm in West Texas would receive $1.5 billion in financing through Export-Import Bank of China and seek tax credits and support from the federal stimulus package. China’s Shenyang Power Group would exclusively supply the project with 240 of its 2.5-megawatt wind turbines, among the biggest made in the world.

The Texas project should create 2,800 jobs -- of which only 15% would be in the U.S. The rest would flow to China. The project would soak up more than half of Shenyang's current annual production of 1,125 megawatts of turbine capacity.

On the surface, these two projects appear to be a win-win arrangement. China is partially funding US’s effort to generate more renewable energy and green jobs. America is supplying core mechanical components to the manufacturing of wind turbines in America.

But the initiatives seem to be emanating from the Chinese side even though China only licensed its wind turbine technology from Germany, which in turn got its technology originally from America.

That China is able to capitalize on American government’s stimulus package is a result of America’s persistent trade deficit with China. With funds generated from its trade surplus, China is able to fund real and financial investments in America. In fact, the Chinese are merely repeating what the Japanese did in the 80s. The Japanese were so aggressive in investing in American assets with its huge trade surplus that an American best-seller proclaimed “Japan as No. 1”. Now China has accumulated an even larger trade surplus. In spite of US Congress’s sporadic xenophobic objections, American assets are ripe for Chinese pickings.

Sen. Charles Schumer (D-N.Y.) is urging the Department of Energy to reject stimulus support to the project because it would use Chinese-made turbines. But that is like closing the stable door after the horses are gone.

There are no free lunches. And there are no free trade deficits either.

References:
Access Tools
• Advanced Search
• Browse Micro
Comparative advantage (14) Competitive strategy (27) Costs and opportunities (53) Entrepreneurship (3) Externality (28) Free Market Solutions (17) Free Ridership (3) Game Theory (22) Incentives (13) Income Distribution (25) Information (19) Labor Market (24) Marginal optimization (33) Market Demand (17) Market Entry (9) Market Exit (2) Market Intervention (12) Market Structure (29) Market supply (4) Material Flow (2) Miscellaneous (3) Price Discrimination (17) Pricing Strategy (46) Profit maximization (48) Property Rights (42) Regulation (16) Rent Seeking (2) Risk Taking (12) Scarcity (10) Tastes & Preferences (27) Taxes (7) Technology (9) Type of goods (31) What Price Means (27)
• Browse Macro
Boom and Bust (9) Budget Balance (12) Comparative advantage (13) Economic Development (1) Economic Indicators (6) Fiscal Policy (12) Incentives (1) Income and output (25) Income Distribution (5) Labor Market (6) Money and Credit (20) Regulation (5) Rent Seeking (1) Saving (6) Taxes (4) Technology (1) Trade and Foreign Exchange (30)
• Glossary
List All
Search

• Microeconomics Lectures • Macroeconomics Lectures
Instructor
• Instructor Log in • Sample TOC • Demo/Register • Video Tour
Student
• Student Log in
Close
Instructor Log in

Class
Close
Student Log in


Open Menu
Term
Definition