Jan Hylleberg, Danish Wind Industry Association
Release Date: 2009-01-20
You entered the wind industry as Managing Director of the Danish Wind Industry Association only 6 weeks ago, coming from the pharmaceutical industry what surprised you the most?What surprised me the most is that, in comparison with the pharmaceutical industry, the wind industry is growing very fast globally. It has what you could call a 'positive problem' in keeping up with demand. The biggest challenge at the moment for most sub-suppliers is to deliver what they have promised to deliver at the different time scales out in the future. This is an industry that is trying to upscale as fast as possible to follow the demand, that is the most interesting characteristic for the industry at the moment.
Of course, at them moment it is a little bit unclear which effect, if any, the financial crisis will have on the wind industry, but you could maybe foresee a situation where some of the small and medium sized sub-suppliers have to adopt a new strategy in relation to location of production and the development of plants around the world. Should it get too difficult to finance expansion, these might change the plans of some companies.
What kind of changes would you be expecting then?
From a Danish perspective, many companies are looking very deep into how to position and locate in the future. There is no doubt that the big manufacturers are moving production and some development out into the world, which creates a challenge for many of the sub-suppliers who have to decide whether they are going to do the same or whether they can stay in their current locations and manage the new situation through successful logistics strategies while maintaining their position as preferred sub-suppliers for the turbine manufacturers. These are strategic decisions that many of the companies are dealing with at the moment.
What are the main issues that your members take into consideration when making strategic decisions?
I see this discussion running in two tracks. One of the tracks is the direct dialogue between the manufacturers and their sub-suppliers about how to deal with their relationship in the future. The second is an ongoing dialogue among the sub-suppliers about the possibilities to enter into strategic alliances, link different parts of the business, and prepare for a global strategy. The question is whether sub-suppliers can gain easier access to the global market by cooperating or do they have to solving all the challenges by themselves.
How competitive is the Danish supplier base at the global stage at the moment?
I would say that they are in a good position because looking at Denmark from the outside, the Danish manufacturers and sub-suppliers know the technology, because most of it has been developed here. So there is a very deep insight as to how the technology works. The second strength we have is that it is in Denmark that we find one of the most experienced competences in renewable energy and in wind, due to the history of the Danish wind turbine industry. So we have the knowledge of the technology and we have an interesting knowledge space in Denmark. We also see a very open and direct cooperation between the private and public sector. The small and medium sized sub-suppliers are in very close and direct cooperation projects with the universities in this area. So, we have technology, competence, and the forefront of research and development in this region. Based on that, many of the sub-suppliers have of course, good precision in supplying the global market. But I think the biggest challenge is how to bring some of the sub-suppliers' production and competences into a global landscape.
Does the Danish government play a role as a catalyst for the globalisation of the Danish supplier base for the wind industry? How proactive is the Danish government in stimulating cooperation between China and Denmark in areas such as technology development and for the wind industry as China will become the world's largest turbine manufacturer in 2009?
First of all, Denmark is a small and very open economy, meaning that Denmark has no traditional industry policy in comparison with other European countries. Industry basically has to take care of itself and there is no direct government support for specific industries in Denmark. Free competition has been the development model for many years. However, in Denmark, we focus on the different industries' needs such as research, education and that part of the game, because industry has important demands in terms of future supply of new competences. This country is very focused on increasing public R&D in renewable energy, and particularly the wind sector, because that is the most important base for educating future PhDs, professors, and higher skilled people to be employed in this industry. In these areas there is a very close dialogue about how to develop the labour force.
The primary need for the wind industry in Denmark is the development of future competences in Denmark or bringing competences from abroad to Denmark. The second challenge in Denmark is finding enough room for the industry to develop, test and demonstrate future technologies. On both sides we are dependent on the government. In recent years, the planning period has been delayed a little so it is really important for the industry that the government makes decisions regarding the locations where the industry can test new technologies in the future.
In recent years, international turbine manufacturers have located their R&D facilities in Denmark to benefit from the technological knowledge and experience that is clustered here. However, Denmark is a very country and the wind industry is globalizing rapidly. How is Denmark going to stay ahead of the game and retain its positioning as a technology hub for the wind industry in the medium and long term?
In the coming years, the wind industry will act as any other big industry. Companies will move investments to the places in the world where they can find the required competences. Future development will show that, as in nearly every industry, some core competences will stay in Denmark due to history, tradition and the fact that Denmark has a unique position in these areas. At the same time, others will move to China, India, US, Spain, and Germany where companies will find the needed competences.
Denmark, together with the northern part of Germany, will have a unique position due to its long tradition in this industry. One of our future areas of focus will be how to integrate wind energy into a more flexible energy system. In Denmark, renewable energy, and especially wind energy, is the basis in the system and the existing coal-based energy production in applied to cover peaks in energy demand. In many other countries, renewable energy complements the traditional fossil-based energy production. The challenge is how to organise future energy systems to ensure that they are capable of introducing more wind energy into the system. Therefore, methods to get more value out of wind energy in the energy system will be one of the future areas of focus for research and development in Denmark. In Denmark, the goal is to integrate 50% wind into the energy system in 2025, so that is one of the areas in which Denmark can be a global centre of excellence.
Another area of excellence will be the offshore wind segment in which Denmark is already very strong and the country is determined to continue developing this competence. There already is a link between Denmark, Sweden and Germany in relation of these offshore plans, which also result in the need to integrate systems across the different countries. How to do that in practice? How do we have to develop systems to create a regional market for renewable energy? There are a lot of areas in which we are still at the forefront of the international developments.
As the wind industry globalizes the Danish suppliers and service providers are facing the decision to follow the turbine manufacturers into international markets. Do you believe that the majority of the industry will go global? And what will be the future for those who remain focussed on Denmark?
I think most of the Danish suppliers and service providers will follow the manufacturers and become global players. You will also see some of the sub-suppliers staying where they are and then find maybe another position in the supply chain. They might pursue joint initiatives with other sub-suppliers or focus more on delivering systems rather than components to the turbine manufacturers. We will see not one strategy, but several depending on where sub-suppliers are positioned in the supply chain.
Of course, the turbine manufacturers are interested in getting their suppliers to join them into international markets. On the other hand, some of them may have different strategies for different markets. In countries such as China and India they may be having a strategy that focuses more locally on these markets which already have relatively high competence levels. But still, the turbine manufacturers will favour having some of their well-known sub-suppliers with them in addition to finding new sub-suppliers in markets such as China.
Next year, China will become the world's largest manufacturer of wind turbines. To which extend are the Danish suppliers already actively supplying these Chinese companies in addition to the international turbine manufacturers operating in China?
Many suppliers have until now been focused on the internationalization strategy of their current main customer. How are they locating, what have they decided to do? Some suppliers will focus on their existing customers, while others will build a new customer base in China. The question for each company is can they do both? Will they focus on an exclusive strategy by following one or maybe two key manufacturers or will they pursue a strategy of supplying as many manufacturers as possible? I think this will be different depending on product or service offered.
Many Danish sub-suppliers are already doing business with the Chinese manufacturers, which benefits the Chinese turbines, as the cooperation with the Danish sub-suppliers gives access to products of high quality.
The supply chain of the wind industry already has several bottlenecks, do you believe that the financial crisis will provoke cuts in investment among your members, resulting in an even more challenging environment for the industry's growth?
The financial crisis is still very new for the industry still; it is too early to answer your question. I think the situation for many companies is that the investment decisions for 2009, 2010 and 2011 have already been made. It will be interesting to see over the next half a year whether the financial crisis will have any impact on the planning for 2011-12 and beyond. In some parts of the world maybe it will, in other parts of the world it won't. It also depends on who is building the new wind farms around the world. Is it private investors, or the big energy companies? The utilities basically have the money themselves and can decide nearly independently what will be happening, while in other places in the world demand will depend more on private investors. In my opinion, it is too early to decide on what will happen and what consequences it will create.
Outside of Europe, China and the US are two key markets in the wind industry, where do you see the greatest opportunities in the coming years?
Many companies in the industry will have a huge focus on both markets, and they have to deal with the fact that these two countries are operating differently. I foresee that the companies will have to deal with the two big markets in different ways because the speed of development in each market will be different. Decisions such as where to locate will also be different because you could say that many of the big manufacturers are already located in both markets, but they have been present in the United States for longer than in China so the industry is in a different position in each market. It will also be interesting to see how China will develop, how the new turbine manufacturers will succeed in the longer run, what the core competences of China will be in the long term, and how will the Chinese companies compete outside China. Of course, it will change the conditions in the industry.
Next year, Copenhagen will host the United Nations Climate Change Summit, placing Denmark's renewable energy ambitions and competences in the global spotlight. To which extend is the Danish Wind Industry Association taking advantage of this momentum?
We are having two areas of focus. First of all, we will be working together with GWEC to run a global campaign called 'Wind Power Works'. There will be a short presentation of the campaign in Beijing at the end of this October 2008, and the campaign will officially be launched in Poznan in December. It will run from COP 14 in Poznan to COP 15 in Copenhagen, and the campaign will demonstrate that wind power works by focussing on one wind site each month. In political debates there are still question marks in relation to wind in some countries, and we are trying to get into a dialogue with political decision makers around the world. A report that was published by the International Energy Agency this summer showed that that we have to solve the climate challenge, and that wind energy will be one of the key solutions. This campaign will demonstrate and document that wind power is already a solution, and that there is no risk in investing in wind as a solution.
Of course, in Copenhagen as far as we see it there are two very important issues. First of all, there is the need to set up new goals for CO2 reduction, which must be as firm as possible because that is important for the future development in this area. The second important thing is that we need a new decision to follow up on the Kyoto Protocol because otherwise it will be unsure what will happen after 2012. We need this market for CO2 and clear political support for it if we want to fight climate change further. These are the two most important political goals for the Copenhagen summit.
If we assume the Copenhagen Summit will have a very positive outcome for the renewable energy sector, how would you foresee the future of the wind industry?
The most positive impact that a decision in Copenhagen will have is that it will renew the political support and mandate to deal with climate change. It is very important and necessary for the sector to make huge investment decisions further in the future beyond 2012, so we need new political decisions regarding the climate change problem and CO2 emissions. The Copenhagen Climate Change Summit will form the outer frame for how this industry can and will develop. Without political support for renewable energy in relation to dealing with the climate change challenge then it is difficult to foresee that countries with start investing in wind energy. Of course, it is important for the industry that there is a very clear CO2 emissions goals as well as a market to support green energy. At the moment, China and the USA are big markets and we are waiting to see how markets like Russia, Brazil and other parts of the world will develop in the future.
The position that China will take at the United Nations Climate Change Summit will be very important for the success of the summit. What would be the message that you would like to send to the Chinese government and the key players in the Chinese wind industry about the role that cooperation between Denmark and China can play in realising both country's ambitions?
I would send basically two messages. In relation to the United Nations Climate Change Summit next year I would like to emphasize that reaching an agreement is very important. The second message is that the Danish wind industry is ready to enter into a debate about how wind can be the solution in different parts of the world. Being a country that has the technology, competences, and a country that is integral to the industry's R&D activities, we can be a partner for countries like China and India in discussions on how to establish energy systems around the world in which wind energy is integrated to reduce the amount of fossil-based energy production. Energy system planning and grid development are crucial for the future development of the wind industry, and we have the competences and knowledge to take this decision forward.
| Company: | Danish Wind Industry Association |
| Position: | Managing Director |
| Country: | Denmark |