Runevad: EU at energy crossroads

Vestas chief executive Anders Runevad is decidedly upbeat about the current perspectives for the European wind industry, despite palpable disappointment over the European Commission’s recent White Paper.

Still on a high from presenting Vestas’ higher-than-expected 2013 results last month, Runevad spoke to Recharge in Brussels after joining other leading renewables company bosses to call on the EU to adopt binding national targets for green energy for 2030. The event was part of an initiative that has brought together 91 companies and associations with an interest in developing the sector.

“I am positive,” says Runevad. “What we asked for was 30% and a binding target and what the commission came out with was 27% and a binding target, so I think that is a very good step in the right direction.

“Now the next part of this is to make sure that binding is binding. And we think the best way to achieve that is to have binding national targets — this is a system that has worked well in Europe before.”

Despite the positive tone, however, Runevad has little doubt that Europe’s energy policy is at a crossroads. He is conscious of the current problems facing the market, like rising consumer prices in some countries, as well as perverse developments such as comebacks for dirty coal generation in Germany and elsewhere. While admitting he has no general “cure” for the market, he is adamant that the current problems are not being caused by a growing percentage of renewables.

“Europe has invested in renewables and taken the lead and got a lot in return, I would say, both when it comes to European-based companies but also in terms of changing the energy mix,” he says, adding that the fact that Europe has subsidised its renewables industry to gain early mover status is all the more reason to keep developing it now.

“I think it’s important now that we reap the benefit of that going forward and not give up on the investment,” he says, pointing out that the wind industry is lowering generation costs — by 15% in the past five years — while the cost of new fossil-fuel plants has risen. “Let’s not stop now when we are so close to the finish line.”

While the wind industry needs to continue lowering costs, particularly offshore, Runevad says there are two major problems with the current debate around costs.

Firstly, there is no level playing field, with the fossil-fuel and nuclear industries receiving a wide range of subsidies. Secondly, wind-power costs are routinely compared with the generation costs of old legacy fossil-fuel plants.

“The fact is that there is about 95GW of capacity that needs to be retired in the next ten years in Europe, which is a substantial amount of energy.

“It’s a question of how you want to handle the mix change. It has to happen, it’s a question of when and how it will happen.

“Of course, if you are really short-term-focused, it’s probably more cost-efficient to run a coal plant for another month, but that’s not a solution.”

Runevad calls Europe “basically a replacement market” rather than one of growing power demand. But replacement market or not, Europe continues to be key for Vestas, although Runevad refuses to speculate on the impact on his company if binding national targets are not adopted.

In general terms, Vestas supports “green free trade” and sees this as fundamental to improving the cost equation. However, Runevad says he also understands the appeal of linking benefits such as job creation to certain incentive schemes.

Like most observers, Runevad is concerned about the current lack of clarity on the size of the offshore market as policy environments change in key markets such as the UK and Germany.

“I have seen the forecasts coming down, but I think if we can hold it at this level then it is a good enough size for us to be extremely interested and committed.” He adds that Vestas is completely committed to bringing its new 8MW V164 turbine to market and is “deep into many customer discussions” on sales.

Runevad says that Vestas’ offshore joint venture with Mitsubishi Heavy Industries, which is due to be completed and ready for launch in April, makes perfect sense given the size of offshore projects.

“On the customer side, it’s big utilities grouping together because these are big projects, and it made sense for us to pool resources with Mitsubishi and go for a good slice of a big cake, rather than a small cake.”

Runevad recognises that 2015, with the crucial COP climate meeting in Paris in December, will be a key year for the development of renewables, although he admits that “political decisions are one of the hardest things in the world to predict”.

“At the end of the day, what makes me very comfortable is that in all the surveys we have done, 70% of the population want renewable energy. And as any business school will teach, if such a big majority of the end-consumer asks for and wants your product, that is the best reassurance for the future.”

Engaging with the public and policymakers will be of utmost importance over the coming period. While Vestas has traditionally played a big role in promoting the wider interests of the wind industry, Runevad says the company will be looking to build on initiatives such as the joint declaration unveiled in Brussels.

“I have no problems with Vestas taking a lead, but the message is much stronger with an agreement among 90 companies than to go at it alone.”