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Ditlev Engel on the wind power industry's long road to prominence

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ANALYSIS

Ditlev Engel, president and CEO of Vestas Wind Systems discusses the wind power industry's long road to prominence.

What do you think are the main industry drivers — business, government or consumers?
There is a rich interplay among diverse drivers in the green energy industry. For their part, public policies play a crucial role in the energy sector – and have for many decades.

Driving green growth requires recalibrating the incentives and disincentives to clearly favour green growth. In order to harness wind energy fullest potential, the sector needs long-term stable national policies that provide the industry with the necessary opportunities to plan and invest in employees, technology and production facilities.

The bottom line message is clear: policy does matter. If our political leaders are serious about green growth they need to foster the right “growth environment” with a new balance between incentives and disincentives that indisputably favours green energy.

A new balance that creates the market conditions to enable industry to what it does best: forge innovative, efficient and profitable solutions to the challenges we face globally.

Industry leaders will do their part to create green growth and a low-carbon energy future. But it is a two-way street. Our message to the political leaders is simple: “Give industry the policy frameworks, we’ll give you the results”.

We’ll make the investments, we’ll take the risks, and we’ll create the jobs. A big part of rebalancing the incentives and disincentives 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.

Are you saying that wind power can be a competitive energy source even without subsidies and mandates from government?
Wind energy is more and more price competitive. Vestas itself is constantly working to deliver the most efficient and reliable wind solution at the lowest cost of energy.

But in order to harness wind energy’s fullest potential, the sector needs long-term stable national policies that provide the industry with the necessary opportunities to plan and invest in employees, technology and production facilities.

The bottom line message is clear: policy does matter. If our political leaders are serious about green growth, they need to foster the right “growth environment” with a new balance between incentives and disincentives that indisputably favours green energy.

A new balance that creates the market conditions to enable industry to do what it does best: forge innovative, efficient and profitable solutions to the challenges we face globally.

Our message to the political leaders is simple: “give industry the policy frameworks, we’ll give you the results. We’ll make the investments, we’ll take the risks, and we’ll create the jobs.”

A big part of rebalancing the incentives and disincentives 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.

What are the biggest challenges facing the wind industry in the next three years, both globally and regionally?
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.

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 a robust carbon pricing that captures their true cost to society, fossil fuels like coal and natural gas are priced attractively – though again these prices do not capture their true cost to society.

One of the factors contributing to counterbalance this challenging situation is the business case certainty Vestas wind turbines offer our customers.

The more reliable are the turbines and the more certain will be the production output, the more the banks will be willing to finance a wind project.

Thanks to our total commitment to wind solutions and their innovation, we offer cutting-edge wind turbine technology that ensures the customer a stable production output, together with a high return in the investment.

How does Vestas view the MENA region’s increasingly strategic role in the development of wind energy?
With around 160,000 MW of global installed wind power capacity at the end of 2009, wind power accounted for less than two percent of the world’s combined electricity production.

The Global Wind Energy Council ‘Global Wind Energy Outlook 2010’ revealed that global wind power is set to double between 2010 and 2014, and that half of the growth currently taking place in the wind industry is taking place in emerging economies.

There are several factors supporting the development of wind energy in the MENA region. Some of them are the following: The region’s world class wind resources: Countries such as Morocco or Egypt, just to give an example, have the region’s strongest wind speeds, reaching levels above 8.0 m/s at 40m.

Wind can be an important contributor to the power mix in MENA countries with no indigenous fossil fuel reserves (eg. Moroco), countries with declining exports (eg. Egypt) or countries that rely heavily on electricity imports (eg. Jordan, Morocco).

Wind can help to cover the increasing energy demand due to economic and population growth in the MENA region in the following years. Wind can help to alleviate the MENA countries’ concerns about over-reliance on a single source of energy improving their energy security and diversity of energy supply.

Wind can also contribute to mitigate MENA’s water scarcity problem: Wind does not consume any water during electricity generation. Wind can help to combat pollution: MENA region has the second highest urban air pollution levels in the world, and wind is a clean source of energy that does not generate any gas emissions.

With the development of the appropriate regulatory national policies, the improvement of grid connections in and among the MENA countries, the establishment of relevant permitting processes and financing mechanisms supporting the integration of wind energy in the energy mix, the MENA region has the potential to become one of the world’s largest producers of wind energy.

How do you see sustainable energy sources developing in the MENA region?
Rapidly increasing domestic energy demands, concerns over energy security, fresh water scarcity, and diminishing domestic energy resources make the need of developing new sources of energy even more urgent.

A year on from Bloomberg New Energy Finance’s last overview of the region, the Middle East and North Africa are witnessing a concerted push into renewable energy, a significant increase in commissioning, the announcement of more ambitious renewable energy strategies and the improvement of legislation. This is of the utmost important considering that water, energy and climate are closely linked to each other.

Energy is needed to produce, treat and distribute water; water is needed to produce most forms of energy, except wind, and energy production is the largest single source of climate changing CO2 emissions.

Water, especially in this region, has already become an important issue and it is time to take this into account when rethinking the global energy and climate agenda.

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