Vestas is on a roll in the United States, with more good news to come in what is shaping up to be a solid 2015 for the vendor’s turbine and O & M businesses, Chris Brown, head of sales and service for North America, tells Recharge.
“We had a really good year last year. We expect to follow it up with a real good year next year,” he says, referring to sales. In recent months, the Danish company has announced 1.733GW of firm orders in North America – mainly in the US with about 960MW in Texas alone – with potential for 2.6GW of additional ones.
The 2MW V100 and V110 platforms have become best sellers with almost 900MW firm sales between them in the US. “But we have a lot more coming behind that,” says Brown, without providing details. He did not forecast 2014 or 2015 sales.
Vestas is challenging Siemens for the number two spot in the US market, which it lost in 2012. General Electric is the market leader. The Big Three have dominated order flow through 2016 totaling at least 7GW in firm orders. Acciona and Games have publicly announced one order each.
The consultancies see 4.5GW to 6GW in installations this year and somewhat better in 2015.
All this is quite a change for Vestas from a year ago when it had recently laid off hundreds of workers at its four Colorado plants - two of which manufacture blades, and one each for nacelles and towers. There was talk the company also was moving to sell or shutter the tower facility in Pueblo, which was operating at a fraction of its 1,000-per-year capacity.
Things looked bleak. The company and cyclical US wind industry were mired in their worst downturn in a decade, after Congress again allowed the federal production tax credit (PTC) to expire.
Even though lawmakers did renew it in early January 2013 with more favorable eligibility criteria, wind developers had no shovel-ready projects available. Those were rushed to completion the previous year to qualify them for the incentive, starving the supply chain in the first half 2013.
After July, however, orders began flowing, and then flooding in, as developers again rushed projects forward to beat the year-end PTC expiration date. Even so, installations in 2013 plunged 92% to an anemic 1.08GW, with Vestas delivering only two turbines totaling 4MW, according to the American Wind Energy Association.
While 2013 was a year to forget from a delivery standpoint, Brown took advantage of the market lull to better position Vestas for the inevitable upturn with the PTC again in place. Steps taken include:
*Standardizing Vestas’ product lineup around the 2MW and 3MW platforms. This simplifies marketing, and reduces inventory and production costs. Both platforms are robust and solid performers. Vestas is the leader for the 3MW US market which Brown sees as mainly in states along both coasts and possibly in the northern Rocky Mountain region.
*Getting closer to the customer. “We’re trying to position ourselves to be the first call. To make sure the customer understands the value of our product, and understanding what role they play,” says Brown, adding, “We’ll meet the customer where they want to be met.”
This means designing and providing solutions, as opposed to simply supplying turbines. “I think before you just kind of created a product – take it or leave it,” remarks Brown. “Now it’s more about how you elect your wind turbine.”
*Emphasizing O&M. “It’s critical,” says Brown, not only for product support, but also as a growing profit stream. “We think that service is going to be a second leg for us and pretty strong.” With a large fleet in the US - it installed its first turbine here in 1981 and had 12,444 of them spinning in 28 states as of 1 January - Vestas has a natural market to service.
Like its main rivals, Vestas had traditionally focused more on selling turbines, allowing some of the smaller service providers to cannibalize what is a lucrative business. In today’s context, that’s unacceptable with the vendors’ technologies driving what is now a maturing industry, and growing sophistication of wind markets and customers.
“They want to know real-time how we’re serving them and what impact it has,” says Brown. Implementing a more aggressive service strategy in still a work in progress, but he promises “you’ll be seeing us develop that over the next six or seven months.”
*Focusing on profitability. “We’re looking purely at profitable growth,” says Brown, implying that Vestas will not sacrifice profits for market share.
*Seeking third-party business. Retaining the Pueblo plant proved a smart move after several US tower suppliers left the business, and the Obama administration slapped tariffs on imports from China and South Korea. Suddenly, demand outstripped supply with the industry rebounding. The plant was well-placed to win outside business, which it did, and now is a profitable part of the US supply chain.
Looking ahead, Brown says from a manufacturer’s standpoint, he favors a four-year extension of the PTC by Congress to provide medium-term certainty. He believes that the incentive remains critical for industry success as it helps level the playing field with all forms of energy receiving subsidies.
“How the PTC looks and whether it is phased out over time, is up to Congress,” Brown says. For now, the incentive enables utilities to buy power very economically, on top of value they are deriving from increased competitiveness, quality and technological improvements of turbine makers’ products, he adds.
He expects the wind industry to get to grid parity in the not too-distant future, and then the PTC will become less important. The key then is that all energy sources get equal treatment.