The CEO of Vestas urged governments to fix policies based on an “outdated mindset” and to help foster a “less hostile business environment” for the development of wind power.
Henrik Andersen said policy mechanisms focused solely on cost of energy that lead to “unsustainable industry mechanics” have in many markets helped create the problems that have beset the sector over the last few years.
“This has, in turn, driven developers to extreme measures to maintain their stake in the business,” Andersen wrote in an article ahead of the Davos summit of global business leaders.
“These measures include a race to the bottom in bidding wars, an arms race for ever larger turbine platforms and speculative bidding that leads to unrealistic project commitments.
“The result? Unviable project economics that cannot sustain what is now – with just six years until the global deadline to peak carbon emissions – a critical industry.”
The Vestas chief said governments urgently need to reform auctions that underpin such negative outcomes, adjusting price ceilings to allow more realistic bids – as seen already in the UK – and shunning mechanisms such as uncapped negative bidding, instead replacing them with more sophisticated revenue-sharing measures to create a more sustainable sector.
Andersen wrote: “Overall, it’s time to focus on what wind energy will deliver – if granted a less hostile business environment – and not just what it costs. If governments really want to lower power prices and build resilient energy systems, it’s time for action. This means entering a new era of reformed auctions.”