Vestas’ CEO answers your questions – Part 1

Picture by Vestas

Picture by Vestas

In this week’s readers’ Q&A session, Ditlev Engel, CEO of Vestas, the world’s biggest wind turbine manufacturer, answers your questions on the future of wind power.

In the first of two parts, Ditlev defends his industry’s government subsidies, explains his company’s decision to axe 3,000 jobs and discusses the major global obstacles to developing wind energy.

In the second part, to be published later this morning, he will talk about the inefficiencies of wind power and the impact of the recession on Vestas.

Next in the hotseat is Yvo de Boer, the former head of the UN’s climate change boyd and the man who led the UN at Copenhagen. He is now an advisor at KPMG and will be answering your questions on this site next Friday, December 10th. Send in your questions for consideration by the end of Monday, December 6th to energysource@ft.com.

But for now, over to Ditlev:

Government subsidies

Do you believe your company could compete were it not for subsidies and mandates from governments?
Tim Carney, senior political columnist, Washington Examiner

Wind energy is increasingly price competitive, particularly at the best wind sites. But let’s be clear about the role of public policy: the energy sector has long been driven by public policies. There is nothing new or unique about that in the context of renewable energy. Just look at the literally hundreds of billions of dollars spent subsidising the exploration, development, and consumption of fossil fuels. Government policy plays a critical role in levelling or distorting the market place in which we compete. As we highlighted a few weeks ago at the G20 Business Summit in South Korea, growing the green economy is a two-way street.

Industry doesn’t need guarantees – it needs public policies that are transparent, long-term, and certain

Our message to the G20 political leaders was simple: give us the policy frameworks and the industry will give you the results. We’ll make the investments, we’ll take the risks, and we’ll create the jobs. But it requires a policy framework that re-balances the incentives indisputably in favour of green investment. A big part of re-balancing is eliminating fossil fuel subsidies. Another is putting a price on carbon, high and stable enough to change people’s behaviors and investment decisions. A third is allowing free trade in green goods and services.

Green investments have high upfront capital costs and long payback horizons. Industry doesn’t need guarantees – it needs public policies that are transparent, long-term, and certain.

Job cuts

Vestas is cutting 3,000 jobs even though the wind power market is still growing after economic crisis. Are you expecting a drop in the market soon?
Taylors Lei, Viasystems

Not at all. The announced changes primarily affect our factories and organisation in Denmark, as the production costs in Northern Europe are too high. Today, it is cheaper for Vestas to manufacture a turbine in Spain and ship it to Sweden – compared to having it produced in Denmark and shipped to our neighbouring country. Vestas is the only wind turbine manufacturer with a truly global setup. We have factories, research and development departments, sourcing offices, etc, in the US, Europe, India and China – servicing the local markets and our customers there. So, no matter where we operate, we need to stay competitive. We are making these adjustments ourselves before someone forces us to do so.

Wind obstacles

What are today main constraints on development of wind energy in the world?
Ynerveau Bastien, strategy project manager, Cez Group

As noted above, the absence of transparent and long-term policies – particularly in some important markets – is a constraining factor. There is also a greater risk aversion in the financial sector compared to a few years ago, which puts a premium on financing.

Of course, the general economic downturn in the west has led to lower energy demand and thus lower energy prices in some key markets.  Thus in the absence of other factors like robust carbon pricing that captures their true cost to society, fossil fuels like coal and natural gas are priced attractively.

Asian market share

How do you intend to stabilise your market share in the Asian market?
Sven Träder

At Vestas, we do not focus on market share. We focus on our customers and their needs. Last year, this commitment led to Vestas being number one, two or three in nine of the ten largest wind markets. In China, we are the largest non-Chinese player, and this year we have announced some of the largest ever orders in the market. We currently have an all-time high order backlog of more than 8,000 MW.

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