Thursday, October 30, 2008

Rust Belt Solar Revival

The demise of the rust belt was always an exaggeration, just as the fear that German industry could not compete. All industrial production is about intelligent design and then taking a few cents of raw material, pounding it a few times and selling it for dollars.

The industrial heartland that also includes Ontario is one of the globe’s great industrial engines.

It has supported high wages and high taxation. This put it at a disadvantage when competing with low tax and low wage economies. It still managed to become richer and more efficient as did German industry.

The next generation is seeing the wages of China and India rising and their economies begin to properly internalize as happened in Europe. There is still plenty of cheap labor around but never so concentrated and organized as that of China and India. In fact China and India are now beginning to compete for those workers.

What this article makes clear is that solar energy and wind energy represents a massive manufacturing effort. A lot of this had not really registered. The modern windmill showed that it is possible to build hardware robust enough to stand up against all that Mother Nature can throw at it. We are now going to build thousands of them and install them everywhere that makes any sort of sense. After all, free fuel works for everyone.

The solar industry is an even bigger manufacturing opportunity. The nanosolar thin film is actually a minor part of the manufacturing bill and its cost is now dropping sharply, exponentially increasing manufacturing demand.

We will be installing hundreds of square miles of solar panels over the next twenty years. The hardware for all this must be manufactured and will surely generate a manufacturing boom for the rust belt.

I personally think that while the rest of the globe still has energy options to postpone conversion to alternative energy, North America and Europe does not. The Europeans recognized this twenty years ago and made it public policy to stay ahead of the curve.

In North America, we have ignored the inevitable day of reckoning until it arrived and sucked the cash liquidity out of the economy. Now we need to catch up in a hurry. That means a massive build out of windmills and conversion of our trucking industry over to LNG fuel over the next five years. This will slash our dependence on oil and commence the reduction of our reliance on coal fired and natural gas fired power plants.

This all translates into a major manufacturing boom in the rust belt, even before we factor in the rapid build up of solar energy.

Our thermal plants will end up been standby power sources to pick up the slack on bad weather days.

Logistics Resurrects the Rust Belt

by Lara L. Sowinski

October 28, 2008

As in recent presidential elections, much has been said by politicians about the tens of thousands of manufacturing job losses that have occurred in the region of the U.S. known as the Rust Belt—those states that have a long history in industrial manufacturing, particularly steel and auto production, as a driver for their economies. But politicians usually don’t tell the whole story, and such is the case with how the jobs were lost and, more importantly, what’s been occurring in recent years to turn the situation around.The “secret,” according to Bill LaFayette, Ph.D., and vice president, economic analysis, for the Columbus (Ohio) Chamber (, is in large part due to logistics, and he and many others in the business, government, and academic sectors are pulling together to get that secret out in the open.

For starters, “There’s an initiative at the state level, the Ohio Skills Bank, to align public colleges and universities as well as secondary education providers with economic development priorities. The goal is to make sure the state’s workforce has the skills that employers really need now and in the future. And, transportation and logistics is one of the main focus sectors of this initiative, especially in the Columbus region,” says LaFayette. “Part of the plan includes making sure university classes and credits are on par around the state, so the workforce can be more mobile,” he adds.

State lawmakers also recognize the role of logistics in the larger economic development picture. Ohio is in the midst of a major tax reform, which along with numerous other advantages, is helping the state become more competitive against others that it often goes head-to-head with, including Illinois, Indiana, Wisconsin, Michigan, and Minnesota, explains Matt McCollister, vice president, economic development, Columbus Chamber.

In a recent article in the Wall Street Journal, Ohio Governor Ted Strickland asserted that the tax reform would yield significant results for the state.

“By 2010, Ohio will be one of only two states without a general tax on corporation profits or a property tax on business machinery, equipment, and inventories. This year is the last for Ohio’s business property tax; next year is the last for the corporation profits tax. And, Ohio’s personal income tax rates are falling by 21 percent across the board.”

“Between 2005 and 2007, Ohio’s per capita state tax burden has already fallen to 38th in the nation, from 27th, according to the Federation for Tax Administrators. When the new tax cuts are phased in, Ohio’s business taxes will be the lowest in the Midwest.”The Governor also pointed out that exports are up sharply. Last year, the state’s exports totaled more than $42 billion — an 11.1 percent increase over 2006—making it the only state in which exports have grown each year since 1998.

Moving from concept to creation

It’s great to have a vision, but it’s even better to put it into action, and the major logistics players in the Columbus region and throughout the state are beginning to see the results of this combined effort from the various interests in a number of ways.

Undoubtedly, one of the most important projects has been the Norfolk Southern railroad’s Heartland Corridor, a three-year railway improvement project scheduled for completion in 2010 that will significantly increase the speed of containerized freight moving in double-stack trains between the East Coast and Midwest. Currently, double-stack trains are routed through Harrisburg, Pennsylvania or Knoxville, Tennessee. However once it’s completed, the Heartland Corridor will move double-stack trains from Norfolk, Virginia’s seaports to Chicago, via West Virginia and Ohio.

The centerpiece of the Heartland Corridor is the Rickenbacker Intermodal Terminal located just outside of Columbus, which opened in March.

“The construction of the Rickenbacker terminal punctuates Norfolk Southern’s commitment to serve the growing intermodal demands of central Ohio and Midwest shippers,” said Wick Moorman, Norfolk Southern’s chief executive officer, earlier this year. “Rickenbacker, one of five Norfolk Southern intermodal terminals in Ohio, will anchor our Heartland Corridor when that project is completed.”

Elaine Roberts, A.A.E., president and CEO of the Columbus Regional Airport Authority, added that, “We have already witnessed the start of the intermodal terminal’s economic impact with new industrial development in the Rickenbacker area. We expect 20,000 new jobs over the next 30 years as a direct result of the new intermodal facility.”

The initial footprint of the Rickenbacker Intermodal Terminal will comprise approximately 175 acres with a handling capacity of more than 250,000 containers and trailers annually. However, it was designed to accommodate expansion as traffic volumes grow.At the same time, officials at the Columbus Regional Airport Authority are optimistic that the Rickenbacker International Airport (, a former military airport that boasts some of the longest runways in the country, will figure more prominently for air cargo shippers. One big draw is the relatively short taxi times and very low landing fees, along with easy entry to the cargo apron with direct plane-to-truck access so cargo can be off-loaded and ready for transport within an hour of arrival.The airport is currently under-utilized, say officials. Although the airport can handle up to 1 million metric tons of cargo, only about 100,000 metric tons are coming in now. In addition, there’s no regularly scheduled air cargo service at the moment, just charters. Nonetheless, airport officials say they’ll continue to aggressively pursue more business, which may come about sooner than expected should DHL’s hub in Wilmington, Ohio close down.

Another rail project that will bring more capacity to central Ohio is CSX’s National Gateway. Similar to the Heartland Corridor, the rail project will also link Mid-Atlantic ports to the Midwest with double-stack routes, which will transit through Maryland, Virginia, North Carolina, Pennsylvania, Ohio, and West Virginia.

The railroad plans to expand an existing intermodal terminal near Columbus and build a new terminal at Marion, Ohio. The total cost of the public-private partnership is estimated at $700 million.

In the meantime, the formation of the Columbus Region Logistics Council is a further example of how members of the business community, government, and academia are taking action to develop logistics throughout the region.

Battelle, the huge consulting, research and development organization, was tapped to put together a long-range strategic plan, a ‘logistics roadmap,’ that was delivered in 2007, explains Ben Ritchey, vice president, transportation market sector, Battelle. “One of the results was the Columbus Region Logistics Council,” he says. It’s a volunteer organization comprised of shippers, freight forwarders, developers, and transportation companies. Some of the members include ODW Logistics, Honda of America, Exel, Limited Brands, Ohio State University, CSX, and Norfolk Southern.

Part of the logistics roadmap calls for: fostering a logistics-friendly business environment; continuing to develop and enhance advanced logistics infrastructure; infusing world-class logistics technology into regional industry; and building a high-skill workforce for competitive advantage.

“The benefit of this four-pronged strategy lies in focusing appropriate investments and activities that will most readily achieve job and business growth, build infrastructure, develop a talented workforce, and enable technology adoption that sets our regional logistics industry apart from competing markets,” notes Ritchey.

However, lack of capital is still a concern, he acknowledges. Yet, the promise of public-private partnerships, especially for “last mile” projects, is a reason to stay enthusiastic, says Ritchey.

Transitioning to emerging industries

While the logistics industry is a key part of the broader economic development activity in Ohio, several other emerging industries are taking root there and in surrounding Rust Belt states, namely solar.

The U.S. is poised to become the manufacturing mecca for the $18 billion solar industry and nearly all of the current solar manufacturing capacity is in the Midwest. In fact, with the exception of Nanosolar’s thin film facility in San Jose, California and Ausra’s plant in Las Vegas, all solar panels manufactured in the U.S. are made in the Rust Belt.

First Solar, a $22 billion solar panel manufacturer based in Perrysburg, Ohio, announced in August that it plans to expand its manufacturing operations and development facilities near Toledo.

The investment will add approximately 500,000 square feet of manufacturing, research and development, and office space, and will add at least 134 new jobs to the company’s current workforce of 700 at its Perrysburg facility. First Solar is collaborating with state and local leaders on a comprehensive incentive package for these two projects. These incentives are central to First Solar’s expansion plans in Ohio and are subject to approval by state and local authorities.

The expansion is expected to be completed in the second quarter of 2010 and will increase the annual capacity at the Perrysburg facility to approximately 192 megawatts. In addition, First Solar will construct a separate facility to support increased development activities associated with its advanced thin film solar module manufacturing technology.“Scaling our manufacturing capacity while taking advantage of existing infrastructure will incrementally lower the manufacturing cost per watt at a rate comparable to our lowest cost facility in Malaysia,” said Bruce Sohn, president of First Solar. “The expansion of our operations in Ohio is a direct result of the outstanding achievements of our associates and a strong, ongoing partnership with state and local leaders.”

“The state of Ohio is proud to support industry leaders like First Solar who are using renewable energy to power the future,” said Ohio Governor Ted Strickland. “In making this significant investment and expansion in Toledo, First Solar is helping us to send a message to the world that Ohio is reinventing itself as the leader in the advanced energy industry.”State regulations require that at least 25 percent of the electricity sold in Ohio to be generated from new and advanced technologies by 2025.

According to Gov. Strickland, “Already, Ohio has more alternative energy-related projects under way than any other state. The state’s extensive manufacturing supply chain provides thousands of products to the alternative energy industry. And, Ohio is home to the largest fuel cell supply chain in the country. Our welders, machinists, electricians, and iron and steel workers are retooling and transferring their skills to retrofitting buildings, building mass transit, installing wind and solar power, and manufacturing energy-efficient cars and trucks.”

“Ohio now leads the Midwest in the growth of venture capital investments in the biosciences; we rank first nationally in per capita clinical trials and operate the largest center for stem cell and regenerative medicine between the coasts. In the U.S. News & World Report rankings, Ohio leads the nation with four of the country’s top 15 children’s hospitals. The Cleveland Clinic, meanwhile, has spun off two dozen start-up companies in the past decade, and averages 200 inventions each year.”

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