New U.S. Energy Supply Chain

July 22, 2009
How the manufacturing industry is reinventing itself as a new global supply chain for alternative energy, with handsome rewards.

The U.S. manufacturing industry is in the midst of a long and sometimes difficult transition. As globalization leads to lower-cost production of mainstream products, American manufacturers must re-apply their world-class expertise in old-line processes to emerging technologies. This process is rapidly accelerating in the advanced energy supply chain, which promises to lessen U.S. dependence on unstable foreign energy markets while establishing a foundation for a thriving domestic clean-energy industry.

Nowhere is this transition more apparent than in traditional manufacturing states like Ohio. Here, state leaders are leveraging key assets such as Ohio's manufacturing infrastructure, skilled workforce and advantageous location to support a growing advanced energy industry. Ohio-based companies are producing an increasing array of solar panels, wind turbines and component parts, biomass products, fuel cells, hydroelectric components, geothermal parts and storage facilities that promote better utilization of advanced energy resources.

A 2008 report, released by the Political Economy Research Institute at the University of Massachusetts, notes that many of Ohio's manufacturing workers can easily transition to green manufacturing jobs. As a result, 551,000 workers in Ohio could see new job opportunities and wage increases from the growth of environmentally friendly industries.

The way Ohio-based manufacturers have successfully reinvented themselves as leading suppliers to the technologies of the future serves as a model for other struggling states and cities with economies reliant upon manufacturing.

State Support in Building a New Supply Chain

Ohio-based manufacturers have maximized the state's strong manufacturing history to successfully shift from past inventions to tomorrow's innovations. State government can be a key supporter of old school manufacturers' growth into the advanced energy industry. Sometimes, a large statewide investment can help jumpstart a plagued economy. The necessary capital and incentive must also be present for local manufacturers to successfully transform from a traditional manufacturing operation.

In Ohio, traditional manufacturers were able to make such a transition, a result of state funding initiatives like the Ohio Third Frontier, a 10-year, $1.6 billion research and development funding program, which has leveraged an additional $6 billion in federal and private sector support for emerging industries and technologies. Since 2002, Ohio Third Frontier has invested more than $71 million for energy related research, development and product commercialization.

Ohio's Advanced Energy and Fuel Cell Programs also encourage commercialization of solar, wind, bio-fuels, energy storage and energy efficiency products. Another force behind Ohio's current wind and solar manufacturing boom is the state's Alternative Energy Portfolio Standard. By 2025, Ohio will require at least 25% of the electricity sold in Ohio to be generated from advanced energy technology -- with a minimum of 12.5% from renewable sources. To help meet this requirement, Ohio created a $150 million bipartisan Advanced Energy Job Stimulus Fund to support grants for clean energy development.

Aligning Manufacturing with Advanced Energy

Ohio is a leading steel producer, manufacturing more than $4.6 billion of steel and steel products a year. This homegrown asset allows Ohio manufacturers to produce advanced components for wind, solar, biofuel and fuel cell solutions for clean energy.

Change doesn't always mean totally reinventing oneself. Manufacturing-strong states like Ohio use industry proficiency as the foundation for keeping up with the changing marketplace. As a result, the state's manufacturers now lead the nation in production of plastics and rubber, fabricated metals and electrical equipment needed for advanced energy development.

And manufacturers aren't stopping there-they are continuously evolving their production capabilities. Today, the Ohio manufacturing sector is engaged in advanced plastics applications and development of stronger and lighter steel components and chemicals, which are on the cutting edge of fuel cell and other advanced energy solutions, such as wind.

One Ohio manufacturer based in Athens, Dovetail Solar & Wind, recognized the strength of the renewable energy demand across the country and has phased out its original business model of selling custom-milled wood products to focus exclusively on wind and solar power systems.

Ohio's Winds of Change

Some of Ohio's best-known manufacturers-such as Avon Bearings, Lubrizol, Owens-Corning, Parker Hannifin, Sherwin-Williams and Timken-are now key suppliers to the nation's wind industry. Their traditional manufacturing processes easily supply bearings, performance coatings, composite windmill blades and components.

As home to some of the highest wind volume east of the Mississippi River, Ohio is planning extensive commercial wind farm development in the state's windy areas, and proximity to supply makes a difference. New York-based EverPower has applied to develop Ohio's first commercial wind farm, the $340 million Buckeye Wind Project, which would place 70 turbines in the western Wind Alley region.

Realizing Advanced Energy's Supply Chain

The potential is already paying off for the companies that have staked a claim in the supply chain business across the U.S. and globally. As development of advanced energy projects escalates, more and more manufacturers are expected to join the movement.

Advanced energy may be the answer to the world's over-reliance on fossil fuels, but it takes a world-class manufacturing network to supply the parts and equipment to capture and convert it to a usable energy supply.

Ed Burghard is Harley Procter Marketer, Procter & Gamble, and executive director of the Ohio Business Development Coalition (OBDC), a nonprofit organization that markets the state for capital investment.

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