“uåX˜äŠÊ˜·³Ç

Under the agreement, Vestas will co-develop the 210MW Blakliden and 143MW Fäbodberget sites with Swedish developer Vattenfall and Danish pension fund PKA. 

The 50-turbine Blakliden and 34-turbine Fäbodberget sites will be situated in Åsele and Lycksele municipalities respectively, in central Sweden, and are due to be commissioned in the fourth quarter of 2021.

Speaking exclusively to “uåX˜äŠÊ˜·³Ç, Vestas' northern and central European president Nils de Baar explains the rationale behind the move, and what it takes to be successful as competition intensifies.

Why did Vestas decide to take a holding in the Blakliden and Fäbodberget projects?

The energy market is in a big transition from subsidy support to a merchant system and we are in the middle of that.

In the long-term, that creates a very nice future for renewables, for sure — wind, in most markets, is the most economic source of energy — but it will be a bumpy road to get there. It is very competitive.

For a company like Vestas, it is important to continue with our core businesses, but it is also important to create value beyond turbine sales. What Vestas is doing is to look into alternative business models to create a good return on our money.

We think selective investments in projects to get a return will be of interest to us. It also helps secure our turbine sales. 

Why did you pursue this particular co-development venture?

The opportunity emerged. Our financing guys looked into it and it looked a good opportunity to take an accretive stake.

From a financial perspective, it is a stable, attractive market, very low on the risk side, and with some strong partners. 

Are you looking at other strategies beyond your core businesses?

Vestas is in a strong financial position with the two main pillars of our core business: turbine sales and our service business. But in this highly competitive phase we will make use of the finances we have available to get a good return.

We will look at different, alternative business models, including co-development. There will be more examples in the future.

It is important in this transformation that we use all of our creativity to remain in the leading position.

Would Vestas consider fully owning a project?

It’s not likely. When it comes to co-development, it’s important that we have all the right competences in place to develop the project in the right way.

When you co-develop, it is never the intention for Vestas to remain the asset owner in the long-term.

We have a clear exit strategy in place. It gives us flexibility to get out of the project. For Blakliden and Fäbodberget it’s one year from commissioning.

Vestas’ orders and deliveries in northern and central Europe were down in the first quarter. Does this concern you?

We confirmed our guidance for the full-year and so that sends you the signal of the trust we have.

As a whole, we have confidence that we can deliver on the guidance.

Have you noticed a change in turbine pricing in the region?

I couldn’t say. This is a big region: about 40 countries, and 28 active markets. Globally, there are more competitive markets.

What do you make of the German tender being undersubscribed and the slow progress of permitting?

There are specific markets in northern and central Europe, for example Germany, where auction regimes have been introduced, and we have seen a reduction of the tariff and then an increase of the tariff.

The market transition makes it harder. The transition comes with increased competition.

It’s better for the German market if the allocation is fully absorbed. It would be good to have more turbines in place.

I think it’s a big change of regime. It was definitely a 4GW-a-year market, now it’s a 2.8GW-a-year market.

The auction system led to a drop in the tariff, then the volume was not fully used: it’s not a positive development. 

Vestas will provide its new V150-4.2MW turbines for what is set to be the first wind farm to be built without subsidy in Finland. Is subsidy-free likely to be an emerging trend?

We will see more of this in the Nordics and the UK.

In general terms, subsidy-free will happen.

How do you remain competitive in the transition away from subsidies?

There are different elements that are crucial to remaining competitive.

Our core business is technological leadership in terms of turbine size, rotor size and generator size. That track record will further develop as levelised cost of energy (LCOE) drops.

On the service side, we now do maintenance on the turbines of our competitors and we also bring more market share to our competitors through fleet optimisation and spare parts, which we can sell on top of the service contracts.

We‘ve changed our mission statement to be the industry leader in sustainable energy solutions.

We’ve actively looked into developing hybrid solutions: combining wind, solar and battery storage. It’s very important for the industry that we can offer baseload power to the grid with hybrid solutions.

In Australia, there’s the Kennedy project, and with EDPR in Spain we’ve combined these technologies.

What new, emerging or re-emerging markets are you excited about?

South Africa. We have a strong track record there. The auction system has been restored, which is really good news, and it has abundant natural resources.

We have also worked towards eastern Europe from this region (northern and central Europe). We’ve entered into Georgia, Belarus and Kazakhstan, and we have a big framework agreement in Russia. We see emerging potential towards the east.