The State of Wind Power … part one

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Re-posted by Madeleine Lewis, for Virgin United, June 30, 2014

As an innovative floating wind turbine is launched off the Portuguese coast, and the Germans start touting wind farms to tourists, we asked Morten Albaek, Group SVP & CMO of Vestas about the state of the wind energy industry, and a little about himself too. Here’s part one…

Vestas is the world’s leading wind power company, and Denmark is known for its progressive approach to renewables. Could a business like Vestas have been started in any other country?

It’s difficult to say. Denmark was a pioneer in developing commercial wind power during the 1970s. As concerns over global warming grew in the 1980s, Denmark found itself with relatively high carbon dioxide emissions per capita, primarily due to the coal-fired electrical power plants that had become the norm after the 1973 and 1979 energy crises.

Renewable energy became the natural choice for Denmark, reducing our dependence on other countries for energy, and greenhouse gas (GHG) emissions.
Furthermore, one year before the Chernobyl disaster, the Danes passed a law forbidding the construction of nuclear power plants.

The Danish grassroots movement also played a big role. The Danish Anti-nuclear Movement’s smiling-sun logo “Nuclear Power? No Thanks” spread worldwide, and the renewable alternatives were promoted by the Danish Organisation for Renewable Energy.

Many countries tried to subsidise green technology, but most failed to make a viable industry. The Danish system was an exception, providing 30% of initial capital cost in the early years which was gradually reduced to zero, but still maintaining a feed-in tariff. Finally, Denmark has always had fairly good wind resources.

Turbines in production. Image (c) Vestas
Turbines in production. Image (c) Vestas

Can you give us a snapshot of how the wind energy market is developing globally?

Based on the forecasts done by the Global Wind Energy Council (GWEC), we expect the market to continue to diversify over the coming years. Most of the growth will be in markets outside the countries in the Organisation for Economic Co-operation and Development (OECD).

Inside the OECD, wind power is approaching double-digit penetration levels in an increasing number of markets, and demand is either stalling or going backwards. The fight for market share and policy support is becoming more and more intense.

The competition with fossil fuel incumbents will continue until and unless there is a global price on carbon, a prospect which few look for any time soon even though the Chinese have started to consider it. However, the shine is starting to come off of the notion of the ‘Golden Age of Gas’, much touted in recent years, as the environmental and climate impacts of the fracking revolution in the US begin to emerge, and as artificially low prices begin to rise.
That, combined with political unrest in the hydrocarbon-rich parts of the world, has given wind and other renewables a competitive boost in terms of price.

In the absence of a concerted effort to combat climate change, it is wind’s cost competitiveness that is its greatest advantage in the marketplace. In Brazil, South Africa, Turkey, Mexico and elsewhere, wind is competing directly and successfully with heavily subsidised incumbents.

The boom and bust cycle in the US is driven by on-again, off-again policy; China’s support for wind as a major pillar of its energy strategy supports the continued growth in that market; and in the EU, the debate over 2030 climate and energy policy dominates the perspective for wind going forward, both on and offshore.

All in all, 2014 looks to be a record year, with annual market growth of about 33%, bringing it to about 47GW, with strong installations in North America and Asia, and the Brazilian market really beginning to come into its own. It is safe to say that growth over the next five years will be concentrated in Asia, Latin America, and Africa.

Growth of carbon pricing around the world. Image courtesy of the World Bank
Growth of carbon pricing around the world. Image courtesy of the World Bank

The 2013 market saw China back on top, installing about five times as much wind power as Germany in the number two spot. The 2012 market leader, the US, dropped back to sixth place, behind Canada (which had a record year), and just ahead of Brazil. Despite a lacklustre year, India moved into fourth place, right behind the UK, which had a good year both on and offshore.

Image (C) Wind for Prosperity
Image (C) Wind for Prosperity

Wind for Prosperity is a very exciting new business model for good. What are your future plans for that business?

Upwards of 1.3 billion people across the globe currently lack access to affordable and reliable electricity – with dramatic consequences for human health, education, and economic wellbeing. But up to 100 million of those live in areas with abundant wind resources.

Wind for Prosperity puts the two together, creating opportunities to provide clean water, healthcare, irrigation, educational opportunities, communications infrastructure, and other social and economic benefits for rural communities – and can do so on self-sustaining commercial terms.
The first Wind for Prosperity projects will be built in Kenya, and we’re now working with EP Global Energy to extend this to Jordan. In Kenya the projects will focus on up to 13 communities that are home to more than 200,000 people. The projects are expected to supply electricity at around 30% below the current cost of diesel generation; and when fully implemented, reduce diesel fuel use by more than 2,000 tons per year.

Wind for Prosperity is expected to bring the same benefits to Jordanian communities and thus support Jordan’s goal of becoming energy independent while lowering CO2 emissions. Additional opportunities are being explored in countries such as Ethiopia, Tanzania, Indonesia and Pakistan.

Screen Shot 2014-07-04 at 11.09.07 AM

Everything was looking as if I should stay in the industry, but six years ago, when I was 32, my dad died at 64, meaning that if I died at the same age as he did, I had half my life left. And that made me think about how I should use the next 32 years.

A month later, the bank had its annual dinner for global senior management. I was late. And looking through the window at my colleagues as I arrived, I thought, “They’re nice people, good colleagues, but is this professional community the only thing I want to experience?”
After dinner, I made up my mind that I simply needed to do something else with my life. I thought I might want to leave the country. And then a friend asked me if there was not one corporation in Denmark that I would like to work for. And I said, “Actually one. Vestas.”

Through a string of coincidences, I got a phone call from Ditlev Engel, the Vestas CEO at that time. He had heard I might be interested in working for his company and that we should meet.

Morten Albaek, 38, is Group Senior Vice President and CMO at global wind turbine manufacturer Vestas Wind Systems A/S. He has been selected three times as one of the 100 Most Influential CMOs in the World by the Internationalist and has been selected by Fast Company as one of the world’s 1,000 most creative people in business. He is the author of three bestselling books Generation Fucked Up?, Encounters Between What You Say and What You Do, and The Average Human Being.