WIND ENERGYResearch Brief

Sustainable Industry Classification System™ (SICS™) #RR0103

Research Briefing Prepared by the

Sustainability Accounting Standards Board®

December 2015

www.sasb.org© 2015 SASB™

I N D U S T R Y B R I E F | W I N D E N E R G Y

WIND ENERGY

Research Brief SASB’s Industry Brief provides evidence for the disclosure topics in the Wind Energy industry. The brief

opens with a summary of the industry, including relevant legislative and regulatory trends and

sustainability risks and opportunities. Following this, evidence for each disclosure topic (in the categories

of Environment, Social Capital, Human Capital, Business Model and Innovation, and Leadership and

Governance) is presented. SASB’s Industry Brief can be used to understand the data underlying SASB

Sustainability Accounting Standards. For accounting metrics and disclosure guidance, please see SASB’s

Sustainability Accounting Standards. For information about the legal basis for SASB and SASB’s

standards development process, please see the Conceptual Framework.

SASB identifies the minimum set of disclosure topics likely to constitute material information for

companies within a given industry. However, the final determination of materiality is the onus of the

company.

Related Documents

• Wind Energy Sustainability Accounting Standards

• Industry Working Group Participants

• SASB Conceptual Framework

INDUSTRY LEAD

Henrik R. Cotran

CONTRIBUTORS

Andrew Collins

Bryan Esterly

Anton Gorodniuk

Jerome Lavigne-Delville

Nashat Moin

Himani Phadke

Arturo Rodriguez

Jean Rogers

Quinn Underriner

Gabriella Vozza

SASB, Sustainability Accounting Standards Board, the SASB logo, SICS, Sustainable Industry

Classification System, Accounting for a Sustainable Future, and Materiality Map are trademarks and

service marks of the Sustainability Accounting Standards Board.

Table of Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Industry Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Legislative and Regulatory Trends in the Wind Energy Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Sustainability-Related Risks and Opportunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Social Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Human Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Workforce Health & Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Business Model and Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Design to Mitigate Community & Ecological Impacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Materials Efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Leadership and Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Materials Sourcing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Appendix

Representative Companies : Appendix I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Evidence for Sustainability Disclosure Topics : Appendix IIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Evidence of Financial Impact for Sustainability Disclosure : Appendix IIB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Sustainability Accounting Metrics : Appendix III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Analysis of SEC Disclosures : Appendix IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

References

I N D U S T R Y B R I E F | W I N D E N E R G Y

I N D U S T R Y B R I E F | W I N D E N E R G Y | 1

INTRODUCTION

The Wind Energy industry, while the largest in the

renewable energy space, is still a nascent industry

in the worldwide energy space. While on a

country level, notably in northern European

countries such as Denmark, wind energy can

make up a significant percentage of electricity

production, it still only produces a fraction of

global energy. Furthermore, its intermittent

nature means that until storage technology

evolves significantly, wind energy will have to

exist in compliment to other base-load powers.

This industry, like all in the energy generation

space, has experienced decades of significant

government support. While there are some

regions of the world where the wind resources

and technological possibilities make wind energy

cost competitive with other sources, the industry

will need to continue its rapid pace of innovation

while minimizing environmental and social

concerns in order to maintain its governmental

and societal license to operate and financial

incentives.

There is increasing public concern about the

environmental and health impacts of both

nonrenewable and renewable energy generation.

Wind energy’s major advantage over conventional

energy sources, such as coal, is that it does not

produce greenhouse gases (GHG) or air pollutants

during generation. There are, however, other

renewable sources of energy generation, and the

industry needs to continue to address societal

concerns (e.g., turbine blades killing legally

protected species of birds, turbine size and noise

causing community pushback in the project

development phase) to maintain its license to

operate.

Management (or mismanagement) of certain

sustainability issues, therefore, has the potential

to affect company valuation through impacts on

profits, assets, liabilities, and cost of capital.

Investors would obtain a more holistic and

comparable view of performance if wind energy

companies report metrics on the material

sustainability risks and opportunities that could

affect value in the near and long term in their

regulatory filings. This would include both positive

and negative externalities and the non-financial

forms of capital that the industry relies on for

value creation.

Specifically, performance on the following

sustainability issues will drive competitiveness

within the Wind Energy industry:

• Ensuring worker health and safety to

reduce injuries and fatalities;

• Designing wind turbines so that wind

energy projects are less likely to face

community pushback over social and

environmental concerns;

• Designing wind turbines and managing

the production process to use materials

more efficiently and lower costs; and

• Managing the sourcing of key inputs to

minimize the cost, supply volatility, and

reputational risk that comes from

SUSTAINABILITY DISCLOSURE TOPICS

HUMAN CAPITAL

• Workforce Health & Safety

BUSINESS MODEL AND INNOVATION

• Design to Mitigate Community &Ecological Impacts

• Materials Efficiency

LEADERSHIP AND GOVERNANCE

• Materials Sourcing

I N D U S T R Y B R I E F | W I N D E N E R G Y | 2

manufacturing products that contain rare

earth metals and conflict minerals.

INDUSTRY SUMMARY

The Wind Energy industry is comprised of

companies that manufacture wind turbines,

blades, towers, and other components needed for

wind power generation.I Firms invest heavily into

research and development to produce wind

turbines for both onshore and offshore use that

can efficiently turn wind into electrical energy.

Companies that develop, build, and manage wind

energy projects are also a part of this industry.

However, as manufacturers represent the vast

majority of revenue generated by the companies

in this industry, this brief focuses primarily on

issues related to their activities.

Wind Energy Technology

There are generally three major categories of

wind turbines: small turbines, which generate 100

kilowatts (kW) or less of power, mid-scale

turbines, which generate between 100kW and

1000kW, and large turbines, which generate

more than one megawatt (MW) of power. In the

U.S., these represent 15 percent, 15 percent, and

70 percent, respectively, of the total turbines

manufactured. The percentage of large-scale

turbines will likely increase as manufacturing costs

decrease and states increase their Renewable

Energy Portfolio requirements (covered in the

following section, Legislative and Regulatory

Trends in the Wind Energy Industry).1

Small turbines are often for individual or small-

scale commercial use. The rest of the turbines are

sold to independent power producers or directly

to utilities companies that then construct large-

scale wind power-generating facilities. There is

I Industry composition is based on the mapping of the Sustainable Industry Classification System (SICSTM) to the

also a trend in this industry toward companies

diversifying their offerings to include the

installation and maintenance of the turbines for

these downstream customers.2

While there are differing technologies, a generic

turbine has three fiberglass blades attached to a

tall cylindrical steel tower, often ranging between

80 and 120 meters tall, with a gearbox to

increase the power of relatively slow rotations of

the blades. The blades are attached to a rotor,

and a nacelle houses the gears and generator

behind that rotor. Generally, these tall objects are

held in place with a concrete base.3

The main differences between turbines are from

the use of the aforementioned gearbox and the

use of direct-drive technology, which includes

using magnets to amplify the power of the

spinning blades. Direct-drive turbines have the

benefit of reducing the number of moving parts in

the unit, potentially increasing its lifespan and

reducing maintenance needs, since the gearbox is

the component of the wind turbine most subject

to failures.4 This makes these types of turbines

particularly attractive for offshore wind farms. Not

only do the higher average wind speeds offshore

put even more strain on these systems, but

getting maintenance crews out to sea is often

very costly.5 Direct-drive turbines also have the

added benefit of lower inertia, which means that

they can start to operate at significantly lower

speeds than those needed for standard turbines.6

Direct-drive turbines do, however, require large

amounts of rare earth materials, making them

expensive and prone to supply chain risks

(discussed later in the disclosure topic of Materials

Sourcing). Direct-drive turbines have been rising in

popularity, representing 18 percent of the total

market in 2006 and 22 percent in 2011. They are

Bloomberg Industry Classification System (BICS). A list of representative companies appears in Appendix I.

I N D U S T R Y B R I E F | W I N D E N E R G Y | 3

projected to reach 29 percent of the total market

by 2020.7

Wind energy project development consists of a

few key elements: analyzing and choosing

potential sites with satisfactory wind resources,

engaging with landowners and stakeholders to

gain access and licenses to operate on the land,

connecting the wind turbines to the electrical grid

so the energy can be sold, choosing a model of

wind turbine that best suits the area, financing,

and transporting the often massive wind turbines

to the development site.8

Industry Size and Segments

As of September 24, 2015, the Wind Energy

industry had approximate global annual revenues

of $28.9 billion.9 Only four publicly traded firms

on U.S. exchanges had primary operations in this

industry: China Ming Yang Wind Power Group,

Broadwind Energy, Cleantech Solutions, and

American Superconductor Corporation. Both

Ming Yang and Cleantech Solutions are

headquartered in China. Other major companies

manufacturing wind turbines include General

Electric (GE) and Siemens, although turbine

manufacturing forms a small component of their

overall business.II Vestas, GE, and Enercon had the

largest cumulative market share as of 2014, with

67 GW, 44 GW, and 37 GW, respectively, of the

376 GW installed globally. In 2014 alone, GE

(headquartered in the U.S.) was responsible for 11

percent of new installations, Siemens (Germany)

10 percent, Vestas (Denmark) 10 percent, and

Goldwind (China) 9 percent.10 These companies’

locations generally mirror the largest markets

worldwide. In 2014, China installed the most

wind power generating capacity, 23 GW (up from

16 GW in 2013). This is nearly five times as much

as the 4.8 GW the U.S. installed in 2014. In

II GE is classified under the Electrical & Electronic Equipment industry in the Sustainable Industry

absolute numbers, China also had installed the

largest amount overall at the end of 2014, with

115 GW, followed by 66 GW in the U.S. and 39

GW in Germany.11

This is a highly concentrated industry, with the

top four manufacturers that sell products in the

Chinese market (Gold Wind, Guodian United

Power, Ming Yang, and Envision) comprising

roughly 47 percent of the market in China in

2014.12 The top three companies selling products

in the U.S. market (GE, Siemens, and Vestas)

represented roughly 98 percent of the nameplate

capacity installed in the U.S. in 2014.13 The

significant capital costs and expertise required to

build wind turbines creates a high barrier to entry

for new companies. Furthermore, as wind

turbines represent a significant cost and have

expected usefulness for three decades, earlier

entrants who were able to cultivate a reputation

for quality work maintain a significant competitive

advantage.14

Key External Drivers and Cost Structure

Major drivers for this industry are costs of

competing energy sources and governmental

regulation (covered under Legislative and

Regulatory Trends in the Wind Energy Industry),

which both affect demand. Additionally, volatility

in the cost of key inputs, discussed later in the

Materials Efficiency issue, as well as capital costs,

can have large effects on industry profits.

The rise of fracking (hydraulic fracturing) in the

U.S. has driven down domestic costs of natural

gas significantly. The average cost in the U.S.

between 2005 and 2010 was 44 percent higher

than the average cost between 2011 and October

6, 2015.15 The low cost of generating electricity

from natural gas has made investment in the

Classification System (SICSTM), while Siemens is not listed on U.S. exchanges.

I N D U S T R Y B R I E F | W I N D E N E R G Y | 4

building of natural gas power plants more

appealing to utilities, while driving down domestic

demand for wind energy projects.16 However, as

wind (and solar) energy costs reach parity with

natural gas in more markets, the capacity factor

of these plants has been dropping, making them

less certain investments.17

Total demand for electricity also affects demand

for wind energy components and projects. In the

U.S., demand for electricity is predicted to grow

at a slow rate, as the majority of sectors have

become electrified already and population growth

is slowing. Globally, however, the U.S. Energy

Information Administration (EIA) predicts that

energy consumption will rise 56 percent by 204018

as more sectors are electrified and manufacturing

operations expand,19 which represents a

significant opportunity for wind energy firms.

The industry has a slightly higher level of capital

intensity than the average manufacturing

industry, with $0.30 spent for every dollar of

wage costs in the U.S.20 The industry’s largest cost

segment is purchases, driven by rising steel prices.

Wage costs in the U.S. wind industry are more

than 50 percent higher than the average for the

manufacturing sector, accounting for 16.5

percent of revenue, as firms in this industry need

mostly skilled labor. The industry also faces

moderately high research and development (R&D)

costs: for example, Vestas spent 2.9 percent of its

revenue in 2014 on R&D.21 The median net

income margin for firms in this industry is a low

2.9 percent.22

If U.S. subsides do not continue, companies with

large U.S. market share will look both to members

of the North American Free Trade Agreement

(NAFTA) and Latin American countries to continue

their growth. U.S.-based manufacturers ship to

European countries as well, but the high cost of

shipping such massive components keeps nearly

half of U.S. exports to Canada.23 The major

Chinese firms in this industry will derive most of

their growth domestically, as the Chinese

government has committed to doubling its wind

power capacity between 2014 and 2020.24

Popular dissatisfaction with the pollution caused

by China’s rapid industrialization has fueled the

aggressiveness of this expansion. China’s Prime

Minister Li Keqiang has announced a “Combating

Air Pollution Action Plan” that aims to begin to

reduce China’s reliance on coal, providing a major

opportunity for even greater expansion of China’s

renewable energy sectors, such as wind power, in

the future.25

Intense price competition from Chinese

manufacturers in the past five years has caused

failures and consolidations of U.S. players, as the

higher-cost manufacturers were no longer

competitive. While exports are a relatively low

percentage of overall Chinese production—4.3

percent of total sales volume in 2013—they are

rising rapidly as the Chinese domestic industry has

nearly double the capacity of the annual

governmental target.26 Nonetheless, the ability of

U.S. companies to provide ongoing maintenance,

along with significantly lower shipping costs,

keeps them competitive. Shipping costs from

China to the U.S. are estimated to be around

$200,000 for a single turbine, or roughly a fifth of

the total cost.27

Firms have recently been moving toward

differentiating their offerings from competition,

especially international competition. They have

also been diversifying their revenue streams by

adding more local post-sale maintenance and

support services.28 These types of services can

constitute a substantial part of a firm’s income,

especially as these services often have higher

margins than wind turbine manufacturing. For

example, in fiscal year (FY) 2014, revenue from

these services constituted 14 percent of Vestas’s

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total revenues and 31 percent of its operating

income.29 Vestas is the world’s largest maker of

wind turbines.

In the U.S., wind farms are concentrated in Texas

and Oklahoma in the Southwest, in California in

the West, and in Iowa and around the Great

Lakes in the Midwest.30 Given the high cost of

transporting wind energy equipment, much of the

manufacturing in the U.S. is heavily concentrated

in these same regions.31 Similarly, China-based

firms like Ming Yang and Cleantech Solutions do

functionally all of their manufacturing in China.32

The U.S. recently saw approval for its first

offshore wind project off the coast of Rhode

Island, with new large-scale land auctions

expected in early 2015.33 Offshore wind is

typically a better natural resource for electricity

generation than onshore wind, as it is stronger

and more reliable, and therefore able to generate

more power more often. Offshore projects also

receive generally lower levels of community

pushback and are closer to major coastal cities,

which are potential markets, making them more

attractive to companies.34

By the end of 2014, installed wind energy

capacity added up to roughly 5 percent of the

U.S.’s total electricity demand.35 This percentage

is likely to increase if the favorable trends

currently affecting the industry continue: a

general decrease in input prices; strong demand

increases from the U.S., China, and emerging

markets (recently, this has been especially true of

Latin America);36 and a continued solid rate of

technological advancement in materials efficiency

and turbine power output. A 2012 study by the

National Renewable Energy Laboratory (NREL)

found that there was a general consensus among

wind energy technology studies that the field

would see cost reductions in the range of 20 to

30 percent by 2030.37

Levelized cost of energy (LCOE), a metric

commonly used to compare the viability of

building new sources of energy, is the per-

megawatt hour (MWh) total cost of building and

operating a power generating plant over its

expected life.38 It includes everything from cost of

materials to capital costs to tax breaks. As of Q4

2014, Bloomberg calculated the LCOE for onshore

wind to be $85/MWh. For offshore wind, it was

as high as $2,176/MWh. For reference, the LCOE

for coal was $91/MWh and for nuclear energy it

was $140/MWh. A 2014 U.S. EIA study projected

that by 2019, accounting for regional cost

variances, wind projects could be even more cost-

competitive. They could have a lower bound of

$71/MWh for onshore wind and $169/MWh for

offshore wind in the U.S. Again, for comparison,

in this projection, coal would have a lower bound

of $87/MWh and nuclear would have $93/MWh.39

Investor interest in this industry is growing rapidly,

and this trend is expected to continue. There was

roughly $17.9 billion invested globally in new

wind generation capacity in 2000. In 2014 there

was $99 billion invested globally in new wind

energy capacity, an 11 percent increase over the

previous year.40

Valuation

Analysts examining alternative energy assets

evaluate each project by net present value (NPV),

internal rate of return (IRR), and payback period

metrics. Capacity factor of wind energy projects—

that is, how much electricity is actually being

produced (rather than the nameplate efficiency)—

is the main determinant a wind energy project’s

projected cash flows. By managing cost of

production, as well as by increasing capacity

factors of wind energy equipment, companies in

the Wind Energy industry are likely to increase the

NPV of wind energy assets for clients and shorten

their payback period, driving demand.41

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LEGISLATIVE AND REGULATORY TRENDS IN THE WIND ENERGY INDUSTRY

The Wind Energy industry is a heavily regulated

segment of the economy, affected by national as

well as state policies that offer subsidies and

create demand through clean energy purchasing

requirements. It is also subject to environmental

legislation and conflict mineral disclosure

guidelines. The Wind Energy industry has seen its

revenue ebb and flow over the past decades in

response to varying levels of governmental

support. That support is put in place to attempt to

decrease national carbon emissions and reliance

on foreign sources of energy. The following

section provides a brief summary of key

regulations and legislative efforts related to this

industry.III

The Renewable Electricity Production Tax Credit

(PTC),IV which has been in place on and off since

1992, has historically been a significant driver of

production growth for the U.S. Wind Energy

industry.42 It initially offered a 2.3-cent/kilowatt

hour (kWh) tax credit for energy produced in the

first decade of a project’s life.43 It was allowed to

expire at the end of 2013, but in December 2014,

a retroactive one-year extension through

December 31 was granted. A further extension

was granted in March 2015, to January 1, 2017.44

According to many industry members, this small

extension did them little good due to the long

lead time of wind projects. A major industry

group, the American Wind Energy Association

(AWEA), wanted a six-year phase-out, as the year-

to-year uncertainty of the governmental support

was harming companies’ ability to finance wind

energy projects. If this credit is again allowed to III This section does not purport to contain a comprehensive review of all regulations related to this industry, but is intended to highlight some ways in which regulatory trends are impacting the industry.

expire in 2017 it could, at least in the short-term,

stunt industry growth.45 While firms in this

industry that manufacture wind turbines or

related products are not direct beneficiaries of

this tax credit, they benefit from the resulting

increased demand for wind energy projects.

Companies in this industry also benefited from

the Advanced Energy Project Credit, created by

the American Recovery and Reinvestment Act of

2009. It provided a 30 percent tax break for

creating (among other things) wind turbine

manufacturing plants, significantly cutting down

the cost of building a wind farm by bringing

down turbine costs.46 The expiration of this credit

at the end of 2013 caused some revenue

contraction for the industry, more of which may

be felt when the projects that started with the

help of this credit are completed in the coming

years.47

Besides the U.S., governments in other major

markets have also provided incentives for wind

energy and other renewable energy projects.

China has a myriad of governmental support

programs for the wind industry,48 but the main

governmental tool used is feed-in tariffs, which

offer a guaranteed payment rate for energy

produced. The Chinese government introduced

feed-in tariffs for onshore wind in 2009 with

payments ranging between €0.052/kWh and

€0.062/kWh, depending on the region.49 A feed-

in tariff for offshore wind was introduced in

2014, with rates ranging between $0.12/kWh and

$0.14/kWh. These rates are guaranteed for 20

years for projects put into operation before 2017,

after which the price will be reassessed based on

changes in technology. These payments drive

production of wind power capacity, as investors

IV It is worth noting here, that many of the regulations in this section deal with the renewable energy sector as a whole, i.e., they also include other types of energy technologies, like solar, hydroelectric, or geothermal.

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know that once installed, their projects will have a

guaranteed cash flow.50 China is currently in the

midst of its 12th Five-Year Plan for Renewable

Energy, in which their National Energy

Administration set a goal of reaching 100 GW of

grid-connected wind power by the end of 2015.51

The Chinese government has claimed to have met

these goals52 and also announced the goals of the

13th Five- Year Plan for Renewable Energy, which

is aiming for 200 GW.53 This provides a certain

market guarantee for Chinese manufacturers. In

2014, E.U. leadership agreed to a goal of 40

percent GHG reduction by 2030, while obtaining

at least 27 percent of all of its energy from

renewable sources.54 To meet these goals, nations

make binding yearly commitments based on their

size and wealth.55

The U.S. federal government has purchasing

requirements related to renewable energy. The

Energy Policy Act of 2005 stated that by 2013,

the total amount of renewable energy purchased

by federal agencies could not be less than 7.5

percent of the total electricity purchased. This was

updated with a Presidential Memorandum on

December 5, 2013, which provided an updated

purchasing schedule. The memo raised the

minimum to 10 percent in FY 2015, with gradual

increases each year to 20 percent in FY 2020 and

subsequent years.56 With $5.8 billion in annual

energy costs, the federal government is the

largest utilities customer in the U.S., making these

requirements a significant driver of national

demand for renewable energy.57

Twenty-nine U.S. states and the District of

Columbia have Renewable Portfolio Standards

(RPS).58 These require a specified percentage of

electricity used in a state to be generated from a

renewable source. There are varying thresholds

among states. For example, New York has a quota

of 30 percent by 2015 and California has a goal

of 33 percent by 2020. In many states, these

requirements can be met by buying a credit that

has been unbundled from the underlying energy,

further facilitating growth in this industry and

generating demand for manufacturing and

maintenance services.59

Incentives for this industry could also come in the

form of advantageous tax structures in the future.

Currently, master limited partnerships (MLPs) (a

funding structure that is taxed like a partnership

but can be publicly traded on U.S. markets) are

only available for non-renewable energy sources

like oil and coal. If the currently stalled MLP Parity

Act eventually passes, wind energy project

developers could gain access to significantly more

and cheaper capital, which would in turn drive up

demand and reduce costs for wind energy

products.60 To take advantage of the previously

mentioned PTC, an investor must have a

significant tax liability, which limits the benefits of

the tax credit to pension funds and retail

investors. Allowing these major sources of capital

to be more easily invested in wind energy projects

through structures such as MLPs could therefore

prove to be a boon for the industry.61

Currently lacking this form of financing, both

wind and solar firms began to use the yieldco

model in 2013. In this structure, a parent

company can create a publicly traded subsidiary

with its long-term contracted assets. This divorces

the steady payments of a wind farm, for example,

from a company’s riskier operations. It also helps

it attract more and cheaper capital. The yieldco

structure mimics many of the benefits of the MLP,

as it is structured so that the depreciation on the

assets and costs void all or most of the tax burden

that the generated income creates. Then, the

earnings can be passed on untaxed, or mostly

untaxed, to investors. This avoids full double

taxation, with profits being taxed at the corporate

and investor level, as is the case in a traditional

corporate structure.62

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Companies in this industry are also subject to U.S.

regulation in environmental and social matters.

Project developers and utilities in the U.S. are

potentially subject to the Endangered Species Act,

the Migratory Bird Treaty Act, and the Bald and

Golden Eagle Protection Act. The U.S. Fish and

Wildlife Service and the U.S. National Oceanic and

Atmospheric Administration Fisheries Service

implement these acts.

The U.S. Department of the Interior passed a rule

in 2013 that allows the U.S. Fish and Wildlife

Service to issue 30-year take permits for

endangered species. This effectively shields wind

energy companies and power producers from the

large fines that generally accompany responsibility

for the death of a protected animal.63 Take

permits do not penalize company activities that

cause the death of protected animals, provided

the company proves it is making efforts to lessen

its impact on a species and its actions will not

have a long-term impact on the population. Many

in the media have criticized this as government

favoritism.64

The Wind Energy industry is required to adhere to

specific employee health and safety standards,

which, in the U.S., are enforced by the

Occupational Safety and Health Administration

(OSHA) of the U.S. Department of Labor. The

major concerns in this industry involve safely

handling electrical equipment and securing

workers, who often work at great heights during

the wind turbine installation process.65

In addition to these environmental and worker

safety laws, wind energy companies are also

subject to the Dodd-Frank Wall Street Reform and

Consumer Protection Act of 2010 and subsequent

rules adopted by the U.S. Securities and Exchange

Commission (SEC). These laws require companies

to publicly disclose their use of “conflict minerals”

if they are “necessary to the functionality or

production of a product” that the company

manufactures or contracts to be manufactured.

These minerals include tantalum, tin, gold, or

tungsten (3TG) originating in the Democratic

Republic of Congo (DRC) or adjoining countries.

Specifically, the provision requires SEC-registered

companies to determine if they have exposure to

DRC-sourced 3TG, and 3TG minerals are

commonly used in wind energy equipment.

Companies with exposure must subsequently

determine and report on the specific source.66 The

rules, which required companies to make their

first filings effective by June 2, 2014, have been

upheld by the U.S. District Court for the District of

Columbia, despite a legal challenge from trade

associations.67

SUSTAINABILITY-RELATED RISKS AND OPPORTUNITIES

Industry drivers and recent regulations suggest

that traditional value drivers will continue to

impact financial performance. However,

intangible assets such as social, human, and

environmental capitals, company leadership and

governance, and the company’s ability to innovate

to address these issues are likely to increasingly

contribute to financial and business value.

Broad industry trends and characteristics are

driving the importance of sustainability

performance in the Wind Energy industry:

• Product design to minimize ecological

and human health impacts: The Wind

Energy industry, through its potential to

reduce global GHG emissions compared

to traditional energy sources, has received

substantial government support around

the world in the past few years.

Maintaining a reputation as an

environmentally and socially beneficial

alternative to traditional energy sources is

I N D U S T R Y B R I E F | W I N D E N E R G Y | 9

therefore vital to the industry’s success in

the short and long term.

• Cost reductions to scale impacts: The

Wind Energy industry needs to continue

to innovate to drive its costs down relative

to traditional power production. While

there is a global move toward renewable

sources of energy to decrease GHG

emissions, the most cost-effective means

of reducing GHGs are likely to gain

competitive advantages, particularly in an

environment of slow global growth. In

this context, efficiency in the use and

sourcing of materials will help wind

energy companies not only to reduce

impacts on the environment and society

from materials production, but also will

enable them to lower costs and drive

long-term industry growth.

As described above, the regulatory and legislative

environment surrounding the Wind Energy

industry emphasizes the importance of

sustainability management and performance.

Specifically, recent trends suggest a regulatory

emphasis on environmental protection, which will

serve to align the interests of society with those

of investors.

The following section provides a brief description

of each sustainability issue that is likely to have

material financial implications for companies in

the Wind Energy industry. This includes an

explanation of how the issue could impact

valuation and evidence of actual financial impact.

Further information on the nature of the value

impact, based on SASB’s research and analysis, is

provided in Appendix IIA and IIB.

Appendix IIA also provides a summary of the

evidence of investor interest in the issues. This is

based on a systematic analysis of companies’ 10-K

and 20-F filings, shareholder resolutions, and

other public documents, and highlights the

frequency with which each topic is discussed in

these documents. The evidence of interest is also

based on the results of consultation with experts

participating in an industry working group (IWG)

convened by SASB. The IWG results represent the

perspective of a balanced group of stakeholders,

including corporations, investors or market

participants, and public interest intermediaries.

The industry-specific sustainability disclosure

topics and metrics identified in this brief are the

result of a year-long standards development

process, which takes into account the

aforementioned evidence of interest, evidence of

financial impact discussed in detail in this brief,

inputs from a 90-day public comment period, and

additional inputs from conversations with industry

or issue experts.

A summary of the recommended disclosure

framework and accounting metrics appears in

Appendix III. The complete SASB standards for the

industry, including technical protocols, can be

downloaded from www.sasb.org. Finally,

Appendix IV provides an analysis of the quality of

current disclosure on these issues in SEC filings by

the leading companies in the industry.

ENVIRONMENT

The environmental dimension of sustainability

includes corporate impacts on the environment.

This could be through the use of natural resources

as inputs to the factors of production (e.g., water,

minerals, ecosystems, and biodiversity) or

environmental externalities and harmful releases

in the environment, such as air and water

pollution, waste disposal, and GHG emissions.

The possibility of wildlife deaths from turbines in

use in wind farms has led to some opposition to

wind farm development. This opposition has

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caused fines, delays, and even the closing of

projects. Furthermore, wind turbines and towers

use large amounts of steel, the production of

which can have significant environmental and

social impacts. With volatile commodity prices,

efficiency in the use of this natural resource,

without compromising on energy output, is key to

wind energy remaining cost competitive with

other electricity generating technologies.

Managing these environmental externalities and

the resulting impacts on project development, and

therefore on demand for wind energy products,

requires innovation in product design. Wind

energy companies can design turbines to

minimize biodiversity impacts of projects and

innovate to make efficient use of steel in turbines

and towers. The disclosure topics related to

company performance on such innovation, Design

to Mitigate Community & Ecological Impacts and

Materials Efficiency, are discussed below in the

Business Model and Innovation section.

SOCIAL CAPITAL

Social capital relates to the perceived role of

business in society, or the expectation of business

contribution to society in return for its license to

operate. It addresses the management of

relationships with key outside stakeholders, such

as customers, local communities, the public, and

the government.

As discussed above, wind farm development has

been met with some resistance, which has led to

fines and project delays. Part of this resistance is

due to the impacts on the local community of the

noise that turbines generate in use.

Manufacturers can design wind turbines to

minimize community impacts, thereby driving

greater demand for their products. This is

discussed below under the topic of Design to

Mitigate Community & Ecological Impacts.

HUMAN CAPITAL

Human capital addresses the management of a

company’s human resources (employees and

individual contractors), as a key asset to delivering

long-term value. It includes factors that affect the

productivity of employees, such as employee

engagement, diversity, and incentives and

compensation, as well as the attraction and

retention of employees in highly competitive or

constrained markets for specific talent, skills, or

education. It also addresses the management of

labor relations in industries that rely on economies

of scale and compete on the price of products

and services. Lastly, it includes the management

of the health and safety of employees and the

ability to create a safety culture within companies

that operate in dangerous working environments.

Wind turbine operations and maintenance (O&M)

services exposes workers to health and safety

risks, and resultant financial impacts. Safety

records are a key component of companies

receiving O&M contracts. A company’s ability to

protect employee health and safety, and to create

a culture of safety at all levels of the organization,

can directly influence the results of its operations.

Workforce Health & Safety

Many wind turbine manufacturers offer higher-

margin O&M services for wind farm owners or

operators together with the sales of their

products. These activities may include installation,

maintenance, monitoring, and repairing turbine

installations.

Furthermore, employees and contractors working

on O&M services are exposed to physical dangers

including falls from height, electrical hazards, and

moving mechanical parts. The safety record of

wind farm operations has the potential to affect a

company’s reputation and demand for its

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products and services. Company performance in

this area can be analyzed in a cost-beneficial way

through the following direct or indirect

performance metrics (see Appendix III for metrics

with their full detail):

• Total recordable injury rate (TRIR) and

fatality rate for direct employees and

contract employees.

Evidence

The wind farm O&M segment is held to a high

safety standard because the work is inherently

dangerous (employees often work at great

heights with electrical equipment).68 This potential

for danger also makes a company’s safety record

a key element in winning an O&M contract.69

Wind farm O&M services had a global revenue of

$9.25 billion in 2014, which is projected to nearly

double to $17 billion by 2020, due to the

expansion of the wind energy market and the

aging of existing turbines.70 Companies are

expanding into the O&M space to diversify their

offerings, as well as to boost their profit margins.

The margin differences between turbine sales and

O&M services for companies involved in this

industry can be substantial. For example, Gamesa

made 84.7 percent of its $3.8 billion revenue in

2014 from wind turbine manufacturing, and 15.3

percent from its O&M activities. However, 69.4

percent of its operating income came from wind

turbine manufacturing and 30.6 percent came

from O&M.71 Growth in O&M operations is

therefore seen as important for the financial

condition of companies in the industry going

forward.

Safety improvements can increase operational

efficiency of wind farms. Due to the nascent

nature of this industry, there is currently no

comprehensive repository of industry-wide safety

information. However, there is company-level

evidence of the benefits of focusing on safety. For

example, after significant organizational safety

pushes, Vestas reduced instances of lost-time

injuries per one million working hours from 46.7

in 2005 to 1.6 in 2014.72 Vestas notes that it

“work[s] closely together with customers to fulfill

the demand for the highest level of safety in [its]

operations as this adds certainty for their business

case.”73 Companies that can ensure operational

safety, particularly in O&M operations, will likely

be able to create significant value for their

shareholders in the near-term.

Gamesa, in its Q1 2015 earnings call, discusses the

importance of safety to the growth of its business:

“[h]ealth and safety, as we've repeated time and

again, is one of the most outstanding drivers of our

company. And the evolution of safety indices in

terms of frequency and severity is in line with our

objectives. And the first quarter of 2015 was very

favorable too because it's improved all of the ratios

we have achieved throughout the year 2014. And

the trend is still very positive in terms of frequency

indices and severity indices.”74

This issue will likely also become more significant

with the rapid growth of offshore wind. Installed

offshore capacity has more than doubled, from

3.55 GW of installed capacity to 8.3 GW between

2011 and 2014.75 Furthermore, offshore wind is

projected to grow to be 10 percent of all globally

installed capacity by 2020.76 There are currently

four different government agencies involved in

the offshore regulatory environment, but offshore

wind currently has little specific regulation. Some

members of the industry believe that companies

will need to come up with a comprehensive

system and ensure best-practice safety outcomes

to address the safety risks in order to placate

potential regulators or else face a greater

regulatory burden.77 The nature of offshore work

also means that workers are exposed to greater

potential danger as they must be brought by

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helicopter or boat to the work site. Poor weather

conditions off the coast can increase these safety

concerns.78

Value Impact

A strong safety culture and record is integral to

gaining and maintaining contracts in the growing

wind turbine O&M market. Successful companies

can increase their profit margins, diversify their

offerings, and increase their market share through

success in this space.

Injuries or fatalities can result in one-time costs,

including regulatory penalties, and legal costs

from personal injury litigation. These costs can

lower profitability and lead to contingent

liabilities. Frequent accidents resulting in injuries

or fatalities may also lead to chronic impacts on

company value that stem from lower employee

morale and lost productivity, ultimately lowering

intangible assets.

The probability and magnitude of the impact of

this issue will increase as more companies move

into the O&M space and more companies increase

their exposure to this market segment.

The TRIR and fatality rate are indicative of a

company’s safety environment and culture, and

the likelihood that it will face costs associated

with accidents or fatalities. Past incidents also

provide an understanding of the magnitude of

possible future incidents.

BUSINESS MODEL AND INNOVATION

This dimension of sustainability is concerned with

the impact of environmental and social factors on

innovation and business models. It addresses the

integration of environmental and social factors in

the value-creation process of companies,

including resource efficiency and other innovation

in the production process. It also includes product

innovation and efficiency and responsibility in the

design, use phase, and disposal of products. It

includes management of environmental and social

impacts on tangible and financial assets—either a

company’s own or those it manages as the

fiduciary for others.

Companies in this industry are in a position to

anticipate the social and environmental

externalities that may cause communities to reject

the large-scale installation of wind farms.

Similarly, companies can anticipate and prevent

potential violations of ecological laws such as the

Endangered Species Act in the operation of wind

farms.

These concerns are creating new innovation and

business opportunities for both manufacturers

and project developers in the Wind Energy

industry. Companies that are able to expend

human and financial capital to develop creative

solutions to these issues are in a position to gain

or maintain a favorable market position.

Companies are also committing R&D resources to

lowering their usage of steel, their costliest input,

while maintaining or improving energy output of

turbines. Wind energy firms that successfully

reduce the cost of wind turbines through such

innovation, thereby lowering project costs, could

see expansion in market share, while aiding the

overall adoption of wind energy technologies.

Increasing the cost-effectiveness of wind energy

in reducing global GHG emissions will also ensure

that the industry continues to enjoy a supportive

policy environment, even if governments move

from policies targeted at certain renewables

industries like wind to more technology-agnostic

policies that simply aim to lower GHG emissions

in the most cost-effective manner, such as by

placing a price on carbon.

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Design to Mitigate Community & Ecological Impacts

Building wind farms is fraught with regulatory

and financial obstacles: according to the

American Wind Energy Association, only one in

ten projects moves from being conceived by a

developer to being built.79 Once developers find

an adequate site, they must secure land rights

and they generally need to produce an ecological

impact report.80 Obtaining permits for wind

energy projects can be slowed or even stopped if

community members and/or environmental

regulators push back against the development.

This can happen if these stakeholders perceive the

project to infringe on their quality of life—e.g., if

turbine noise is a concern, or if the turbines have

the potential to cause an unreasonable amount of

harm to local wildlife.

Wind projects’ approval processes directly impact

equipment manufacturers, as the processes will

determine demand for the manufacturers’

products. While manufacturers do not control the

project approval process, they can design their

products to have as little ecological and

community impact as possible. For example, they

can design quieter turbines, or turbines that will

have a lower impact on local bird or bat

populations. This could give wind energy

manufacturers a competitive advantage and

potentially increase their market share over time,

as it could cut down the time needed to get

permits for wind projects.

Company performance in this area can be

analyzed in a cost-beneficial way through the

following direct or indirect performance metrics

(see Appendix III for metrics with their full detail):

• Average A-weighted sound power level of

wind turbines, by wind turbine class;

• Backlog cancellations associated with

community or ecological impacts; and

• Description of efforts to address

ecological and community impacts of

wind energy production through turbine

design.

Evidence

Companies in this industry can differentiate their

offerings by optimally manufacturing products to

cause fewer impacts on quality of life and the

environment, which in turn can substantially

streamline the permitting process for their

customers.

In December 2014, a federal judge halted the

installation of a 122-turbine wind farm in West

Virginia run by Invenergy, an independent wind

power generation firm. The judge ruled that the

project was likely to be in violation of the

Endangered Species Act and ordered the project

to be halted until it received a take permit for the

endangered Indiana bat.81 The issuing of take

permits to wind farms is something that has been

opposed by various environmental groups. So far,

however, there is no indication that this protective

policy will be reversed.82

Even so, delays such as this will not only be costly

to the companies involved, but they will also

generally affect manufacturers and wind farm

construction companies in the Wind Energy

industry by creating volatile demand and a higher

risk profile for future wind energy projects. In the

U.K., where bird and bat risk assessments are also

an explicit part of the permitting process, 6

percent of proposed wind projects are rejected for

failing to pass these assessments.83

Companies may not only face project delays due

to concerns about species impacts, but may also

be required to pay fines. The utility company

Pacificorp was fined $2.5 million in January 2015

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for killing two golden eagles without a take

permit at two of its wind farms in Wyoming,

which was a violation of the Migratory Bird Treaty

Act.84 By designing turbines that minimize

biodiversity impacts, wind equipment

manufacturers could aid project developers in

demonstrating that they are taking measures to

minimize both short- and long-term impacts on

species. This could make it easier for wind energy

developers to obtain permits, and it would

minimize the potential for fines. If a company is

strictly a manufacturer, being able to offer a

product that lowers the potential for fines can be

positioned as a competitive advantage and can

help assuage criticism against the industry that

could, in the long term, affect its license to

operate.V 85

Smaller private firms such as Ogin are designing

innovative turbines that would result in fewer bird

deaths and potentially mitigate delays caused by

the need to secure endangered species permits.

Ogin’s work in this area, combined with efficiency

increases, has resulted in Ogin turbines replacing

73 older turbines in California’s Altamont Pass.

The pass is an area known both for its rich wind

resources as well as being a major migratory route

for birds. This demonstrates the potential for

increased market share that can come from

innovations that lessen wind turbines’ ecological

impacts.86

In Maine, an organization called the Citizens Task

Force on Wind Power has formed as an umbrella

organization to aid communities that are resisting

wind projects in their localities. One of the main

reasons protestors cite for their actions is that the

constant noise from many wind turbines affects

their quality of life.87 These types of organized

efforts are happening in communities all across

V It is worth noting though that siting decisions have the largest impact on this issue. As of October 2015 only 2.8 percent of industry revenue comes from

the U.S.,88 and can be costly to investors in wind

energy, potentially lowering demand for wind

energy products.

Similar protests have occurred in other countries.

The issue of noise and how it would impact local

fishers and farmers was one of the major

concerns cited by the armed groups of protesters

that have been blocking the development of the

396 MW Marena Renovables wind project in

Oaxaca, Mexico. This project, which would be the

largest wind energy project in Latin America, is

now in jeopardy, and places its investor, the

Macquarie Mexican Infrastructure Fund, at risk of

losing its 1.1 billion-peso ($83 million)

investment.89 Similarly, uncertainty over how

turbine noise would affect a threatened

humpback dolphin species caused delays, and

ultimately relocation, of a wind farm in Taipei.90

To address these challenges, Siemens, a major

electrical equipment manufacturer with a wind

turbine product line, has developed a turbine that

has a noise-adjusted mode. The turbine can

intelligently vary between “day of the week, time

of day, or wind speed and direction” so as to

optimize output and minimize noise.91

Ming Yang, the largest wind turbine

manufacturer publicly traded in the U.S., notes

noise measurement as one of the factors in

testing its wind turbines in its FY 2014 Form 20-F:

“We had also obtained from WINDTEST … a

leading wind turbine testing firm in Germany …

reports on power performance measurement,

acoustic noise measurement and power quality

measurement for our 1.5MW wind turbines in

Zhanjiang.”92 To operate in some markets, wind

power turbines are required to be able to reliably

be below certain sound limits. For example, in

project developers, so the focus of this issue is on turbine design.

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Denmark, there are specific decibel levels for

different levels of population density that wind

farms must adhere to prior to operations.93

Wind turbines also received community pushback

about the shadow flicker effect the rotation of

the blades can cause. The complaints range from

the strobe effect being an annoyance to claims

that it can cause medical issues, although there is

no conclusive evidence of this. In some markets,

there are regulatory limitations. For example, in

Germany, wind farms are allowed only eight

hours per year of actually casting a shadow on a

community structure.94 In response to these

consumer complaints and regulatory effects, wind

turbine manufactures such as Vestas have

engineered products that attempt to minimize the

shadow falling on communities.95

Pattern Energy, a San Francisco-based

independent power company (therefore not in

this SICS industry), notes in its FY 2014 Form 10-K

that “local opposition to wind turbine installations

is growing in certain markets due to concerns

about noise, health and other alleged impacts of

wind power projects.”96 Related to community

pushback, in its FY 2014 Form 10-K, Broadwind

Energy discloses one of its risk factors as being

“public perception and localized community

responses to wind energy projects.”97

Value Impact

Companies that put their efforts into R&D to

lower community and ecological impacts will be

able to gain market share and raise their revenue.

Such actions would lower a project’s overall risk

profile. For project developers, this could lower

the cost of capital directly. For manufacturers, this

could provide a competitive advantage, leading to

higher revenue and market share and lowering

the company’s cost of capital.

Additionally, fines resulting from laws protecting

endangered species would affect project

developers and operators, which could lower

future demand for turbines that were used in

such projects. Community and ecological impacts

could also create reputational risks for wind

energy companies, affecting their intangible

assets and long-term growth.

The continued growth of this industry will likely

increase the profile of pushback to these projects

as more areas are affected. This increases the

probability and magnitude of impacts on company

value in the medium-term.

Analysts can compare different turbines’ average

A-weighted sound power level to better

understand how the manufacturer is addressing

one of the major causes of community pushback.

The backlog cancellations associated with

community or ecological impacts also can indicate

how well a company’s product offerings help their

customers mitigate community and ecological

impact related concerns.

Materials Efficiency

Governments worldwide have supported the

Wind Energy industry for its potential to displace

other energy technologies that are significantly

larger net producers of GHGs. The industry’s

long-term future is dependent upon its ability not

only to produce more power, but to do so at a

comparably lower cost than other energy sources.

Steel is one of the largest cost components of

turbines. How efficiently companies use this

input, without sacrificing energy output, can

determine their competitiveness and is, in the

aggregate, vital to the success of the industry.

General trends in wind turbines have shown rapid

growth in size compared with their 1980 average

of 15 meters.98 A recent NREL report found that

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an increase in U.S. turbine height from the 2014

average of 80 meters to 140 meters would make

roughly 237,000 square miles of the U.S.—an

area roughly 45 percent larger than the state of

California—viable for wind energy production due

to the increased stability and speed of winds at

those greater heights. To make this cost-effective,

however, companies will have to find innovative

ways to continue to increase turbine tower height

while using less steel.99 This engineering feat

comes with the added efficiency challenge of

making the towers in pieces that are still small

enough to be transported by truck under highway

overpasses.100

Company performance in this area can be

analyzed in a cost-beneficial way through the

following direct or indirect performance metrics

(see Appendix III for metrics with their full detail):

• Top five materials consumed;

• Average top head mass per turbine

capacity, by wind turbine class; and

• Discussion of approach to optimize

materials efficiency of wind turbine

design.

Evidence

This industry has, on average, four percent higher

materials costs than other manufacturing

industries, averaging 60 percent of revenue.101 For

some companies this can be even higher. For

example, in FY 2014 Suzlon Energy spent 68

percent of revenue on raw materials and

components.102 Steel purchase is one of the main

cost components for wind energy companies—a

typical wind turbine is 89 percent steel.103 The

remaining components of an average turbine are

roughly 5.8 percent fiberglass, 1.6 percent

copper, 1.3 percent concrete, and then less than

three percent combined for various adhesives,

aluminum, and plastics, among other

components.104 An analysis of the effect of

changing commodity prices in the Spanish wind

industry showed that increases in the price of

steel have been responsible for about 38 percent

of the increase in the raw material cost of a

typical wind turbine tower between 2006 and

2010.105 Indeed, the volatility of steel prices

continues to be a major source of concern for

firms in this industry, with prices reaching lows of

$533 and highs of $1,203 per metric ton in the

past seven years.106

In January 2015, Bloomberg analysts credited

industry analysts’ higher consensus share price for

wind turbine producers, compared to the previous

year, to cost-cutting measures and the

subsequent increase in firm margins. Much of this

was due to decreases in steel usage. Indeed, the

Bloomberg Intelligence wind peer group saw

operating margins rise by 124 basis points over

the previous year.107

Broadwind Energy states in its FY 2014 Form 10-

K, “The primary raw material used in the

construction of wind towers and gearing products

is steel in the form of steel plate, bar stock,

forgings and castings … Raw material costs for

items such as steel, our primary raw material,

have fluctuated significantly and may continue to

fluctuate … In the event of significant increases or

decreases in the price of raw materials,

particularly steel, our margins and profitability

could be negatively impacted.”108 Similarly, in its

FY 2014 Form 10-K, Cleantech Solutions discloses

that “any restrictions on the supply or the

increase in the cost of the materials used by us in

manufacturing our products, especially steel,

could significantly reduce our profit margins … in

recent years, raw materials, including steel, which

is our principal raw material, have been subject to

significant price increases.”109 China Ming, in its

FY 2014 Form 20-F, states, “Our future success

highly depends on our ability to keep pace with

the rapid technological changes in the wind

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power equipment industry. In order to maintain

and enhance our competitive position that we

currently enjoy and to continue to grow our

business, we need to design, develop and market

new and more cost-efficient wind turbines and

introduce new products to meet growing market

demands and changing technical standards.”110

GE has been investing heavily into a technology

that will allow new 120-meter towers to use 20 to

30 percent less steel than a traditional 100-meter

tube tower due to a wider base, which reduces

the need to reinforce the tower walls.111

Vestas patented a similar technology in 2014 for a

steel tower that uses a negligible amount of extra

steel to make a 3 MW turbine tower 20 meters

taller. This is done by increasing the diameter of

the base of the tower rather than reinforcing all

of the steel. This taller tower allows the turbines

to reach more fertile wind energy and can boost

annual energy production on low-wind sites by

eight percent.112

Value Impact

Companies that are able to spend R&D resources

on designing their products to more efficiently

use expensive metal inputs such as steel can lower

their cost structure over time. These companies

will be better positioned to mitigate the

operational risks associated with the supply and

price volatility of raw materials. This can lower a

company’s risk profile relative to its competitors.

In addition, increasing materials efficiency while

maintaining energy output can increase the

competitiveness of individual products if cost

savings are passed down to customers,

contributing to revenue growth in the long term

through increased market share.

Analysts can examine and compare the largest

materials categories to understand the related

pricing risk and opportunity a company faces. The

average turbine weight scaling relationship and

weight to specific power relationship both can

indicate how efficient a manufacturers’ design is

with these materials.

LEADERSHIP AND GOVERNANCE

As applied to sustainability, governance involves

the management of issues that are inherent to the

business model or common practice in the

industry and are in potential conflict with the

interest of broader stakeholder groups

(government, community, customers, and

employees). They therefore create a potential

liability, or worse, a limitation or removal of

license to operate. This includes regulatory

compliance, lobbying, and political contributions.

It also includes risk management, safety

management, supply chain and resource

management, conflict of interest, anti-competitive

behavior, and corruption and bribery.

Wind energy firms currently rely on sensitive and

critical materials, such as conflict and rare earth

minerals, whose sourcing has been linked to

violence, disease, and environmental damage. The

sourcing of such materials could expose

companies to reputational and operational risks.

Therefore, the ability of a firm’s leadership and

governance structures to manage risks and

opportunities associated with the sourcing of such

materials will be important for shareholder value.

Materials Sourcing

Wind energy companies source rare earth

minerals, mainly neodymium and dysprosium, for

use in their turbines. Among these, neodymium

stores are the largest concern, as vast quantities

are needed per turbine and there is currently no

known low-weight magnet substitute.

Dysprosium, which can be used to increase the

I N D U S T R Y B R I E F | W I N D E N E R G Y | 18

lifespan of magnets, is notoriously difficult to

mine.113 Direct-drive turbines, which have been

rapidly expanding in popularity because of their

reliability, can use ten times more of these rare

earth metals than a more traditional drive train.114

The mining of these rare earth minerals has been

associated with environmental and human health

effects in China. There are also conflict minerals

used in the drive train.

Governmental support of this industry is a key

demand driver. This places wind energy firms at a

particularly high reputational risk if they are

connected to the sourcing of rare earth metals

and conflict minerals associated with violence,

illness, and environmental degradation. The

potentially negative publicity associated with this

could make continued support of the industry

politically unpopular.

Apart from reputational risks, wind energy firms

are exposed to risk of supply chain disruptions

and input price increases or volatility when these

rare earth metals or conflict minerals are used in

their products.

Sourcing risks related to rare earth minerals and

metals arise due to their low substitution ratio,

the concentration of deposits in only a few

countries, and geopolitical considerations. Wind

energy companies also compete with other

industries that rely on these minerals, including

the transportation, hardware, and infrastructure

industries. This, along with supply constraints, can

result in significant price increases and supply

chain risks related to these minerals.

Furthermore, the use of conflict minerals also

exposes wind energy companies to regulatory

risks associated with the Dodd-Frank Act.

Companies face pressure to track and eliminate

the use of minerals responsible for conflict in the

Democratic Republic of Congo (DRC) from a

number of fronts, including legislation,

nongovernmental organizations (NGOs), and wind

turbine customers.

Companies can gain competitive advantage by

being transparent about related risks, working

actively to source materials from reliable suppliers

or regions that have minimal environmental or

social risks associated with them, and supporting

research for alternative inputs. These measures

will decrease wind energy companies’ exposure to

reputational and resource scarcity risks, protecting

shareholder value.

Company performance in this area can be

analyzed in a cost-beneficial way through the

following direct or indirect performance metrics

(see Appendix III for metrics with their full detail):

• Percentage of materials costs for products

containing critical materials;

• Percentage of tungsten, tin, tantalum,

and gold smelters within the supply chain

that are verified conflict-free; and

• Discussion of the management of risks

associated with the use of critical

materials and conflict minerals.

Evidence

Most turbines use rare earth metals, mainly

neodymium and dysprosium, for the magnets in

their turbines. These are a significant cost, as the

gear box of a two-megawatt turbine can contain

roughly 800 pounds of neodymium and 130

pounds of dysprosium.115 As of November 3,

2015, these materials would cost $19,600 and

$15,800, respectively.116 For reference, wind

turbines cost roughly between $750,000 and $1

million per megawatt.117 These key inputs

represent a risk to companies, as the price of

neodymium has fluctuated wildly in the past 10

years, from a low of $16,290/ton in 2009, to a

high of $178,000/ton in 2011, to a price of

$57,200/ton in 2015. Similarly, Dysprosium was

I N D U S T R Y B R I E F | W I N D E N E R G Y | 19

$83/kg in 2009 and $1,450/kg in 2011, and is

$350/kg in 2015.118

The increased usage of the rare earth metals by

wind energy manufacturers, as well as by other

industries such as electric car manufacturers,

could increase the demand for neodymium by as

much as 700 percent over the next 25 years.

Additionally, the demand for dysprosium may go

up by 2,600 percent over the same period, adding

to the potential for significant future price

increases.119 Peter Kelemen, a professor of

geochemistry at the Earth Institute at Columbia

University, has noted that wind power has

increased by a factor of 10 over the last decade,

and that “[i]f wind is going to play a major part in

replacing fossil fuels, we will need to increase our

[worldwide] supply of neodymium.”120

Vestas has expressed concern over these supply

constraints and the future risk they place on its

business, and therefore has attempted to design

turbines that use less rare earth metals. While

different turbine designs will have slightly

different ratios, direct-drive turbines use about 10

times more rare earth metals than conventional

geared turbines, causing Vestas to pursue more

efficient conventional turbines.121

China alone has around 30 percent of worldwide

rare earth metal deposits, and controls more than

90 percent of worldwide production.122 The

inherent risk that this situation creates for foreign

firms was made apparent in July 2010, when

China cut its export quota for rare earth minerals

by 40 percent (a clear cause of the price volatility

discussed above), driving rare earth prices up

significantly.123 This caused major firms in the

industry to express concern over the future supply

of the material.124 At the end of December 2014,

China revoked its quota after losing an appeal to

the World Trade Organization, which ruled that

the Chinese government did not have reasonable

grounds for a trade quota.125 However, the

concentration of rare earth minerals’ production

in China continues to pose supply risks for wind

energy companies, particularly those with

operations outside of China.

Use of these rare earth metals also exposes firms

in the Wind Energy industry to another category

of risk: reputational. As a “green” energy industry

that historically has relied on governmental

subsidies in many parts of the world, and will

likely continue to do so in the short and medium

term, the Wind Energy industry will need to

continue to be perceived as a positive alternative

to conventional energy production technologies

to continue receiving such support. Similarly, in

many markets, some consumers believe that wind

energy causes net positive externalities, making

them willing to pay above market prices for wind-

based electricity production, electricity being an

otherwise homogenous good. A 2013 global

survey found that 32 percent of U.S. commercial

consumers and 50 percent of Indian consumers

were willing to pay more on their utility bills if the

energy was generated from a renewable

source.126 This image clashes with reports from

China about the environmental and human health

effects of the mining of neodymium and

dysprosium widely used in wind turbines. There

are reported instances of toxic waste byproducts

from the production of neodymium being

improperly disposed of by miners, which is

causing a significant rise in cancer rates in some

parts of northern China.127

In recognition of the reputational and input risks

involved with the use of rare earth metals, some

companies, such as Enercon, have attempted to

make a turbine without the use of neodymium.128

If its attempts (or similar ones) are successful,

such companies could benefit from a lower risk

profile, and therefore lower costs of capital

compared to peers.

I N D U S T R Y B R I E F | W I N D E N E R G Y | 20

The industry also faces risk around the use of

conflict minerals. Artisanal and small-scale mining

in the DRC is responsible for much of the current

global output of 3TG. While such mining is an

important source of livelihood to the local

population, it also is helping to finance armed

conflict in the region and has significant

ecological impacts. Several legislative and project-

based efforts are underway globally to improve

traceability and due diligence of the supply of

minerals from the DRC. These have the potential

to affect wind energy companies and their

customers and suppliers. They could also provide

incentives and resources for leadership in supply

chain management. These incentives include the

United States Agency for International

Development’s Responsible Minerals Trade

Program, which includes the creation of a pilot

conflict-free supply chain.129 Companies that do

not engage in this type of supply chain

management open themselves up to the types of

reputational risk discussed previously with rare

earth metals.

The SEC estimates that costs to comply with the

Conflict Minerals provision of the Dodd-Frank Act

will include a total of $3 billion to $4 billion in the

first year and at least $200 million each year

afterward. Other estimates suggest compliance

costs may be as high as $16 billion.130 However,

the SEC expects that non-reporting companies

that are part of reporting companies’ supply

chains will bear much of the cost of the final

rule.131 The new disclosure rule was expected to

affect approximately 6,000 issuers and their

275,000 suppliers.132

Broadwind Energy, in its FY 2014 Form SD, a

specialized disclosure document used for

Reasonable Country of Origin Inquiries around

conflict minerals, states that “[w]e conducted an

analysis of our products and found that 3TG can

be found in our towers, weldments, and gearing

products … we have concluded that our supply

chain remains ‘DRC conflict undeterminable.’”133

American Superconductor Corporation, a

manufacturer of wind turbine components,

discloses in its FY 2014 Form 10-K, “New

regulations related to conflict-free minerals may

force us to incur significant additional

expenses.”134

Apart from regulatory costs, global prices of 3TG

have shown high volatility, sometimes related to

the conflict in the DRC. A 31 percent increase in

tin prices in 2008 coincided with a rebel offensive

against the DRC’s primary tin trading center. The

DRC also leads in the global production of

tantalum, with various estimates suggesting it is

responsible for 8 to 20 percent of global

production.135 Due to supply constraints and rising

demand, the price of tantalum increased from

$110 per kg in 2011 to nearly $300 per kg in

2012.136 If these price trends continue, they could

take away from the already slim margins of wind

turbine manufacturers and create a long-term

impact for those players not investing in

alternatives.

Value Impact

Failure to effectively manage the sourcing of

critical and sensitive materials can affect the cost

structure of companies over time through higher

input costs. Companies may also face regulatory

compliance costs associated with the sourcing of

conflict minerals.

If companies do not investigate their supply chain

they may face significant reputational risk that

could result in lower sales. Reputational risk and

lower sales could also result from the sourcing of

rare earth minerals linked to environmental and

health effects from extraction activities. Impacts

on reputation could affect companies’ intangible

assets and therefore long-term growth potential.

I N D U S T R Y B R I E F | W I N D E N E R G Y | 21

The increasing scarcity or unavailability of certain

key materials used by wind energy companies, as

well as the price volatility of such materials, can

increase companies’ risk profiles if they rely

heavily on such materials and are unable to

source them effectively. Company’s R&D costs will

likely increase as they look for ways to use less of

these materials. As a result, such companies can

face a higher cost of capital. Companies could

also lose revenues due to production disruptions

from problems with the supply of critical and

sensitive materials.

These risks will likely increase in probability and

magnitude as the industry scales up, direct-drive

turbines rise in popularity and as the industry

increasingly competes with others for the

sourcing of critical and “conflict-free” materials.

The percentage of materials cost for critical

materials indicates how sensitive a company’s

profitability is to shifts in critical material pricing.

The percentage of 3TG verified conflict-free

indicates the company’s potential risk for

reputational damage related to 3TG sourcing.

I N D U S T R Y B R I E F | W I N D E N E R G Y | 22

APPENDIX I FIVE REPRESENTATIVE WIND ENERGY COMPANIESVI

VI This list includes five companies representative of the Wind Energy industry and its activities. This includes only companies for which the Wind Energy industry is the primary industry, companies that are listed on U.S. exchanges or traded over the counter, and for which at least 20 percent of revenue is generated by activities in this industry, according to the latest information available on Bloomberg Professional Services. Retrieved on October 6, 2015.

COMPANY NAME (TICKER SYMBOL)

Vestas Wind Systems (VWDRY)

Gamesa (GCTAY)

China Ming Yang Wind Power Ltd. (MY)

Broadwind Energy (BWEN)

Cleantech Solutions (CLNT)

23I N D U S T RY B R I E F | W I N D E N E R G Y

APPENDIX IIA: Evidence for Sustainability Disclosure Topics

Sustainability Disclosure Topics

EVIDENCE OF INTERESTEVIDENCE OF

FINANCIAL IMPACTFORWARD-LOOKING IMPACT

HM (1-100)

IWGsEI

Revenue & Cost

Asset & Liabilities

Cost of Capital

EFIProbability & Magnitude

Exter- nalities

FLI% Priority

Workforce Health & Safety 58 - - Medium • • Medium • Yes

Design to Mitigate Community & Ecological Impacts

56 93 1 High • • • High • • Yes

Materials Efficiency 67 87 2 High • • High No

Materials Sourcing 33 93 3 Medium • • • Medium • Yes

HM: Heat Map, a score out of 100 indicating the relative importance of the topic among SASB’s initial list of 43 generic sustainability issues. Asterisks indicate “top issues.” The score is based on the frequency of relevant keywords in documents (i.e., 10-Ks, 20-Fs, shareholder resolutions, legal news, news articles, and corporate sustainability reports) that are available on the Bloomberg terminal for the industry’s publicly listed companies. Issues for which keyword frequency is in the top quartile are “top issues.”

IWGs: SASB Industry Working Groups

%: The percentage of IWG participants that found the disclosure topic likely to constitute material information for companies in the industry. (-) denotes that the issue was added after the IWG was convened.

Priority: Average ranking of the issue in terms of importance. 1 denotes the most important issue. (-) denotes that the issue was added after the IWG was convened.

EI: Evidence of Interest, a subjective assessment based on quantitative and qualitative findings.

EFI: Evidence of Financial Impact, a subjective assessment based on quantitative and qualitative findings.

FLI: Forward Looking Impact, a subjective assessment on the presence of a material forward-looking impact.

24I N D U S T RY B R I E F | W I N D E N E R G Y

APPENDIX IIB: Evidence of Financial Impact for Sustainability Disclosure Topics

Evidence of

Financial Impact

REVENUE & EXPENSES ASSETS & LIABILITIES RISK PROFILE

Revenue Operating Expenses Non-operating Expenses Assets Liabilities

Cost of Capital

Industry Divestment

RiskMarket Share New Markets Pricing Power

Cost of Revenue

R&D CapExExtra-

ordinary Expenses

Tangible Assets

Intangible Assets

Contingent Liabilities & Provisions

Pension & Other

Liabilities

Workforce Health & Safety • • • •

Design to Mitigate Community & Ecological Impacts

• • • • • •

Materials Efficiency • • • •

Materials Sourcing • • • • •

H IGH IMPACTMEDIUM IMPACT

I N D U S T R Y B R I E F | W I N D E N E R G Y | 25

APPENDIX III SUSTAINABILITY ACCOUNTING METRICS – WIND ENERGY

TOPIC ACCOUNTING METRIC CATEGORY UNIT OF

MEASURE CODE

Workforce Health& Safety

(1) Total recordable injury rate (TRIR) and (2) fatality ratefor (a) direct employees and (b) contract employees Quantitative Rate RR0103-01

Design to Mitigate Community & Ecological Impacts

Average A-weighted sound power level of wind turbines, by wind turbine class

Quantitative dB(A) RR0103-02

Backlog cancellations associated with community or ecological impacts

Quantitative U.S. Dollars ($) RR0103-03

Description of efforts to address ecological and community impacts of wind energy production through turbine design

Discussion and Analysis

n/a RR0103-04

Materials Efficiency

Top five materials consumed, by weight Quantitative Metric tons (t) RR0103-05

Average top head mass per turbine capacity, by wind turbine class

Quantitative Metric tons per megawatts (t/MW)

RR0103-06

Discussion of approach to optimize materials efficiency of wind turbine design

Discussion and Analysis

n/a RR0103-07

Materials Sourcing

Percentage of materials costs for items containing critical materials

Quantitative Percentage (%) RR0103-08

Percentage of tungsten, tin, tantalum, and gold smelters within the supply chain that are verified conflict-free

Quantitative Percentage (%) RR0103-09

Discussion of the management of risks associated with the use of critical materials and conflict minerals

Discussion and Analysis

n/a RR0103-10

26I N D U S T RY B R I E F | W I N D E N E R G Y

APPENDIX IV: Analysis of SEC Disclosures | Wind Energy

The following graph demonstrates an aggregate assessment of how representative U.S.-listed Wind Energy companies are currently reporting on sustainability topics in their SEC annual filings.

Wind Energy

Workforce Health & Safety

Design to Mitigate Community & Ecological Impacts

Materials Efficiency

Materials Sourcing

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

TYPE OF DISCLOSURE ON SUSTAINABILITY TOPICS

NO DISCLOSURE BOILERPLATE INDUSTRY-SPECIF IC METRICS

-**

93%

87%

93%

IWG Feedback*

* Percentage of IWG participants that agreed topic was likely to constitute material information for companies in the industry.

** The “Workforce Health & Safety” disclosure topic was introduced after SASB convened IWGs and per stakeholder feedback.

I N D U S T R Y B R I E F | W I N D E N E R G Y | 27

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12 Ibid, p. 38. 13 U.S. Department of Energy, 2013 Wind Technologies Report, August 2014, p. 15. 14 IBISWorld, Industry Report 33361a Wind Turbine Manufacturing in the US,” September 2014, p. 24. 15 The U.S. natural gas price is represented by the Henry Hub spot price. Author’s calculation based on data from Bloomberg Professional service, accessed on October 6, 2015, using the NGUSHHUB <GO> command. 16 Michael Specter, “The Trouble with Cheap Oil,” The New Yorker, December 5, 2014, accessed January 7, 2015, http://www.newyorker.com/news/daily-comment/trouble-cheap-oil. 17 Tom Randall, “Solar and Wind Just Passed Another Big Turning Point,” Bloomberg Business, October 6, 2015, accessed October 20, 2015, http://www.bloomberg.com/news/articles/2015-10-06/solar-wind-reach-a-big-renewables-turning-point-bnef. 18 “EIA projects world energy consumption will increase 56% by 2040,” U.S. Energy Information Administration, July 25, 2013, accessed January 11, 2015 http://www.eia.gov/todayinenergy/detail.cfm?id=12251. 19 International Energy Agency, Worldwide Trends in Energy Use and Efficiency, 2008, p. 22, accessed October 19, 2015, https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&ved=0CCQQFjABahUKEwiFtZ6M3rPIAhXLM4gKHbobDKk&url=https%3A%2F%2Fwww.iea.org%2Fpublications%2Ffreepublications%2Fpublication%2FIndicators_2008.pdf&usg=AFQjCNG3Ham6HJQrHwOS25vsa35RWrc-yQ&sig2=JTBGqURB_PayOANh0iTo_Q&bvm=bv.104615367,d.cGU&cad=rja. 20 IBISWorld, Industry Report 33361a Wind Turbine Manufacturing in the US, September 2014, p. 29. 21 Author’s calculation based on data from Bloomberg Professional service, accessed on October 6, 2015, using Equity Screen (EQS) for U.S.-listed companies and those traded primarily OTC that generate at least 20 percent of revenue from their Wind Energy industry segment and for which the Wind Energy industry is a primary SICS industry. 22 Author’s calculation based on data from Bloomberg Professional service, accessed on October 1, 2015, using the BICS <GO> command. Firms considered were U.S.-listed firms for whom wind energy is the primary industry. The data represents global revenues of companies listed on global exchanges and traded over-the-counter from the Wind Energy industry, using Level 5 of the Bloomberg Industry Classification System. 23 IBISWorld, Industry Report 33361a Wind Turbine Manufacturing in the US, September 2014, p. 17. 24 David Shukman, “China on world’s ‘biggest push’ for wind power,” BBC, January 7, 2014, accessed January 20, 2015, http://www.bbc.com/news/science-environment-25623400.

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66 “SEC Adopts Rule for Disclosing Use of Conflict Minerals,” U.S. Securities and Exchange Commission press release, August 22, 2012, Accessed April 8, 2013, http://www.sec.gov/news/press/2012/2012-163.htm. 67 “Recommendations for companies pending appellate review of the SEC conflict minerals rules,” Hunton & Williams LLP, February 5, 2014, http://www.lexology.com/library/detail.aspx?g=e8dd78f8-6105-4ce0-8782-615fab7490d4. 68 “Green Job Hazards,” U.S. Department of Labor, accessed November 1, 2015, https://www.osha.gov/dep/greenjobs/windenergy.html. 69 Paul Dvorak, “Deciding between an ISP and OEM for wind-farm maintenance,” Windpower Engineering & Development, July 10, 2013, accessed October 20, 2015, http://www.windpowerengineering.com/maintenance/deciding-between-an-isp-and-oem-for-wind-farm-maintenance/. 70 “Global Wind Turbine Operations and Maintenance Market Worth $17 Billion by 2020,” PRNewswire, April 2, 2015, accessed October 2, 2015, http://www.prnewswire.com/news-releases/global-wind-turbine-operations-and-maintenance-market-worth-17-billion-by-2020-498453671.html. 71 Author’s calculation based on data from Bloomberg Professional service, accessed on October 20, 2015, using the GAM SM EQUITY FA <GO> command. 72 Vestas Wind Systems, 2014 Annual Report, February 11, 2015, p. 9.; Vestas Wind Systems, 2008 Annual Report, February 11, 2009, p. 7. 73 “Sustainability,” Vestas, accessed November 11, 2015, https://www.vestas.com/en/about/sustainability#!safety. 74 Gamesa, Q1 2015 Earnings Call, May 9, 2015, p. 2. 75 Data from Bloomberg Professional service, accessed on November 16, 2015, using the BI WINDG <GO> command. 76 “Global Offshore,” Global Wind Energy Council, 2015, accessed November 11, 2015, http://www.gwec.net/global-figures/global-offshore/. 77 Paul Dvorak, “To avoid government ‘help’, write best safety practices for offshore wind now,” Windpower Engineering & Development, November 24, 2014, accessed November 2, 2015, http://www.windpowerengineering.com/construction/avoid-government-help-write-best-safety-practices-offshore-wind-now/. 78 European Agency for Safety and Health at Work, Occupational safety and health in the wind energy sector, 2013, p. 48, accessed November 10, 2015, https://osha.europa.eu/en/tools-and-publications/occupational-safety-and-health-in-the-wind-energy-sector. 79 “Siting Wind Farms requires choosing a proper location,” American Wind Energy Association, accessed January 11, 2015, http://www.awea.org/Issues/Content.aspx?ItemNumber=853. 80 American Wind Energy Association, The Wind Energy Siting Handbook, February 2008, accessed January 29, 2015, p. 16, http://www.awea.org/Issues/Content.aspx?ItemNumber=5726. 81 “Federal Court Rules Massive Wind Energy Project in Violation of Endangered Species Act,” PR Newswire, December 9, 2014, accessed January 11, 2015, http://www.prnewswire.com/news-releases/federal-court-rules-massive-wind-energy-project-in-violation-of-endangered-species-act-78886682.html. 82 Bonner Cohen, “Environmentalists Oppose Wyoming Wind Project,“ Heartland, April 16, 2014, accessed January 4, 2015, http://news.heartland.org/newspaper-article/2014/04/18/environmentalists-oppose-wyoming-wind-project; Mark Duchamp, “USFWS public enquiry about the issue of eagle ‘take’ permits to windfarms (licenses to kill eagles),” Save the Eagles International, 2014, accessed December 30, 2014, http://savetheeaglesinternational.org/submissions/submission-to-usfws-2014.html. 83 Leo Hickman, “Wind myths: Turbines kill birds and bats,” The Guardian, February 27, 2012, accessed January 20, 2015, http://www.theguardian.com/environment/2012/feb/27/wind-energy-myths-turbines-bats. 84 “PacifiCorp pleads guilty, will pay $2.5M for eagle and other bird deaths at Wyoming wind farms,” StarTribune, January 6, 2015, accessed January 13, 2015, http://www.startribune.com/business/287720771.html. 85 “Conservation Groups Call for National Planning Effort by Feds on Wind Energy,” American Bird Conservancy, April 24, 2014, accessed October 28, 2015, http://abcbirds.org/article/conservation-groups-call-for-national-planning-effort-by-feds-on-wind-energy/. 86 Jon Gertner, “FloDesign's Jet-Engine Turbine Will Change The Way You Think About Wind Power,” Fast Company, September, 2013, accessed January 11, 2015, http://www.fastcompany.com/3014820/flodesigns-jet-engine-turbine-will-change-the-way-you-think-about-wind-power; “Shrouded Wind Turbine Hopefully Prevents Bird, Bat Collisions,” Sustainable Business, June 3, 2014, accessed December 22, 2014. 87 “Maine residents push back against wind power farms,” Bangor Daily News, February 18, 2010, accessed January 12, 2015, http://bangordailynews.com/2010/02/18/politics/maine-residents-push-back-against-wind-power-farms/.

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88 Ethan Lindsey, “Northwest Communities Push Back against Wind Power,” Oregon Public Broadcasting, June 25, 2009, accessed December 29, 2014, http://www.opb.org/news/article/northwest-communities-push-back-against-wind-power/. 89 Louise Dunne, “Dutch Wind Farm in Trouble in Mexico,” Radio Netherlands Worldwide, September 11, 2012, http://www.rnw.nl/english/article/dutch-wind-farm-trouble-mexico. 90 Sean Lin, and Tsai Ying, “EPA asks wind power firm to move turbine,” Taipei Times, July 30, 2014, accessed January 29, 2015, http://www.taipeitimes.com/News/taiwan/archives/2014/07/30/2003596260. 91 “Key Technologies,” Siemans, accessed January 13, 2015, http://www.energy.siemens.com/hq/en/renewable-energy/wind-power/wind-turbine-technology/key-technologies.htm#content=Turbine%20noise%20control. 92 China Ming Yang Wind Power Group LTD, FY 2014 Form 20-F for the period ending December 31, 2014 (filed April 30, 2015), p. 54. 93 Dora Anne Mills and James F. Manwell, “A Brief Review of Wind Power in Denmark, Germany, Sweden, Vermont, and Maine: Possible Lessons for Massachusetts,” January 11, 2012, accessed October 28, 2015, http://www.mass.gov/eea/docs/dep/energy/wind/briefreview.pdf. 94 Vestas, Green light for green energy, accessed January 10, 2015, http://nozebra.ipapercms.dk/Vestas/Communication/Productbrochure/TurbineOptions/VestasShadowDetectionSystem/. 95 Ibid. 96 Pattern Energy, FY 2014 Form 10-K for the period ending December 31, 2014 (filed March 2, 2015), p. 36. 97 Broadwind Energy, FY 2014 Form 10-K for the period ending December 31, 2014 (filed February 26, 2015), p. 11. 98 Marcio Loos, et al. “World’s First Carbon Nanotube Reinforced Polyurethane Wind Blades,” Case Western Reserve University, accessed January 29, 2015, http://engineering.case.edu/emac/news/Carbon-Nanotube-Reinforced. 99 “Upward Spiral,” The Economist, October 1, 2014, accessed October 5, 2015, http://www.economist.com/news/science-and-technology/21621624-best-results-make-taller-turbines-do-weld-them-onsite-upward-spiral. 100 “NREL Investigates the Logistics of Transporting and Installing Bigger, Taller Wind Turbines,” National Renewables Energy Laboratory, July 30, 2014, accessed January 29, 2015, http://www.nrel.gov/wind/news/2014/14383.html. 101 IBISWorld, Industry Report 33361a Wind Turbine Manufacturing in the US, September 2014, p. 22. 102 Suzlon Energy, 2014 Annual Report, August 26, 2015, p. 133. 103 United States Geographical Survey, Wind Energy in the United States and Materials Required for the Land-Based Wind Turbine Industry From 2010 Through 2030, 2011, p. 7, accessed November 2, 2015, http://pubs.usgs.gov/sir/2011/5036/. 104 Ibid. 105 Eric Lantz, Ryan Wiser, and Maureen Hand, IEA Wind Task 26: The Past and Future Cost of Wind Energy, National Renewable Energy Laboratory, May 2012, p. 6. 106 SteelBenchmarker, Report #211 Price History: Tables and Charts, January 26, 2015, accessed January 26, 2015, http://steelbenchmarker.com/files/history.pdf; John Miller, “Rise in Steel Prices Alarms Buyers,” The Economist, July 4, 2013, accessed January 29, 2015, http://www.wsj.com/articles/SB10001424127887324260204578583963765249172?autologin=y. 107 Tobias Nystedt and James Evans, “Wind Turbine Cost Cut, Brazil Support Higher Recommendation,” Bloomberg Intelligence (BI WINDG <GO> command), Bloomberg Professional Services, January 14, 2015, accessed January 16, 2015. 108 Broadwind Energy, FY 2014 Form 10-K for the period ending December 31, 2014 (filed February 26, 2015), pp. 7, 12. 109 Cleantech Solutions International Inc., FY 2014 Form 10-K for the period ending December 31, 2014 (filed March 30, 2015), p. 13 110 China Ming Yang Wind Power Group LTD, FY 2014 Form 20-F for the period ending December 31, 2014 (filed April 30, 2015), p. 14. 111 Herman Trabish, “Is GE’s Space Frame Tower the Future of Wind Power?” The Energy Collective, March 9, 2014, accessed January 29, 2015, http://theenergycollective.com/hermantrabish/351156/photos-ges-space-frame-tower-future-wind-power. 112 “Vestas Announced Her New Large Diameter Steel Tower,” Alternative Energies, March 10, 2014, accessed January 29, 2015, http://www.alternative-energies.net/vestas-announced-her-new-large-diameter-steel-tower/. 113 Renee Cho, “Rare Earth Metals: Will We Have Enough?” Columbia University Earth Institute, September 19, 2012, accessed January 13, 2015, http://blogs.ei.columbia.edu/2012/09/19/rare-earth-metals-will-we-have-enough/. 114 “Material Use,” Vestas, accessed January 13, 2015, http://vestas.com/en/about/sustainability#!material-use. 115 Dan Stover, “The Myth of Renewable Energy,” Bulletin of the Atomic Scientists, November 22, 2011, accessed October 11, 2015, http://thebulletin.org/myth-renewable-energy.

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116 Author’s calculation based on data from Bloomberg Professional service, accessed on November 3, 2015, using the BI WINDG <GO> command. 117 Patrick Smith, “Unmasking turbine prices,” Wind Power Monthly, January 31, 2014, accessed October 10, 2015, http://www.windpowermonthly.com/article/1228426/unmasking-turbine-prices. 118 Author’s calculation based on data from Bloomberg Professional service, accessed on October 18, 2015, using the BI WINDG <GO> command. 119 Elisa Alonso et al., “ Evaluating Rare Earth Element Availability: A Case with Revolutionary Demand from Clean Technologies,” Environmental Science and Technology, February 3, 2012, p. 3406; Travis Fisher and Alex Fitzsimmons, “Big Wind’s Dirty Little Secret: Toxic Lakes and Radioactive Waste,” Institute for Energy Research, October 23, 2013, accessed January 2, 2015, http://instituteforenergyresearch.org/analysis/big-winds-dirty-little-secret-rare-earth-minerals/. 120 Cho, “Rare Earth Metals: Will We Have Enough?” 121 “Powering Sustainability,” Vestas, accessed January 13, 2015, http://vestas.com/en/about/sustainability#!material-use. 122 “China Drops Its Export Limits on Rare Earths,” Associated Press, January 5, 2015, accessed November 4, 2015, http://www.nytimes.com/2015/01/06/business/international/china-drops-its-export-limits-on-rare-earths.html?ref=topics&mtrref=topics.nytimes.com&gwh=18B52AA214CAD83B3E8C534CAEC30865&gwt=pay&_r=0. 123 Jeff Nesbit, “China’s Continuing Monopoly over Rare Earth Minerals,” U.S. News and World Report, http://www.usnews.com/news/blogs/at-the-edge/2013/04/02/chinas-continuing-monopoly-over-rare-earth-minerals. 124 Stuart Biggs, “Rare Earths Leave Toxic Trail to Toyota Prius, Vestas Turbines,” Bloomberg News, January 6, 2011, accessed January 1, 2015, http://www.bloomberg.com/news/2011-01-05/china-rare-earths-leave-toxic-trail-to-toyota-prius-vestas-wind-turbines.html. 125 “China scraps quotas on rare earths after WTO Complaint,” British Broadcasting Company, January 5, 2015, accessed January 15, 2015, http://www.bbc.com/news/business-30678227. 126 Jeff St. John, “Consumers Want Green Energy from the Utility if the Price Is Right,” Greentech Media, November 19, 2013, accessed January 5, 2015, http://www.greentechmedia.com/articles/read/Consumers-Want-Green-Energy-From-the-Utility-If-the-Price-is-Right. 127 Fisher and Fitzsimmons, “Big Wind’s Dirty Little Secret: Toxic Lakes and Radioactive Waste”; Simon Parry and Ed Douglas, “In China, the true cost of Britain's clean, green wind power experiment: Pollution on a disastrous scale,” Daily Mail, January 26, 2011, accessed December 19, 2015, http://www.dailymail.co.uk/home/moslive/article-1350811/In-China-true-cost-Britains-clean-green-wind-power-experiment-Pollution-disastrous-scale.html. 128 “ENERCON WECs produce clean energy without neodymium,” Enercon, April 29, 2011, accessed December 19, 2015, http://www.enercon.de/en-en/1337.htm. 129 International Telecommunication Union (ITU), Greening ICT supply chains – Survey on conflict minerals due diligence initiatives, 2012. 130 Ernst & Young, Conflict Minerals – What you need to know about the new disclosure and reporting requirements, 2012, http://www.ey.com/Publication/vwLUAssets/Conflict_minerals/$FILE/Conflict_Minerals_US.pdf. 131 IPC, Summary of the Final SEC Rules on Conflict Minerals, 2012, http://www.ipc.org/3.0_Industry/3.3_Gov_Relations/2012/IPC-Summary-of-the-Final-SEC-Rules-on-Conflict-Minerals.pdf. 132 “Time to get Started Conflict Minerals,” PWC, May 2013, accessed December 8, 2015, https://www.pwc.com/us/en/audit-assurance-services/publications/assets/pwc-conflict-minerals-compliance-process.pdf. 133 Broadwind Energy, FY 2014 Form SD for the period ending December 31, 2014 (filed May 26, 2015). 134 American Superconductor Corporation, FY 2014 Form 10-K for the period ending March 31, 2015 (filed May 28, 2015), p. 18. 135 BSR, Conflict Minerals and the Democratic Republic of Congo: Responsible Action in Supply Chains, Government Engagement and Capacity Building, May 2010. 136 Chelsea Craven, “Why US Tantalum Imports – And Prices – Are Skyrocketing,” Metal Miner, April 3, 2013, http://agmetalminer.com/2013/04/03/why-us-tantalum-imports-and-prices-are-skyrocketing/.

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