Optimism persists at DSTN
9/27/2012When South Korean manufacturing giant Daewoo talked about transforming a mothballed railcar plant in Trenton into a state-of-the-art wind turbine facility, the province opened its chequebook.
In exchange for $60 million, Nova Scotia would own a 49 per cent stake in a new wind-tower manufacturing plant.
The deal dovetailed with Nova Scotia’s target of sourcing 40 per cent of the province’s electricity from renewable energy by 2020 and promised to bring hundreds of green collar jobs to the hardscrabble Pictou County town.
But less than two years later, orders for DSTN’s steel towers have dried up and dozens of workers have been laid off.
The workforce now hovers at around 70 workers and despite upgrades to the facility, there are no new orders for towers in sight.
Yet the province and the manufacturing firm remain optimistic about the plant’s future.
DSTN, a subsidiary of Daewoo Shipbuilding and Marine Engineering, has its sights set on several large-scale wind farms set to be built in the region in the future.
“Although we don’t currently have an order, our sales team is working very hard to reach out to potential clients and build our name as a top-quality heavy steel fabricator,” spokesman Scott Covey said in an email Wednesday.
In the lull between contracts, Covey said DSTN is positioning itself as an “attractive supplier to many large turbine manufacturers,” such as working to complete audits to become certified in both ISO 9001 and 14001.
“Our sales team has been travelling throughout Atlantic Canada and the New England states meeting with potential clients, as well as researching other potential market niches that may be available to DSTN. This has proven to be quite successful and optimism has grown throughout the plant.”
But a sector-wide United States slowdown could affect the bottom line of the wind-energy supply chain across North America.
Robert Hornung, president of the Canadian Wind Energy Association, said although the Canadian wind sector is entering a period of high growth, the U.S. market is slowing.
“The Canadian and American markets are quite structurally different,” Hornung said in an interview Friday.
The American market is driven heavily by federal policy, including a federal tax credit that expires this year, he said.
While wind energy in Canada, driven by provincial policy, is still going strong, he admitted that the U.S. slowdown could affect suppliers here.
“We’re quite confident we’re seeing record levels of build-out that will be sustained over the next few years in Canada. That has lead to significant growth in the industry in terms of supply chain going forward.
“But having said that, for any supply chain to be sustainable over the long term, it’s going to have to service not just the Canadian market. We’ll have to be exporting as well, so what happens in the U.S. does matter.”
Given the uncertainty surrounding U.S. wind energy policy, Hornung said a temporary decline is widely anticipated.
“But pretty much everyone expects that will bounce back once the uncertainty is resolved.”
Yves Gagnon, KC Irving Chair in Sustainable Development at the Universite de Moncton, said there are many issues affecting new wind farm development south of the border.
But the biggest issue is the uncertainty about the production tax credit, set to expire Dec. 31, he said.
“A lot of manufacturers built wind farms rapidly to benefit from that tax credit. It’s not clear if the credit will be renewed after the deadline, so there are fewer turbines being ordered.”
While Gagnon said he is unfamiliar with DSTN’s experience, he said it is almost certain the company is feeling the impact of an industry-wide U.S. downturn.
Another key issue is the growing dominance of Chinese manufacturers, he said.
“They are inundating markets with very low prices for their turbines and even financing the turbines that they are selling, so it’s changing the dynamics of the industry quite a bit.”
Yet despite the U.S. uncertainty, Wayne Groszko, renewable energy co-ordinator at the Ecology Action Centre in Halifax, said there are several bigger projects approved in the Atlantic region that could require large wind tower components.
“It’s true the market has had a bit of a downturn in the U.S., but overall in North America, it’s not doing that badly,” said Groszko, an instructor at Dalhousie University in Halifax.
“There will be quite a lot of wind energy activity in Nova Scotia and across the region, but the question of whether DSTN will get to make those components” is up in the air, he said.
However, DSTN would only need to secure a small portion of the component manufacturing market to have a thriving business, Groszko said.
DSTN is also at a slight competitive advantage over other wind turbine makers given its location, he said.
“There is a real advantage to producing them on the same continent close to where they’re going to be installed because they are very big objects to transport.”
Trenton Mayor Glen MacKinnon said the town is hopeful a new order for DSTN’s towers is around the corner.
“I know DSTN is working very hard to secure new contracts and make the plant as efficient as possible.”
MacKinnon said the company has kept as many workers on board as possible during the idle period.
“They’ve been good corporate citizens and they’re working hard to try to get orders, and people are glad they’ve cleaned up the site. The future will hopefully be bright once orders start coming in on a regular basis.”
(The Chronicle Herald)
