Wind power becomes mainstream

Vestas, as the market leader, is taking wind power to new, unprecedented heights. Solid financial results for Vestas, in a testing year, have helped confirm wind as the leading source of renewable energy. Vestas’ order intake in 2010 increased by 182 percent, rising from 3,072 to 8,673 MW, the highest in the company’s, and the industry’s, history. The highlight was the EDP Renovaveis deal, the biggest order in the industry’s history. Signed between Vestas and the Portuguese company in April last year, the deal provides wind turbines with a total capacity of 1,500 MW to be delivered to North America, South America and Europe in 2011 and 2012, with the possibility for an additional 600 MW.

The surge in order intake was accompanied by substantial growth in other key financial areas. Generated revenue increased from €5,079m in 2009 to €6,920m. EBIT, before one-off costs, rose from €468m from €251m, corresponding to an EBIT margin of 6.8 percent, up from 4.9 percent. Meanwhile, the number of wind turbines delivered to customers rose from 4,764 to 5,842 MW.

Vestas’ position at the forefront of the global wind power industry was reinforced by two landmark announcements in January this year.

The first was on 25 January 2011, when Vestas won the prestigious Zayed Future Energy Prize for its innovation, leadership and long-term vision with renewable energy and sustainability, according to the jury. Vestas competed for the unique prize against 391 companies, organisations and individuals from 69 different countries around the world.

This came just days after the groundbreaking announcement of the new global consumer label Windmade, which Vestas launched in co-operation with its partners UN, WWF, GWEC, Bloomberg, LEGO and PwC. The eco label allows consumers to select products from companies using wind energy in their production.

“We are making history today,” said Ditlev Engel, Vestas’ CEO. “This is indeed a remarkable event – and to top it all off, it was the second in a row.”

Vestas also recently signed an agreement with WindPlus for the world’s first offshore project integrating a wind turbine with a full-scale semi-submersible floating platform. The project, which will take place off the coast of Portugal later this year, will involve a Vestas’ V80-2.0 MW turbine.

Bright outlook for 2011
Vestas is, therefore, moving into 2011 with great momentum and optimism. In 2011, it expects another high order intake of 7-8,000 MW. Shipments are set to rise from 4,057 MW in 2010 to 6,000 MW by the end of 2011, when Vestas is expected to have installed around 50,000 MW. Meanwhile, the company expects to achieve an EBIT margin of seven percent and revenue of €7bn.

In 2011, Vestas will continue its role as an advocate for sustainable growth and green jobs. At the G20 summit in Seoul and COP 16 in Mexico last year, Vestas made recommendations on how to increase the competitiveness and development of renewable sources of energy. They include, putting a stable price on carbon, allowing free trade in green goods and services, scaling up research and development and abolishing fossil-fuel subsidies within the shortest time frame.

Vestas believes that if the necessary political decisions on a national and international level are made now, the share of wind power relative to the total electricity production can be increased from about two percent today to at least 10 percent by 2020. This translates into an installed wind power capacity of at least one million MW, as compared with around 200,000 MW at the end of 2010, of which Vestas had installed a total of 44,114 MW.

Along the way, the wind power industry, including the many suppliers, will be able to create more than two million jobs. The key to realising the potential is having long-term, national schemes that provide the industry with the necessary opportunities to plan and invest in employees, technology and production facilities.

Tough conditions, tough choices
Vestas’ achievements in 2010 appear even more dramatic as they coincided with the credit crisis and the industry operating in a recovering market.

Two decisions helped ensure that Vestas remained the world’s leading wind turbine manufacturer in 2010: the regionalisation of production and continued dedication to quality, research and technology development.
Vestas has regionalised its production platform under the principle, “In the region, for the region.” The transfer of production from Europe to two of its biggest markets, the United States and China, substantially lowered manufacturing and transport costs and ensured shorter distances to customers and markets.

Vestas previously manufactured turbines in Europe to transport them to other regions such as North America, but in 2011, 80-90 percent of a Vestas turbine will be manufactured locally, including components from suppliers.

In 2010, Vestas opened a nacelle and a tower factory in Pueblo, Colorado – the largest in the world. Together with three other factories in the state, Vestas employs over 1,400 locals, enabling the company to accommodate demand in the North American market in the most cost-effective way.

Compared with 2006, four times as many employees currently develop and design not only wind turbines but entire wind power plants and model wind landscapes to identify the best location for each turbine. Vestas turbines in many locations, therefore, harvest all the wind power available, optimally.

Lower than expected demand in the European market, where earnings were previously the highest, led in October 2010 to Vestas abolishing 3,000 jobs, shutting down five factories and implementing cost savings in a number of administrative functions. Northern Europe, especially Denmark, where costs are the highest, was particularly hit.

In total, this resulted in the dismissal of 2,200 employees. In the first half of 2011, the remaining jobs will be terminated, especially in connection with the establishment of a number of shared service centres. The layoffs in Denmark offset staff additions, especially in the US and China. By the end of 2010, Vestas had 23,253 employees, with 8,127 of them from outside of Europe.

In order to retain its technology leadership position, Vestas invested heavily in development facilities. In 2010, Vestas increased the headcount in Vestas Technology R&D from 1,490 to 2,277.

Combined with centres in Denmark, the UK, India, Singapore, Germany and the US, Vestas opened a new R&D centre in Beijing, China, which is the first international centre solely dedicated to wind energy in the country. This investment will allow the company to attract skilled and dedicated employees in all important markets.

As green as it gets
Investment in wind power technology development totalled €372m in 2010, and is expected to continue this year. The key to Vestas’ development activities is the goal to increase output per kilogram turbine and to build turbines using easily accessible materials, which can be broken down or recycled. The goal is to recycle a wind turbine completely at the end of its lifetime. Today, for example, 80 percent of a V112-3.0 MW can be usefully recycled. 

The elimination race following the global credit crunch has increased the value of quality in new and existing products and services. Combined with regional production and closer relations with its customers, Vestas was able to reach a record order intake in a market, which in the short term, was smaller and more competitive than previously predicted.

Vestas continues to develop, manufacture, sell, service and monitor wind power plants in 66 countries around the world. The building of closer ties with its customers has meant the company has been able to deliver products at ever-increasing speed.

But there is still a long way to go, insists Mr Engel. “Vestas must perform even better and at lower costs,” he says. “Shorter deadlines, lower inventories, fewer employees per MW and fewer injuries are focus areas.

“We are always working on making a more effective Vestas, which is heading towards making wind power an energy source on par with oil and gas.”