Bar Funds for China-Backed Wind Farm, Senator Says

Kim Chipman and John Duce

Nov. 6 (Bloomberg) -- The Obama administration should bar a $1.5 billion wind-farm project in Texas from receiving U.S. government stimulus funds because most of the power turbines would be made in China, Senator Charles Schumer said.

“The idea that stimulus funds would be used to create jobs overseas is quite troubling,” Schumer, a New York Democrat, wrote in a draft of a letter he said yesterday he would send to U.S. Energy Secretary Steven Chu. “I urge you to reject any request for stimulus money unless the high-value components, including the wind turbines, are manufactured in the United States.”

U.S. Renewable Energy Group, a private-equity firm based in Washington, and Cielo Wind Power LP, a closely held company in Austin, Texas, said last week they formed a joint venture with China’s Shenyang Power Group to build the 600-megawatt wind farm. The 36,000 acre-project marks the largest Chinese-American investment in U.S. renewable energy, the companies said.

A-Power Energy Generation Systems Ltd. of China, Shenyang’s largest shareholder, is set to supply turbines for the farm, the companies said. Calls made to A-Power’s offices in Beijing and Shenyang went unanswered today.

“The complaints about Chinese renewable energy equipment being used in the United States are a little odd,” said Dennis Lam, an analyst at DBS Vickers Hong Kong Ltd. “Many of the solar panels used in the States are already made by Chinese companies like Suntech Power.”

Chinese companies are also supplying parts for wind turbines to companies like General Electric Co, Lam said. “These kinds of distinctions about the origin of equipment are increasingly irrelevant.”

‘Furious’ About Aid

Democratic senator Schumer said he was “furious” when he learned that $450 million in U.S. economic recovery aid may be used to help build the wind farm and create as many as 3,000 jobs, mostly in China.

“I don’t care if the Chinese invest here and create jobs here: It’s where the jobs are that I care about,” Schumer told reporters yesterday in Washington. “I think if you told the other 99 senators about this the vast majority would agree with me.”

“China and the U.S. enhancing cooperation on clean energy serves the common interests of the two countries and welfare of their peoples, which is also significant for commonly tackling the challenges posed by climate change,” said Wang Baodong, a spokesman for the Chinese Embassy in Washington. “We hope that people in question will do more to help facilitate the joint effort instead of complicating the situation.”

Renewable Energy

Cielo President Walt Hornaday said the project will boost hiring in the energy industry and benefit people in Texas. He also said international joint ventures are “essential to the development of low-cost renewable energy” in the U.S. and that the project can’t happen without help from the U.S. economic stimulus package.

“Without this incentive, wind projects will wait in the sidelines for energy prices to come back to the levels we saw a few years ago,” Hornaday said in a statement. “This could be next year or this could be next decade.”

The Texas venture will be funded by Chinese banks as well as take advantage of financing through the U.S.’s $787 billion economic stimulus law, Cappy McGarr, managing partner of U.S. Renewable Energy Group, said at a news conference in Washington last week.

Spokesmen for U.S. Renewable Energy Group weren’t available to comment.

Tax Credit

An Energy Department spokeswoman, Stephanie Mueller, said any application for the Texas project to benefit from a tax credit program under the stimulus would have to be “evaluated by the Energy and Treasury departments to determine eligibility.”

“But no application has been received to date,” she said in a statement.

President Barack Obama is preparing to meet later this month with Chinese President Hu Jintao. Energy will be a top issue as both countries say they want to bolster cooperation on clean-energy technology and help clear the way for a new global treaty to fight climate change.

The countries remain at odds over how far developed and developing nations should go in attempts to curb greenhouse-gas emissions blamed for global warming. Legislation to curb carbon emissions has passed the U.S. House and is being debated in the Senate.

Climate Bill

Democratic senators including Sherrod Brown of Ohio sent a letter to Obama in August saying it would be “extremely difficult” to support a climate bill that doesn’t include a tariff on products from countries such as China that don’t impose limits on global warming pollution.

Schumer said he would pursue legislation if necessary to prevent stimulus funds from being used for the Texas project, though he said he’s “hopeful” the Obama administration will “change the policy.”

He said it was “counterproductive” for the U.S. to invest federal funds in Chinese companies. Energy Secretary Chu and other administration officials have said the U.S. is in danger of falling behind China in a competition to dominate the global market for clean-energy technology.

China’s Head Start

“China is fast emerging as one of our main rivals in the race to build the technology that can help us achieve energy independence,” Schumer said yesterday in a statement. “We should not be giving China a head start in this race at our own country’s expense.”

The Obama administration has not been tough enough in negotiations with China on a wide range of issues, including trade, according to Schumer. “They don’t play fair,” he said yesterday, referring to China.

“One of the many reasons we had the financial collapse that we had is because China manipulated its currency,” Schumer said. He said the U.S. should be “a lot tougher” on China.

The Alliance for American Manufacturing, a Washington-based coalition of steel companies and the United Steelworkers union, also have criticized the wind energy project.

“Why aren’t American firms building this clean-energy project?” the group asked in a Nov. 2 statement.