Henrik Stiesdal, Siemens Wind Power
Release Date: 2009-04-10
To which extent will the European, Indian and Chinese turbine manufacturers be targeting different niche markets in terms of turbine size within the global wind turbine industry in the coming years, and where do you see the greatest opportunities?The Indian and Chinese markets have taken everybody by surprise with the potential and growth rates that they are showing. The local suppliers will play a much bigger role than we would probably have imagined 5 or 10 years ago. I still think there are great opportunities for very experienced suppliers of high-end products. I also think that in rural areas there will be a good opportunities for companies that can supply high quality applications suitable for weak grids. Furthermore, building up the grid infrastructure necessary to reach a higher degree of wind power penetration could provide interesting opportunities for a company like Siemens, that provides products and solution along the entire value chain of the energy sector.
How can a company like Siemens retain its current technology edge? Will the focus be on developing larger and larger turbines, or do you believe that technology and reliability gains will be critical to develop a competitive advantage?
In order to answer that question properly, you have to understand that there has been a paradigm change in the industry. Through the first 20 years of modern wind power development, any larger turbine was a more competitive turbine. But that has changed because we have hit a plateau. This leads to a genuine paradigm change, also for companies like Siemens which has been part of the entire history of the wind industry. Historically, it was not conceivable that one should look at smaller machines, but that has changed. There are many reasons for this new trend, such as developments in logistics and the opening of markets where smaller turbines could be more suitable than larger products.
Does this mean that the focus has shifted from size to reliability and efficiency?
Yes. When I started looking at building my very first wind turbine back in 1976, I spoke with the local utility about how one would connect it to the grid. The most important factor was the ability to get off the grid in case a disturbance takes place and to stay off the grid until it becomes stable again. Actually, that was how the grid operators wanted us to behave all the way up until 2002. In that year, a couple of the big system operators changed their minds and started demanding wind power producers to stay on the grid to stabilize the grid no matter what could happen. The penetration of wind power had become so large that wind power producers would have to contribute to the stabilizing of the grid when the conventional power plants would have an issue. That was a very big technological challenge because for the last 20 to 25 years the wind industry had consistently been working on getting off the grid, and suddenly we had to stay on the gird. That change required technological development. As part of that we nowadays, like most of our competitors, have turbines that are connected to the grid through a power converter. What you do is to convert some or all of the power into direct current and then reconvert it back to alternating current for the grid again. Most of our competitors use a system where only part of the power is converted, but we prefer a system where all of the power is converted, because this provides the best flexibility and regulation capability.
In a sense, we decouple the machine from the grid and by doing so create a very flexible system. One could say that we are now gentle to a weak grid. It therefore makes a lot of sense not only to concentrate on R&D activities in areas as optimizing energy yield, but also on how the power is integrated into the grid Because Siemens has huge competence in all of these fields we have a chance to be very well positioned in no matter what turbine size will be required in the market. That is the technological upside of being part of a large family.
What is the impact of the fact that Siemens is also offering such solutions to the other turbine manufacturers?
Siemens is also a major supplier to our competitors. So it makes a lot of sense to keep different business segments separate. But of course we also benefit from the great competences Siemens has in other business groups.
Since the development of the wind industry took off in Denmark three decades ago, the country has become a global centre for research and development in this sector. What do you believe the government should be doing at the moment in order to make sure that Denmark will keep a leading position in the future?
That is of course a good question. It is important to remember why Denmark acquired this position. In 1975, there was no indication that Denmark was heading for the kind of dominance that we have had in the wind industry for many years.
Of course, the leading role of Denmark is gradually being reduced because so many companies in different countries are now getting involved in the wind industry, but for many years Denmark was the leading country. Why? The main reason is that government engaged with the industry differently here than elsewhere. In other countries, the sector was driven by large, government funded R&D projects. Denmark also had its share of those programs, but more importantly the Danish government also stimulated the creation of a market. This market really drove the fast development of the Danish wind industry. While major, high profile projects aiming at the development of large turbines failed in other countries, the Danish wind sector grew from the grassroots.
Unfortunately, the Danish government has not really been good at maintaining a wind power market in recent years., As a result, installations in the Danish market have more or less disappeared. Today the Danish wind industry is facing a challenging situation since its home market has disappeared. This is particularly worrying for us when we develop new products. We are facing challenges because we do not always have the ability to generate our first volumes in close geographic proximity where we can properly monitor the operation of our new turbines. In theory we are a global company that can operate in any country, but it really makes a difference when your engineers are able to go out in the field and have hands-on experience. That is also why it is very important for us that we still have our factory next to our headquarters here in Denmark. This enables our engineers to get their fingers dirty.
Having a strong home market is part of the competitive edge that Chinese turbine manufacturers are experiencing at the moment. Siemens has not been among frontrunners in the Chinese market such as Vestas and Gamesa which have opened local manufacturing facilities in China. Is this a deliberate decision? And which impact could opening a manufacturing facility in China on the R&D and new product development process?
Actually Bonus, the predecessor of Siemens Wind Power, installed the first real wind farm in China in 1989, completed for the 40th anniversary of the establishment of the People’s Republic on October 1st. 1989. Before that, we had already put up individual installations in China as far back as 1986. We have certainly been active in China for decades, but still, Bonus was essentially a regional company. Now we are expanding quickly and have become a truly global company as member of the Siemens family. But you have to acknowledge that this transformation from a regional company to a global company takes time. And when we decide to enter new markets, or to re-enter markets such as China where we have had good results before but have for several years not been active, we want to do things properly. Therefore, we are at the moment investigating how our business approaches and technology features can best come into play in China.
If you were given unlimited financial and human resources, what sort of innovation would you like to bring to the global wind industry?
An exciting technology we are currently working on is the development of direct drive wind turbines. These could be a future option, especially for offshore applications.
What would we like to have? We would like a lot more wind turbines get installed around the world. What will make this happen? Wind turbines need to be competitive with conventional energy sources; that is the ultimate goal. So what target should one be working towards in the long run? We should make wind turbines competitive even in a situation where many governments fail to recognise that conventional energy sources should maybe penalised with some kind of pollution fee. To make wind competitive with no subsidies we need to improve the energy extraction per cost.
That means that what we should focus on aerodynamic research, because that has a direct effect on the energy produced. We should not necessarily focus on lightweight structures, but rather on low cost structures.. Weight reductions obtained through the application of carbon fibre are not necessarily the solution, because carbon fibre is too costly and while weight would go down the cost would go up. What is supposed to happen is that our cost of energy delivered to the grid has to go down. To make that happen, the key focus areas are improving performance, reducing cost, and making the value of the wind electric energy that we produce as high as possible for society. That is where the grid, forecasting of energy production and consumption, and maybe storage come into play.
Does a company like Siemens have to become more vertically integrated to realize these ambitions?
That question is not easy to answer,, because the more you integrate vertically the less flexible you become. Like Bonus, Siemens prefers to have vertical integration only where it makes send. We buy most of the components, like generators, transformers or gearboxes, and assemble them. We design some of the main components ourselves, in other cases the supplier has the design responsibility and we support with wind-related experience, but generally we let our suppliers take care of the component manufacturing.
In case of blade manufacturing it is a bit different. We felt that it was necessary to insource the blades in order to secure quality. In the end, it also turned out to be beneficial in terms of cost. When you do your own blade manufacturing and your own aerodynamics, then you develop the ability to change your products to reflect your new learning without giving it to a supplier who might share your learning with his other customers.
Do you believe that it will make sense that the headquarters of Siemens Wind Power will remain in Denmark in the long term, in the absence of a large local market?
It makes a lot of sense to have your headquarters where your competences are located. Until now, the technology competences in the wind industry have to a large extent remained in Denmark. It is not by accident that some of our big competitors have established development companies in Denmark. Therefore I see no gain whatsoever to move our headquarters anywhere else. But we are facing the fact that we cannot attract all the required researchers to Denmark, therefore we are globalising our engineering effort. We have set up competence centres in the form of engineering and R&D satellites in different parts of the world.
We do not have a heavy industry in Denmark for the development of machine elements, gearboxes, and large bearings, so our machine elements group is now at the Technical University of Aachen in Germany, which is one of the two leading Germany universities in this area. Also, we have an offshore department at the Technical University Delft in The Netherlands because the Dutch are very strong on offshore activities. And we have recently set up a test facility and R&D office in Boulder, Colorado, USA because Boulder is the meteorological and atmospheric science Mecca of the world. In those locations we can attract the people that we cannot attract in Brande, Denmark. This approach is our way to reduce the downside of being in the middle of nowhere in Denmark.
In which ways would you like Siemens Wind Power to expand its R&D activities into China, which has a large supply of engineering graduates, booming wind industry and strong government support for technology development and innovation?
Siemens has a good presence on technology in China. We are already now cooperating with Chinese research institutions and I am sure that there will be dedicated Siemens Wind Power research facilities in China, because we have a lot of respect for the technology competences in China. In five years, there will be features in turbines supplied all over the world that will have originated with our colleagues in China. China will have competences that we all can benefit from.
When you designed your first turbine in 1976, did you ever imagine that this industry would develop into the large global sector that it is today?
No, surely not. Among the pioneers we had a target at that time, which was just a sweet dream, that 10% of all electricity in Denmark should be supplied by wind power by 2000. That was the ultimate goal at the time, but as it turned out we reached that target a long time ago and today about 20% of Denmark’s electricity comes from wind power. We are now supplying wind turbines not only for Denmark but for the whole world. These machines produce more electricity each year than is consumed in our country. Of course I am very proud for having been a small part in that success.
How long do you expect the current wave of growth in turbine size to continue?
We started out with a 22kW machine and for 23 years we had an exponential growth in turbine size. I often mention that in 1985 we were making most of our living from a 55kW turbine, and at the time I was saying at conferences that commercial turbines would never exceed 250kW. Of course it did not go quite like that. Then five years later at a very big conference I repeated this mistake by stating that I made a funny mistake five years before, but that in 1990 we were all sure that commercial turbine size would for sure never surpass 500 kW. Therefore, nowadays I never make predictions on growth or turbine size since I have always been wrong!
| Company: | Siemens Wind Power |
| Position: | Chief Technology Officer |
| Country: | Germany |