The International Energy Agency (IEA), in its recent net-zero roadmap, set out the terms of the global energy transition in the starkest of terms: new fossil developments would have to be shelved around the world and a “immediate and massive” renewables deployment that would quadruple last year's record-setting deployment would have to be undertaken.
As an industry, there is no doubt that renewables are ready for this challenge in spirit. Wind and solar have demonstrated the technological capabilities to comfortably, and competitively, satisfy energy demand for some time now. And this technological reliability signals significant potential for supporting the job creation, electrification, and overall gross domestic growth forecast by the IEA.
Renewables are still a relatively small industry, however. Stood next to the manufacturing giants of the world, like the automotive sector, which commands a global footprint across more than 100 nations, and an output of about 80 million cars and trucks in 2020, it’s clear that the expansion of renewable energy plant has a long way to go to reach this scale. For wind energy suppliers to ramp up annual installations from tens of gigawatts to the hundreds needed for net-zero, the mechanics of our industry must evolve – and do so quickly.
Growing the wind energy supply chain will be the driving force behind much needed scale for renewables. At present, this expansion is hindered by three key challenges: a need to adopt more long-term thinking from governments, varying maturity amongst suppliers, and siloed operations across OEMs.
The stop-start journey of balancing manufacturing operations with demand has created employment volatility, with job losses from factory closures further amplified in the industrial ecosystem that surrounds any given factory. When viewed in combination with the extensive cost-inefficiencies involved with opening and closing manufacturing facilities, the missed opportunities for generating societal value are simply too big to ignore.
To reach a net-zero future, the wind energy supply chain must shift towards a more collaborative, and long-term perspective, starting with a paradigm shift towards supply chain sharing amongst OEMs.
The automotive industry has successfully established a foundation of cross-player collaboration, where car brands share production lines to ensure that factories, and their workforces, are never sitting idle. Intellectual property reservations have prevented wind OEMs from taking this leap at a global scale in the past, but this is a missed opportunity. Vestas has already begun this journey, with the recent divestment of its Pueblo tower factory to CS Wind as the most recent example.
To reach a net-zero future, the wind energy sector must become more collaborative, including supply chain sharing by OEMs
More long-term thinking from governments could help address the employment unpredictability caused by a fragmented operational footprint. Too often, manufacturing operations are planned with individual OEMs, in line with short-term demand. This model leads to a disproportionate focus on the fabrication side of the renewable value chain, whereby local content requirements largely address jobs that may prove to become increasingly volatile as the industry grows.
In order to harness the resilience-building potential of renewable energy, and ensure that the projected 3.3 million new jobs in wind power are fostered sustainably, both public and private stakeholders must adopt a more holistic perspective. As installed capacity grows, and wind farms age, sustainable employment from wind energy will be driven predominantly by service needs. These are the jobs that must be necessarily local, and with most wind farms standing for 20 to 30 years, they are long-term by nature.
In order to pave the way for this employment model to span across a global scale however, the renewables industry must consolidate its manufacturing footprint, sharing production lines and fostering stronger partnerships between OEMs. This would also require governments to grant more autonomy to wind industry leaders, empowering OEMs to shape their own implementation of local content, exercising the freedom to spread requirements across the full lifetime of a project.
As the wind energy manufacturing industry grows, its supplier network must necessarily mature with it, and this process can be enabled by adopting a longer view on planning. A more consolidated manufacturing footprint, encompassing more collaboration between leading manufacturers, could support a longer-term perspective towards strategic planning for OEMs.
If this is in turn shared with suppliers through increased transparency, it can support increased maturity further along the value chain. Materials suppliers can adjust operations in anticipation of large orders, transport providers can more accurately anticipate where and when vehicles need to be deployed.
Enabling this maturity might also better support an increase in sustainability performance, as operational foresight can create better visibility on how sustainable alternatives can be deployed to reduce waste production or carbon emissions.
If the IEA’s roadmap is the most recent in a long line of reminders about the ongoing disconnect between climate rhetoric and reality, the mechanics of the renewable supply chain is a clear example of how this gap can begin to be closed. With stronger industrial partnerships, and through an adjusted approach to local content requirements, wind industry leaders can begin to deploy their technologies at far larger scale, and accelerate progress towards net-zero targets.
Perhaps more importantly however, an adjusted approach can drive more widespread, sustainable employment, both addressing the haemorrhaging of jobs driven by the waning fossil fuels industry and laying the foundation for more prosperous societies in the fast-approaching future.
· Tommy Rahbek Nielsen is chief operating officer at wind OEM Vestas