Paulsson covers energy companies and markets for Bloomberg in London.a Boeing 747. Over that time, the power capacity of the turbines
has increased more than tenfold.
In the early days, the cost of producing power with wind
was much higher than anybody would willingly pay. So a company
like Vestas, with a tiny customer base at the time, was at the mercy
of government subsidies, tax breaks, and tariff exemptions in the
countries where it did business.
Last year wind supplied 5% of the world’s total power
output. As the industry has matured in recent years, nations have
been able to scale back their support and switch to auctions,
forcing both utilities and suppliers such as Vestas to narrow their
profit margins.
Today onshore wind in Europe is competitive with con-
ventional power sources, or nearly so. In Spain, wind technology’s
so-called levelized cost of energy (the unit cost of electrical energy
over the lifetime of a generating asset) dropped 41% from 2016
through the first half of this year, according to BloombergNEF,
Bloomberg LP’s primary research service on energy transition.
Markets and the turbine industry are becoming increasingly
linked. Vedel says his turbine is regularly switched off when wind
speeds exceed about 9 meters per second because of plunging
prices. And who’s switching it off? The folks over at DC.
“It’s good that we drive down the cost of energy, and we’ll
still focus on that,” Vedel says. The challenge is this: If energy
costs fall too quickly, turbine manufacturers won’t be able to get
a sufficiently large return on their own investments. At that point,
Vedel says, “the industry starts to have a problem.”
So far, Vestas hasn’t reached that stage, according to Jacob
Pedersen, head of equity research at Sydbank A/S, based in
Aabenraa, Denmark, who’s tracked the company for almost two
decades. “The sharp drop in prices has hit the competitors harder,”
he says. “Vestas still has the best profitability in the industry.”
To stay ahead, Pedersen says, Vestas needs to keep doing
what it’s doing well and also to innovate. A team of more than
70 people in Aarhus has been tasked with thinking beyond wind
to help the company become a global leader in sustainable
energy—including connecting wind, solar, and storage batteries.
Wind will always be at the center of what the company does. Bo
Svoldgaard may be Vestas’s head of innovation and concepts,
but even he says wind is “our heart and soul.”
It’s clear where Vedel’s heart is. “From my living room and
kitchen, I can see 22 turbines,” he says. “I wanted to tear down
another building on the farm because some of them I can’t see
very well. But my wife said, ‘Stop!’ ”Warehousing rubbish at Lisbjerg that will be incinerated to produce electricity and pump hot water into a district heating system
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