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OEM Report: Energy
Monday | 24 May, 2010 | 5:44 am

Power up

By Michelle Martinez

May 2010 - If there’s no silver bullet for the nation’s growing energy needs, analysts say there is likely "silver buckshot," and that could be a good thing for everybody.

Future power needs won’t be met by one Hail Mary technology but rather by a group of them, both new and mature. Oil, gas and coal will have their place, but wind, solar, marine and other cleantech sources are now in fledgling stages.

"It will be multifaceted," says Piotr Galitzine, chairman of the Downers Grove, Ill.-based oil country tubular goods supplier TMK Ipsco. "It will involve a little bit of everything."

As oil and gas industry suppliers settle into a year decidedly better than the last, a growing number of metal suppliers, fabricators, tool and die makers, and others are seeing opportunity in building the undergirding of wind turbines, solar panel frames and other renewable energy systems.

"We’ve reinvented ourselves several times. We have to," says Jeff Metts, president of Eaton Rapids, Mich.-based Dowding Industries, a family-owned fabricator. Dowding was founded in 1965 as a tool and die maker for the automotive industry, but it diversified in the 1990s to heavy machinery and agricultural equipment.

Four years ago, Metts went to a wind-power expo in Los Angeles. "We were unbelievably surprised," he says. "We saw that this was going to grow." Dowding won its first wind customers that year. In 2007, the company built a 35,000-square-foot building and formed a joint venture with Sterling Heights, Mich.-based MAG Industrial Automation Systems to develop tools and components for wind turbines.

Metts is now working with MAG to build a better wind turbine blade. By October, the venture will unveil a blade system that Metts says is better performing and more efficient to manufacture than existing turbine blades. It’s the type of technology game changer that he thinks can make wind a cost-efficient option and could even influence other industries.

"Our goal is to make renewable energy competitive with coal," Metts says. "Michigan is beautiful for this. We think in terms of Six Sigma, not ‘yeah, I gotta make a good one.’ I think we could dominate the market. We want to be the innovation leaders in the world again."

Expanding business strategies
Dowding isn’t alone. In 2008, motor vehicle engineering and testing firm Ricardo Inc. expanded its focus from automotive powertrain development to include clean energy technologies, such as solar, wind, hybrid and electric vehicle systems, and even wave and tidal power generators.

Diversifying helped protect the U.K.-based company from automotive’s latest, brutal cycle, says Kent Niederhofer, president of Ricardo Inc., Van Buren Township, Mich., the company’s U.S. base. And although clean energy currently represents "low single digits in Ricardo’s revenue mix," if the company meets its forecasted performance at the end of its June 30 fiscal year, it will have grown 300 percent, he says.

For the first six months ending Dec. 31, Ricardo posted a net profit of £3 million (or about $4.5 million) on revenue of £81 million compared with a net profit of £5.2 million on revenue of £91 million for the same period last year.

It’s still early in cleantech’s development cycle, Niederhofer says, but Ricardo sees opportunity in transferring the high level of expertise obtained in the company’s 100 years of developing automotive technologies to clean energies.

"In a wind turbine you have many of the types of technical problems that a company such as ours would [solve] in automotive," he said. "Time will tell whether I can look back on this and say it was a monumental success."

The examples are growing in number. Detroit-based fabricator W Industries is machining components for wind, solar and biofuel industries after a history of exclusively supplying automakers. And Darien, Ill.-based steel plate distributor Leeco Steel LLC formed a wind energy group in 2005. In 2008, that company won the supplier of the year award from wind turbine manufacturer Vestas Towers.

Last year, Bedford Heights, Ohio-based forger Wodin Inc. won a contract to provide main shafts for wind turbines for Northern Power. And Austin, Texas-based Xtreme Power and Clairvoyant Energy of Santa Barbara, Calif., are giving a shuttered Ford plant in Wixom, Mich., a more than $1 billion makeover to churn out solar panels and battery systems by late 2011.

Stirling Energy Systems, the manufacturing arm of Dublin, Ireland-based NTR, contracted Livonia, Mich.-based Tower Automotive to build large solar energy dishes, and Livonia, Mich.-based McLaren Performance Technologies developed the power unit that transforms sunlight into usable electricity for the SunCatcher dishes. McLaren, which was bought by automotive parts and components supplier Linamar of Canada, was founded in 1969 by New Zealand-born auto racer Bruce McLaren and is best known for developing race car engines.

A fledgling industry
More examples are popping up across the Midwest and the rest of the nation as Rust Belt states and the federal government try to infuse new life into flagging manufacturing towns and one-industry cities looking for new ways to survive. But economists caution that whatever promise renewable energy industries hold is a long-term proposal for any company and probably won’t replace the jobs shed by auto plants and other manufacturers.

More than 2 million manufacturing jobs have been lost nationwide since 2007, and more than 200,000 auto-related jobs are estimated to have been lost in Michigan alone during the past decade. Clean energy projects aren’t expected to approach that number for years to come.

"All greentech is very nascent," says Peter Adriaens, a University of Michigan professor who is studying entrepreneurship in clean technologies. "It still depends on incentives from the state and from the federal government. It’s not a mature industry in many ways."

About 18 percent of the world’s energy is created by renewable sources, most of that hydropower. Wind, solar and geothermal made up just 3 percent of that 18 percent, Galitzine says.

But those companies that are developing the components and materials of the fledgling industry are located at the heart of where real growth and value will be created, Adriaens says.

"There will still be assembly going on ... but long term, once this industry matures, that’s when the materials and subcomponents and micro-electrical [components] will start to make up the material supply chain and will start to become bustling industries," Adriaens says. "It’s going from bread crumbs to pearls."

As a result, the industries are attracting plenty of government and investor attention, says Chris Kuehl, an economic analyst with the Rockford, Ill.-based Fabricators & Manufacturers Association, International and founder of Kansas City, Kan.-based Armada Corporate Intelligence. "That means a lot of conferences. And the only way to make good use of sales efforts is to go to these conferences, being aware that these guys are like chum in shark-infested waters," he says. "You sort of have to stand in line to get to the purchasing guys."

New technology for oil and gas
Although oil and gas hasn’t quite achieved the eco-rock star status of wind or solar, oil and gas suppliers say new technology and high demand are driving new growth.

Following a dismal 2009, when low oil prices, a global recession and heavy imports of oil country tubular goods bloated supplier inventories, drilling activity is "definitely on the mend," says Duane Murphy, founder of Huntsville, Texas-based Duane Murphy & Associates and author of the monthly OCTG Situation Report.

The U.S. rig count as of March 12 was 1,407, up 281 or 11 percent compared with the same time last year, according to Baker Hughes, a Houston-based oil and gas industry consultancy.

"Drilling for oil in the U.S. has hit a new high that we haven’t seen since 1993," Murphy says. That’s being pushed by higher oil prices--in mid-March, those prices were hovering around $81 a barrel--and newer horizontal drilling technology that’s made drilling for natural gas in shale formations an easier proposition. Industry consolidation and new tariffs on Chinese imports have also helped.

"You’ve got a whole new level of activity that’s going on in shale play for natural gas," Murphy says.

OCTG global powerhouse Vallourec estimates horizontal rigs now represent 49 percent of active rigs versus 34 percent in December 2008 and one-quarter of all rigs the previous year. The company and its peers are displaying a confidence it hasn’t felt for more than two years.

Vallourec saw net income slide 46 percent to about €518 million in 2009 from €967.2 million last year, but still snapped up locations in Indonesia and the Middle East. It is also building a tube and pipe mill in Brazil.

Startup concern Boomerang Tube, headed by former Maverick Tube Corp. Chairman and President Gregg Eisenberg, is overhauling a former National Pipe and Tube plant to make welded oil country tubular goods in Liberty, Texas. The $200 million project was financed by New York-based Access Industries and is expected to be online late this year.

"We have great confidence in the future of this business and expect to quickly become a high-quality supplier to the oil and gas sector," Eisenberg said in a news release about the project.

Others are "eyeballing the situation and whether they want to commit more capital," Murphy says. He also says growth in 2010 for the United States could reach as high as a 25 percent to 30 percent increase over last year. "I would say that’s a good vote of confidence," he says.

Galitzine agrees. "New technologies will continue to be developed and continue to get more oil and gas out of the ground," he says. "Typically, up until horizontal drilling, a production company only got about 20 percent out of the ground. People that talk about peak oil are uninformed. There’s a lot of oil in the ground.

" We’re optimistic because they’re going to need pipe no matter what." MM

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