Ditlev Engel, Vestas
Release Date: 2009-04-09
Vestas is continuously emphasizing the business case for wind power to influence policy makers around the world. What is the essence of the message that you are sending to drive the global growth of the wind industry?Basically, investing in wind power makes sense. Wind energy is a high-tech, innovative industry that has enormous long-term growth potential in China and around the world. The wind industry has been growing at 25% a year over many years and we continuously strive to enlighten people about the possibilities in the wind sector. Business people do not know enough, so we are creating awareness and knowledge about wind energy more than anything else. We are focussed on raising the awareness of the global scale of the energy and climate challenges that the world is facing and what we can do about them. People have realized that there is a need to change and we are explaining that we have an alternative.
Specifically in China, Vestas sees great potential in China’s wind power market. It has potential to become a wind energy Superpower because of its huge amount of untapped wind energy resources. It is also clear that wind energy has massive potential for both energy security and carbon abatement in China, as it can increasingly compete with coal in terms of cost. We strongly feel that helping to build local capabilities in wind energy is vital to building a strong Chinese wind energy sector
Of course, technology development has brought down the cost of wind power, thereby raising its competitiveness in the energy mix. What are the research priorities for Vestas as the race for bigger turbines appears to be slowing down?
Our research is not something we disclose externally, but we are of course focussed on the cost of energy, the reliability of our turbines and ensuring that our turbines are meeting the needs of our customers in their unique markets. For example, we will soon be introducing a new kilowatt turbine in China that is really tailored to wind and weather conditions in China. We need to pay attention to issues like available wind resources land use so we can offer turbines that maximize productivity in any particular area.
As well, we are focused on the sustainability of our turbines. For instance, 80% of a Vestas turbine is recyclable. It is about making a really sustainable product, not just about generating clean electricity.
Vestas has made the strategic decision to concentrate its R&D activities in Denmark, Singapore, India, the US and the UK. Why did you choose these five locations?
We have chosen those areas because they are close to the main markets in North America, Europe and Asia. In order to access the best brains in the world, we have to be present in the main regions. We are moving from a more local R&D setup to one that is more global.
But we will not stop there. We know that we need to increase our R&D presence in our biggest markets and that includes China. We already have a great technology team working in China on our new kilowatt turbine and we hope that that team will be just the beginning of an increased R&D and technology presence in China.
Of course, since China is one of the key markets for Vestas one would have expected the company to have an R&D office in China…
We certainly understand the need to have an R&D and technology presence in our biggest and most important markets. As we expand our presence in China through building more factories, we also intend to become more engaged in China through increasing our activities on a variety of industry issues, such as building a China-based innovation capacity and establishing a bigger technology and R&D presence here. We are also hoping to increase R&D projects with key university and industry partners.
The development of our new kilowatt turbine has meant the creation of a China-based technology team to support on-going innovation and adaptation of this turbine and other turbines platforms in China. The team will contribute to the ongoing development of the Chinese wind energy industry and the localization of Vestas China.
We have R&D activities in China, we just don’t have an R&D office in China but that is handled out of Singapore. We are in China but we don’t have a big lab in China. We are actually working also with various partners in China and we have 120 people in our sourcing office in Shanghai who are obviously part of our R&D activities through the development of our suppliers. This all takes place simultaneously.
R&D cooperation with companies such as Vestas is very interesting for the rapidly developing Chinese supply chain. To which extent do you cooperate with your suppliers in China and what can they expect from Vestas?
We cooperate a lot with them and it a true win-win situation. The ongoing development of our suppliers in China and the partnerships we build with them brings a lot of benefit to overall wind energy development in China, as well as to Vestas and our suppliers. All of our suppliers in China are part of a partnership designed to increase product quality and performance. Through programs like six sigma, we are helping suppliers to become globally-competitive and capable of delivering high quality products to the entire wind power industry.
What is the feedback you receive from the traditional Danish suppliers that you encourage to follow Vestas to China while at the same time your cooperation with Chinese suppliers is breeding their international competitors of tomorrow?
We are competing all over the world and no matter where you are positioned in the supply chain you have to be ready to compete globally. It is clear that the wind industry is a growing business and the globalization of the supply chain is a natural evolution. As the wind energy industry globalizes, it is also increasingly moving manufacturing capacity to China. This will help to develop the Chinese industry and create a more mature and modern industry with healthy, global competition that is good for the market and good for the industry.
Despite the global economic slowdown the Chinese wind industry is still set for nearly 400% growth by 2013, is the supply chain and local manufacturing capacity going to be the main bottleneck for Vestas’ growth in the Chinese market?
We don’t give any projections about future growth, as this is competitive information. However, it is clear to everybody that China has a solid wind energy strategy and determined leadership. There is no doubt that China has the potential to be a wind energy superpower.
But as far as I know nobody is investing more in China than Vestas is doing. That shows our commitment to China and to actively participating in the market there for the long-term. It also illustrates our dedication to working with our Chinese partners to develop a clean energy agenda for China. I will definitely not try to make clear projections on where China is going to go, since it is one of the most dynamic and fast-moving markets in the world. We do know that China is extremely dedicated to its clean energy agenda and we very much welcome that.
Vestas is committed to China's sustainable development and we recognize our obligations to help develop China in a sustainable manner and to support the development of China’s wind energy sector. As the global leader in wind energy, Vestas has a great deal of expertise and experience to share with China.
Vestas has the ambition to almost double its workforce in China and open several new manufacturing plants. How should the other wind turbine manufacturers interpret this move?
I cannot speak for our competitors, but I can say that we sending strong signals to our customers and to the government. We are saying that we are very committed to developing our business activities in China and that we intend to be here for a long, long time. Vestas’ focus on China as a key global market is a sign of our strong commitment to working with our partners to support the development of China’s wind energy sector. The development of our new kilowatt turbine for China is a good example of this approach and of our committment. This new product was developed in response to the needs of our Chinese customers and the Chinese market – we are listening to our customers and responding with a product made just for them.
Which role does Vestas aspire to play in supporting the Chinese government, electricity producers and wind industry in overcoming the challenges related to increasing the share of wind power in the energy mix?
For us, this is a key goal. There are many areas where Vestas can support industry development, from the policymaking side to turbine siting, grid integration, supply chain development, human resource development and technology and R&D. As the global leader in wind energy, Vestas is committed to helping develop China’s wind energy sector -- we are eager to share our 30 years of industry experience and expertise with China. Going forward, we really intend on becoming more active in this regard. We are active now – we are doing research with Tsinghua university, working with the industry and our customers on wind and siting and grid integration issues – but we want to increase our role.
I think that it is only natural when you are a partner that you work together on all sorts of issues. Of course we are very happy to take part in industry dialogues.
How do you expect the rapidly emerging Chinese wind turbine manufacturers to impact the development of the Chinese and global wind industry?
History has shown that if you do not have dominant domestic players in any market then you will not have a market. We are a global company, so we need to compete with everybody. The need to compete with a lot of companies in China, both domestic and foreign, is just a fact when you are competing in a growing market. We will have to just demonstrate that we are good enough in earning the trust of our customers to keep their business and in being a valuable partner for the entire industry.
We must cooperate and compete in order to develop the industry – just like we have done in Denmark and other countries.
What are the main priorities for your customers and how does your performance put Vestas ahead of the game?
I think it is business case certainty, cost of energy and the fact that we are easy to work with. Vestas has the most experience in the industry, a very reliable product range and is an active and accessible player in China. I think that it is important to say that all Vestas business in China is with Chinese customers. Therefore, it is very important to develop our business with people who also understand that country and make it easy to work with us. That means continuing to localize our company in China and to continue to work hard to better understand our customers and their needs, in the context of a rapidly-growing industry. It also means working closely with the government and others who set the direction for the wind energy sector to see how we can help.
Guillermo Ulacia, CEO of Gamesa, stated that the customer requirements in China are different from those in Europe. Would you agree with this statement?
I would both agree and disagree. All of our customers have some things in common: the requirement for a quality product that is dependable and productive and that drives a low cost of energy. All customers want a good relationship with a company that is easy to work with and that understands their needs.
I think that our Chinese customers are as professional as the ones we are dealing with in the US or Europe.
However, I would also say that each market is different and that would include China. Our challenge is to work hard to move to being partners with our customers in China, and not just a wind turbine supplier. In a relatively younger market like China, that means sharing our experience and knowledge with customers to reach common goals.
You already mentioned the importance of the cost of energy, which is destined to be impacted by the price that the international community will put on CO2 emissions at COP15 this December. What are your expectations for the result of these negotiations, and how will it impact Vestas and the wind industry as a whole?
I think that it is very evident that we have emitted a lot of CO2 in the world that we have not paid for. Everybody around the world is starting to realize that the CO2 comes at a real cost. However, I think that H2O is going to create an even greater challenge. As UN General Secretary Ban Ki-moon said, global warming will hit through water. Unfortunately, drought and floods are much more tangible for all of us, and will create more awareness that something needs to happen. These impacts need to be factored into the CO2 cost which is not just an emission cost; the total cost to society and the world must be taken into account.
Unfortunately, people have a tendency to compare the KWh cost of different energy sources without featuring the cost to society and nature. Some of the studies that I have seen show that right now governments around the world are injecting around US$600 billion a year to support the fossil fuel industry. Our view is that we are at the end of the beginning of the technological development. With 1400 people in R&D, Vestas is the largest R&D centre in this industry, but if you compare this with the R&D capabilities of the established fossil fuel industry we are a very small organization. One could imagine the impact of putting the same kind of determination and resources behind wind energy and other clean energy sources.
It is clear that there is a realization that change is required on the one hand, while on the other hand it is of course up to the governments to make this happen. In China, for example, you have very strong and clear government plans for wind energy that give the market a lot of stability and predictability in terms of the role it can play in reducing CO2 emissions.
I am absolutely certain that with this agenda it is up to everybody to put more emphasis on research and development. There is a clear realization among scientists that something different must take place. I do not think this is just a money issue; it is also an intellectual capital issue because it takes time to educate people to work with this type of energy. Therefore it is not enough to ask governments to put money on the table, this needs to be backed up by research institutes and universities to ensure that we have the whole chain in place. It will be an ongoing journey. We are working with partners around the world on these issues, and we intend on working with partners in China.
The negotiations at COP15 will undoubtedly be very difficult. If you would be given the honour to make a one minute speech at a moment when the negotiations are stuck, what would your say to get the process back on track?
The solution is in the mirror. That is all it takes. We are all responsible for the future of the planet and the health of the environment that we give to our children and grandchildren.
What is the final message that you would like to send to China’s political leadership?
It is very encouraging to hear how much focus the central government is putting on the climate and green agendas. China has the dedication to make this happen and it is up to the rest of us to support China and work together in this direction. When such an important player in the world as China is supporting this agenda it means that we can reach global solutions. China obviously has tremendous influence over this agenda so we welcome that this they give this such a high priority. It is very important for Vestas that we play a strong role in supporting China’s efforts on sustainable development and reducing carbon emissions. This is not just about business, it is also because we have a responsibility to work together to develop solutions to our shared challenges.
| Company: | Vestas |
| Position: | Chief Executive Officer |
| Country: | Denmark |