Restructure, Yes. But Support Wind R&D Too

Vestas, the world’s largest wind turbine manufacturer, has revealed plans to ‘intensify’ its restructuring plan in order to ensure, it says, that it will be profitable. The company has already laid off around 1000 people since the beginning of the year as part of its earlier plan to realise 2335 fewer employees by the end of 2012. However, according to the first half interim report, its more stringent plan will now see the company shed a total of some 3700 staff by the end of the year.

While this headline news will no doubt yet again result in market murmurs of an overblown wind industry, ever teetering on the whim of government handouts, nothing could be further from the truth. In fact, the wind industry is in excellent health. It’s true that the pace of development has declined, but this is only natural in a global recession – as is the realisation that in times of market contraction, jobs are inevitably lost in manufacturing. It’s a sad truth.

Perhaps more significant is the 2012 Global Trends in Renewable Energy Investment Report (GTR)’s conclusion that overall wind turbine prices fell by close to 10% over 2011. This suggests not only that wind power is moving ever closer to the competitive energy threshold, but also that long-term investment in R&D is steadily paying off. Year by year, the machines get both cheaper to produce and yet more robust, more reliable. And that takes good engineering.

Of course, investment in R& D during times of economic malaise can be challenging; the reflex is always to cut costs rather than increase expenditure on a potentially uncertain return. And yet it is precisely continued investment that will see wind power finally cross the threshold which hovers tantalisingly just out of reach.

Indeed, a recent IRENA cost analysis finds that installed costs in 2010 for onshore wind farms were as low as US$1300/kW to $1400/kW in China and Denmark, but typically ranged between $1800/kW and $2200/kW in most other major markets. Offshore wind farms are more expensive and cost $4000/kW to $4500/kW.

Given that, IRENA says, turbines account for 64% to 84% of total installed costs onshore, with grid connection costs, construction costs, and other costs making up the balance. And as turbines account for 44% to 50% of the total cost offshore, there is clearly a huge scope for further savings if investment in good engineering continues and the cost trajectory develops as expected.

It is troubling to see thousands of jobs cut in a market that holds such promise for employment and prosperity, but turning again to the GTR we see that investment in wind energy over 2011, still at a far from embarrassing $84 billion, was down 12%. Inevitably high-profile companies like Vestas, but no doubt many others in the industry too, are thinking along similar lines in the face of market contraction.

Far more alarming than the loss of jobs would be the prospect that investment in research and engineering design could fall by the wayside.

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