Arthouros Zervos, European Renewable Energy Council
Release Date: 2009-10-28
Arthouros Zervos, President of the European Renewable Energy Association, was interviewed by GreenTechFocus to talk about the EU-China cooperation in renewable energyEuropean Union officials stated that "investment in renewables is the way out of this economic crisis". Does this mark a shift in the renewable energy debate from being focused primarily on environmental issues to a stronger focus on the economic impact of renewable energy investment?
There is no possible comparison between the past and today: all the aspects of the renewable energy sector are completely different. Thirty years ago you would have found small enterprises that were struggling to survive; nowadays some of these businesses have become international players. Others have shifted into the renewable energy sector because they saw a tremendous opportunity. Today’s reality is completely different from the one that we were living not even 25, but 10 years ago.
As you mentioned, the big driver in those days was the environment. Today we have shifted not only to economic motives but also into securing supplies. These three elements – environment, economy and supply – will be driving development of renewable energies in future.
Of course, the financial crisis is affecting the wind energy industry, just like any other sector. At the same time, the outlook for wind energy is very healthy. All of the fundamental drivers that have made wind power the technology of choice for those seeking to build a secure, clean energy future are still in place. Wind power is clean, indigenous, fast to deploy, creates many jobs, uses virtually no water and is economically competitive. Neither the threat of climate change nor the macroeconomic insecurity due to reliance on imported fossil fuel is going to go away because of the recession.
How important is the EU Climate and Energy Package and how will affect the development of the renewable energy sector in Europe?
I think that the European Climate and Energy Package is extremely important because it sets targets for the next decade. The goals that are set through the package are ambitious and will really make large scale shifts in the renewable energy sector. Until now, we have only seen changes in the power generation sector. Today, other sectors such as the heating and cooling and the transport sector are extremely important too. In this sense, both the package and the new European directive for renewables will help to drive the development of all sectors of renewable energy because for the first time, binding targets will be set.
European policy started in 1997 with the White Paper for Renewable Resources, followed by two directives: one in 2001 on electricity and the next one in 2003 on biofuels. These directives defined targets but the problem was that they were not binding. With binding targets, we can encourage the European member states to implement their plans. Nowadays, you will not find one single government that is not pro-renewables. However, there is a big difference between words and actions. This directive will give a sense of direction and confidence to all the member states. The directive will also increase the number of investments. Today, the European renewable energy sector is worth an estimated €40 billion, and it should multiply to at least 3 times that by 2020.
If all the European governments are all pro-renewables, why has it been so difficult to reach an agreement to set binding targets in the past?
Let’s be clear, they are not all so pro-renewables. As I said before, Governments often say they are, but the reality is somewhat different. There is often a long distance between words and actions.
Which countries do you believe will be the leaders in this process?
It’s easy to mention Denmark, Germany and Spain but we have to get other countries on board such as Italy, France and the UK. If you look at Europe, there are six large countries that constitute a large part of the continent. So if we want to reach the targets that have been set, these countries have to be on board. If Greece, Malta and Luxembourg reach their targets but France, Italy and the UK do not, I am more than sure we won’t get very far. We have to pay special attention to those countries that are critical in the European Union because of their population size. In this sense it is critical that countries like Italy, the UK and Poland follow the targets set by the European Parliament.
What would you say if the governments of these three countries that have to really make this happen would ask you: “Professor Zervos, which arguments should we use to convince our people that investing in renewables will bring multiple advantages in the long term?”
Firstly, I would say that the population in general is very positive about renewables, so you don’t really have any convincing to do. Those that do have to be convinced are the decision makers in this process. If you look at recent polls you will see that the number one source of energy supported by European citizens is renewables. I do not really think that this is the issue though. There are many myths around renewables, such as that they are very expensive. If we look at the reality today, the situation has changed, in some part due to the energy crisis and the prices of fossil energy sources. For example, a barrel of oil today costs 53 dollars, which few months ago cost three times as much. I think that everyone will agree that the time of the cheap oil is over. Even though we have entered a recession, we have to consider what will happen once the economy starts to recover. Times of cheap energy sources are over.
The main difference between renewable energy and other sources is that they require no fuel. So, in economic terms, if you install a wind farm or PV today, you will know the price that you will pay for energy over the next 20 years. This is not the case with other natural resources. With oil or gas, you have to make assumptions in order to calculate what the price will be in 10 years, and that it is really difficult. As we have seen, all the calculations that were done over the last 5 to 6 years have proved to be completely wrong.
This certainty that renewables are introducing into energy economics is extremely important, as we are beginning to diminish risk. It is true that you might be paying a bit more for your energy, but you will know that this will be the exact amount that you will be paying for the next 20 years. As we are today, wind energy is a mainstream option, and probably the cheapest way to produce electricity today.
Outside Europe, China is the fastest growing economy with the fastest growing energy needs. Which role do you think that China will play in the development of the global renewable energy sectors?
China is a critical country when it comes to renewables. The reason is because it represents 20% of the world’s population, and thus should be considered more as a continent than as a country. China’s energy needs are incredible. The country is annually installing the same power capacity that we have installed in Europe over the last 7 years. Today, China has a tremendous need for power, which is mainly supplied by coal, but this has to change because if not, we can forget all about the climate change discussion. My belief is that the Chinese government has realized that. I have been going to China for many years and over the last 2 years I have seen great improvements and changes in the environment there. At the beginning of this decade, the environment was not one of their priorities. Improving it was believed to be something that could only be considered by rich countries. However, there is now a complete change in the mindset of the policy makers. Of course their view is different from the Germans, French or Americans, but they have realized that the environment is worth working on. Not only because it is a global issue, but also because China needs it. As we all know, when we are talking about pollution in China we are not just talking about CO2 emissions. Pollution in China is not sustainable and has linked long-term costs such as health. Over the last few years they have realized, and that is why we see China moving into the renewable sector.
Also, China is quickly emerging as a strong competitor to the European wind industry. Do you foresee Europe and China will primarily become partners or competitors in the development of this industry?
For me, it’s a positive story that China is now not only installing capacity but also manufacturing wind turbines. At the end of the day, it is no different from what happened in other countries. Denmark started the development of its wind industry three decades ago, followed by Germany. Then in 1997, Spain started to develop their industry, which today has become global. Of course, the scale of the Chinese market will be the major difference. International companies have understood this, and have already established themselves in China in order to compete. In China we will not just see one manufacturer succeeding in the market, but perhaps three or four.
The wind sector is experiencing huge development. Last year more than 27 GW of new wind power generation capacity came online in 2008, 36% more than in 2007, to reach total global installations of more than 120.8 GW at the end of 2008. GWEC predicts that in 2013, five years from now, global wind generating capacity will stand at 332 GW. Moreover, in Asia the total wind generating capacity is expected to reach 117 GW by 2013, up from just 24 GW in 2008. There is space for everyone, so more manufacturing capacity is needed.
Do you expect the rise in wind turbine manufacturing capacity in China to change the dynamics of the global wind industry?
I would say partially. Manufacturing wind turbines is not the same as, say, making shoes. Although in both industries we have to talk about quality, when we talk about shoes a difference in quality will not really affect the way you walk. However, when it comes to energy production, it is totally different. If you do not have the quality that is needed, you will be producing less, and in the end the final cost will be higher. The cost is not just the purchase amount, but also includes the maintenance cost for the turbine during its lifetime. If I have to change my gearbox 2 or 3 times during that period, I cannot consider it particularly cheap any more.
We have realized that Chinese manufacturers are competing with prices that are lower than those of the international manufacturers producing in China. However, we always need to consider quality, and I think that the Chinese government and the Chinese manufacturers have already begun to realize this. If the Chinese manufacturers want to enter international markets, they will have to compete not only in price, but also in quality, and this will raise prices. They may still end up being cheaper at the end of the day, which could have a positive effect as it will keep prices lower in the sector.
If we are talking about creating products of equivalent quality, we only need to look at Spain to understand that this simply didn’t happen overnight. It needs time. However, the Chinese are progressing quickly, and in the coming years we will have excellent manufacturers coming out of China.
What China can do in the coming years is to open markets. Africa and Latin America are markets where offering the cheapest product will play crucial role in doing business. China already has special relationships with many of these countries, which creates the ideal scenario. Most of the European manufacturers do not want to enter those markets, because as they are already well-established in their own markets, and because the risk involved is higher than the benefits that they foresee.
Suzlon has already acquired Hansen Transmission, while Goldwind took a 70% stake in German wind-turbine maker Vensys Energy last year. Do you expect that more Chinese turbine manufacturers will make a move into Europe through acquisitions in the coming years and follow Suzlon and Goldwind’s pattern and how do you think the European industry will react?
We have seen it in many other sectors, so why not in ours? What could the European wind industry say about it? They have to compete. If you look at who owns almost half of the market in each country, it is always local companies. In Germany it’s Enercon, in Denmark Vestas, in the US it’s GE, and in Spain it is Gamesa. Of course, the other half is owned by the other players. The only global company today is Vestas, and the other big companies in Europe are present in some markets, but we cannot yet call them global players. The solution for the European manufacturers is to globalize. It doesn’t make sense to produce in Europe and then have to ship the product abroad. European companies have the know-how and have been at the forefront of the wind industry for many years. Therefore the solution is to open new markets and to continue to innovate.
You can find all the global players in the world markets. In the future, you will see a much stronger American presence that you have seen until now, and in the shorter term, this is much more dangerous for the European companies than for the Chinese.
It’s also a question of innovation, as I was saying before. The Chinese are not yet innovating in the wind sector, and they are just coping, as the Japanese and Koreans did 20 years ago. As an example, when I was young I always told myself that I would never buy a Japanese car. Today I drive a Toyota Prius. Why I am driving a Toyota? Because I thought it was the best car I could buy according in terms of innovation and value. The European manufacturers will have to keep innovating in the sector to survive.
What should be the main objective for the European wind industry?
The target is twofold. First, it should aim to be present in as many markets as possible, and second, it should continue to drive the innovation process of the industry in order to keep improving the technology.
Would it be interesting to invite Chinese and American companies to participate in Europe’s Upwind research project?
Upwind is a project financed by the European Union and invites other countries out of the European Union to collaborate, including China. It is not a closed affair, but of course it is not easy. The Chinese are really keen to encourage technology transfer which is really understandable, as they want to develop their technology. However, we have to see what technology transfer means because sometimes it seems as if Chinese have their own definition. Of course, you will never see Enercon, Vestas or Gamesa transferring their technology anywhere, let alone China. What’s necessary is to provide a framework so that other companies will be able to produce similar products.
Upwind has this aim. The companies that are participating in this project do not want to share their technology with other companies in the sector, but they are willing to collaborate and share their knowledge. Upwind is trying to look towards designs of the future, what they will look like and discover what still needs to be developed. This could happen as the result of a technology transfer between China and the EU.
The next big event in the agenda will be COP15. How important is that we will be reaching a comprehensive agreement and what will be the role of China at the negotiating table?
Expectations are high, and I think that they have become even more so after the US presidential election. The USA’s position is critical. We saw what happened at Kyoto when the US didn’t participate. It is a country that must be considered since it emits almost one quarter of global emissions. Now that China emits an amount equal to this, how can an agreement be reached without considering these two? Hopefully they will collaborate, but it will be difficult because their approaches are so different to the European model. We need to find a balance, but things look positive in my opinion. Firstly, because President Obama stated that renewable energy will still be a priority despite the financial crisis and secondly, because the Chinese government understands that renewable energy is a priority. Of course, as they have stated, they consider that the rules agreed for the developed world cannot apply to them, and I have to say that I understand. Historically, it has not been China and India that has caused the CO2 build-up that we now have, but rather the USA and Europe. So, there has to be a difference in the approach, but at the same time, engagement from China.
We had a similar discussion in Europe when we signed the Kyoto protocol, as countries like Greece and Spain were saying that that they were not at the same level of development as Germany. So, although we had reached a global emission agreement, we set different targets for certain countries. I am not saying that we should use the same method at COP15, it is clear that we should have a different approach for China and India. Developed countries have to make a better and bigger effort than China and India, but China and India still need to be engaged.
What is the one thing that you would like to see happening in the next 10 years?
I would like to see a good agreement in Copenhagen. I really think that it is crucial for the further development of the sector, and we cannot wait because things are going from bad and worse in terms of climate. I think that this agreement, at a global level as well as the European directive, will have a positive impact on global development.
| Company: | European Renewable Energy Council |
| Position: | President |
| Country: | Belgium |