Vestas CEO Q&A on wind power potential for MENA
Ditlev Engel presents his vision for wind energy industry in region
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 % 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.Morocco), 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 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, according to Bloomberg News Energy Finance, 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.
GWEC’s General Secretary Steve Sawyer commenting on the outlook for wind power in the MENA region, said:
“There have been encouraging signs for wind power development in the MENA region in the past few years, especially in countries such as Morocco, Egypt and Tunisia, and also in Iran. Together, 230 MW were installed in these four countries during 2009, taking the total for the MENA region up 38 per cent to 828 MW at the end of last year.” He also expressed that wind power usage in the MENA region will continue to increase in the future as national policies become more favourable and technological advances are introduced.
What is the importance to Vestas of participating in WFES?
Participating in the WFES is part of our ambition to position wind on par with oil and gas. Wind, Oil and Gas is Vestas’ vision, which expresses the ambition of making wind an energy source on a par with fossil fuels. At the end of 2009, wind power accounted for less than two % of the world’s combined electricity production. Among renewable energy sources, wind power is currently the cost-effective and readily deployable means of securing clean, carbon-free power.
If the necessary policy decisions and investments are made now, for example to expand the power grid and designate wind energy deployment sites, Vestas believes wind power can make up at least 10% of total electricity production by 2020. That translates into installed wind power capacity of at least 1,000,000 MW, as compared with around 160,000 MW at the end of 2009.
The wind power industry, including the many sub-suppliers, will be able to create more than two million jobs along the way. The key to realising the potential is having long-term, stable national policies that provide the industry with the necessary opportunities to plan and invest in employees, technology and production facilities.
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.
Where do you think the main industry driver is/will be coming from — 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.
What do you think have been the biggest changes in the wind industry in the past 30 years?
Since the creation of Vestas until today, wind energy has gone from being an alternative source of energy to being a mainstream energy source employing more than 550,000 people worldwide. In the past three decades, great steps have been taken and the development in wind technology has led to important achievements in terms of top wind turbine performance and reliability. It is more than 30 years ago when Vestas started focusing solely on wind energy solutions, which is why we can proudly say that we are pioneers in this blooming industry.
Indeed, the growth of wind energy has unmatched precedents. According to GWEC’s Global Wind Report, in 2009 more than 38,000 MW of new capacity was installed in the world, which means a growth of 31.7 % compared to the previous year. Globally, the total capacity by the end of 2009 was 160,000 MW, the main drivers for this growth being the markets in Asia, North America and Europe, each of which installed more than 10,000 MW of new capacity that year.
Such growth figures, especially despite the global financial crisis, reflect the potential of wind energy and the interest for wind all over the world, driven by the efficiency, reliability and fast ramp-up of this clean technology.
Among the most remarkable success stories of installing of wind energy at a large scale, the cases of Spain, China or the USA can be mentioned:
• In Spain, wind power is consolidated as the third technology in the electrical system after having reached a production level of 38,188 GWh in 2009, which covered close to 15 per cent of the electricity demand in the country. And despite the financial crisis, Spain was in 2009, for the second consecutive year, in the lead of all European countries in terms of new installations, with 3,186 MW.
• The case of China is equally outstanding having more than doubled its capacity from 12,200 MW in 2008 to 25,800 MW in 2009, becoming the second largest market in the world in terms of installed capacity.
• The USA also shattered all records in 2009, installing nearly 10,000 MW of new generating capacity, and reaching the threshold of 85,000 direct and indirect jobs created all over the 36 states, where it operates.
Beyond the achievements already made, the prospects for wind energy are bright, both in terms of playing a key role in satisfying the world's increasing power demand and achieving major greenhouse gas emissions reductions.
Actually, according to the Global Wind Energy Outlook 2010 (GWEO 2010), the global wind power capacity could reach 2,300,000 MW by 2030, providing up to 22 % of the world's electricity needs.
One of the main key drivers for this growth is the development of wind technology. It is thanks to the R&D development and the discoveries in the field of wind energy that Vestas has been able to achieve a 100-fold increase in turbine power, from 3 kW to 3 MW in the last 30 years, making wind energy a leading competitor in the race for powering the world’s increasing needs. Overall, the steps taken have focused mainly on three fundamental aspects:
Improving the efficiency and reliability of the wind turbines, maximising their production output and reducing the cost of energy.
In 2009, Vestas started to market its new turbine types, V112-3.0 MW and V100-1.8 MW, and the first orders have been announced this year. In addition, Vestas is developing a 6.0 MW turbine for offshore operations. All Vestas’ new products are designed to provide the customers with Business Case Certainty and the lowest Cost of Energy.
As technology is a cornerstone of all Vestas activities, we have the largest and most advanced wind energy Technology R&D facilities in the world, where we continuously seek for innovation at the same time that we thoroughly test all the components of our turbines, in order to ensure that we will offer our customers the most efficient, reliable and profitable wind power solutions. All in all, our aim is simple: to develop today the power systems of the future. Our technological advancements have not focused solely on our products, but also on their service and maintenance during their entire 20-year life cycle. By using predictive and preventive maintenance techniques, Vestas can identify potential problems before they arise and take action to address them, helping to reduce the turbine down time and optimise their production output.
What do you think are the existing key technological developments that have had the greatest impact on the development of the wind industry?
Reliability and efficiency are the key words behind the technical developments in the wind industry, and over the last 10-15 years the wind industry has taken a giant technological leap forward. We now see highly efficient wind turbines delivering energy at a low cost – based on refinement and innovation of the wind turbine technologies. That covers all components in the turbine, ie. tower, generator, blades etc. When asking customers they demand the maximum security for the capital they have invested in wind power at the lowest cost per MWh.
This is the imperative when developing wind turbines, and Vestas’ latest product on the market – the V112-3.0 MW – has been developed to fulfil this demand. This wind turbine will be the most reliable on the market, combining both proven technologies and innovative solutions.
Officially released for sale last summer, the V112-3.0 MW developed to harness the power of the wind at low and medium wind speed sites, will optimise energy production, lower operation costs and strengthen the business case, thus improving the product’s bankability.
Why does Vestas emphasise water consumption in the context of power generation?
Water, energy and climate change are inextricably linked. Energy is needed to produce, treat, distribute and use water; and water is needed to produce most forms of energy. Climate change will hit through water. Energy is linked to causes of and responses to climate change.
Wind energy does not consume water nor does it emit climate changing greenhouse gases. From a cost perspective, wind is the most competitive low water / low carbon power generation technology. Wind is also abundant in many areas, where water is or is expected to become scarce. In fact, one could say that wind is a drought-resistant power technology.
How has Vestas become the world’s leading wind energy company?
Vestas is the only global energy company dedicated exclusively to wind energy – striving for business case certainty and the reduction of the cost of energy for our customers and for the world.
Our core business is the development, manufacture, sale and maintenance of wind power plants – with competences that cover every aspect of the value chain from site studies to service and maintenance. Our vision is to establish wind power on a par with traditional energy sources such as oil and gas.
The main and most important driver for our company is technology. Research and innovation are crucial for the development and growth not only of Vestas, but of the whole wind industry. And it is thanks to our technological leadership that we have been able to maintain our number one position over the time, despite fierce global competition.
Furthermore, the fact that wind energy has been our sole focus during the last 30 years has also been fundamental. This has allowed us to invest all our efforts in getting to understand the energy of the wind and improving the wind solutions, so that it could become a main source of electricity production. Over these 30 years of dedication to the wind, we have learnt more than anybody else in the world about wind energy.
What is more, Vestas is actually the only wind energy pure player with a global scope. It is our goal to serve our customers best, no matter where they are located in the world or where they wish to install their wind power plants. For that, we have developed an approach that allows us to adapt to almost any particular needs, focusing always on offering the best tailored solutions based on our global technology, experience and expertise.
Overall, we have installed more than 41,000 wind turbines in around 70 countries in the world, an unmatched track record equivalent to almost one third of all the turbines ever installed. And for each of these turbines, our efforts have always been on delivering the highest business case certainty and the lowest cost of energy to our customers, at the same time that we secure the highest safety and security standards for our customer, our employees, and the planet.
Can you give us details of any projects Vestas is undertaking in the MENA region?
As of 30th June 2010, Vestas had delivered more than 460 MW of wind capacity to the MENA region distributed, as shown below.
Azerbaijan 2 turbines = 1.70 MW
Cape Verde 9 turbines = 2.55 MW
Egypt 124 turbines = 79.08 MW
Iran 37 turbines = 16.38 MW
Jordan 5 turbines = 1.13 MW
Morocco 84 turbines = 50.40 MW
Turkey 121 turbines = 312.91 MW
UAE 1 turbine = 0.85 MW
Total 383 turbines = 465 MW
In addition, Vestas recently announced the signature of a contract for a wind power plant in Cape Verde totaling 25.5 MW consisting of 30 units of the V52-850 kW wind turbines.
What are Vestas’ expectations for the development of wind in the MENA region?
According to Emerging Energy Research “Middle East and North Africa Market Environment Snapshots”, wind activity has led to almost 900 MW of operational projects. Even through the development of renewable energy is still not a top priority in the oil and gas-rich region, where fossil fuel-based generation represents over 90 % of installed capacity, several countries are starting to increase the renewables contribution (including wind) to their power mix.
Currently, a 6,900 MW wind pipeline in the region, driven by a lack of or declining gas exports, will continue to grow the installed base.
Egypt and Morocco are moving beyond pilot projects with new renewable energy legislation and have a pipeline close to 4,000 MW. In 2010, Morocco passed a Renewable Energy Law and created a renewable energy agency to promote installation of 2,200 MW of wind. Egypt is drafting an Electricity Law to liberalise the power market and achieve its target of 20 % renewable generation by 2020, including 12% from wind (7,200 GW). Other countries, such as Tunisia, Jordan, the UAE, and Israel, are experimenting with different policy approaches.
The MENA region has one of the highest population and economic growth rates in the world, pushing-up energy demand. This increasing energy need is creating an urgency to diversify the sources of energy, particularly in countries that lack or are depleting their fossil fuel supplies, notably petroleum and natural gas products. As for the countries with greater reserves of fossil fuels, the introduction of renewable energy sources in their energy mixes is also fundamental in order to meet international energy standards, reduce their levels of pollution and diminish the consumption of water for energy generation.
Based on this and provided that the political leaders will create the right policy frameworks, the wind industry will produce the results. We will make the investments, take the risks, and create the jobs. However, this requires a policy framework that re-balances the incentives indisputably in favor of green investment.
Why is it important for Vestas to be at the fourth edition of the World Future Energy Summit?
The World Future Energy Summit (WFES) is an event that enables policy creators and business decision makers to come together to find solutions to global energy challenges.
Vestas has been leading the wind energy sector for more than 30 years and, as a pure-play wind company, Vestas is fully committed to find wind solutions capable of increasing energy production while being environmentally sustainable.
Government policies play a critical role in the industry, which needs long-term, stable policy frameworks in order to develop.
The theme at this year’s WFES is – not by chance – “Enabling future energy solutions” and Vestas would like to seize the opportunity to give our inputs to policy makers, industry representatives and other stakeholders.
We firmly believe that with the right regulatory framework and the necessary investments, wind can be on par with other energy sources as oil and gas, and it can contribute to increasing MENA’s energy security and supply while reducing the levels of pollution.
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.
Apart from this, what do you think are the main constraints on development of wind energy in the world?
The lack of long-term policies together with global financial downturn makes the financing of wind projects more difficult. 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 robust carbon pricing, fossil fuels are priced attractively – though, these prices do not capture their true cost to society.
One of the factors contributing to counterbalancing these challenging factors, however, is the business case certainty that Vestas wind turbines offer our customers and their financial backers. The more reliable are the turbines and the more certain their 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 are capable of offering cutting-edge wind turbines technology that ensures the customer a stable production output, together with a high return in the investment.
How do you see wind energy and other sustainable energy sources developing in the near future 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 some countries of the planet incl. countries in the MENA region, has already become an important issue and it is time to take this into account when rethinking the global energy and climate agenda.
Are you planning to expand your business to other power generating technologies?
Vestas is a pure play wind energy company. We have 30 years of total dedication to wind energy solutions, more than 41,000 wind turbines installed in 70 countries and we are working every day to make our vision “Wind, Oil and Gas” come true.
We know that wind energy can be on par with other energy sources, contributing to reducing CO2 emissions, reaching government targets on renewable energy production, transferring technological know-how, and above all the creating green jobs.
In 2009 the wind sector employed 550,000 persons worldwide and we expect to see the figure reaching 2 million by 2020, if the necessary policy decisions are taken now.