When we think about climate change, it’s easy to focus on reducing emissions in order to maintain a healthy global temperature. But any real progress has to be complemented by a significant increase in clean and renewable energy. Fortunately, businesses have plans to build on recent successes and supply the world with the energy we need to grow economies.
A great example is Vestas, a major renewable energy company. I had the pleasure of communicating with the Vestas CEO Mr. Anders Runevad. He has served as CEO since 2013 and prior to that he worked at Ericsson and Sony Mobile. Mr. Runevad combines a technical background and education with business training to chart out pathways for companies to build capacity in the rapidly evolving energy market.
Vestas is a company very familiar to people like me who work in the wind power industry. They are the largest manufacturer of wind turbines in the world. Just this year, they have reached 7 GW of announced orders; their turbines can supply energy to supply the needs of 75 million Europeans.
But providing energy to the developing world is only part of the energy solution. Solving the climate change problem means we also need to revolutionize the power grids in the developing world. Companies like Vestas are working on that problem too.
Mr. Runevad recently met with India’s Prime Minister Modi and presented a plan to build blades at a new factory in India. They also have plans to increase the renewable energy supply in that country. As of now, Vestas has installed nearly 5,000 turbines in India and employs approximately 900 people there. Vestas has also committed to investments in Kenya by participating in the development of a wind park. The goal is to supply 15% of the electrical needs of Kenya, a country that is plagued by expensive and unreliable energy sources.
I asked Mr. Runevad a few questions related to recent wind power developments and to the future outlook on the industry. I asked him what has happened to costs of wind power around the world and in the USA in particular. He told me that in the past 20 years, the cost of wind is down approximately 80%. In the past 5 years, the cost is down 15%. In the USA, the cost has decreased more than 50% since 2009. So, the cost decrease is significant and sustained.
One concern people have about wind power is that they perceive it isn’t reliable. When the wind does not blow, power is not produced. But Mr. Runevad told me that the newer wind turbines are better at creating wind power in variable wind speeds. They have bigger rotors, higher towers, and lighter blades. The resulting grid is more stable. Importantly, there is better interconnection with neighboring countries and linking with storage or hydropower sources, which also increases reliability and efficiency.
I asked how effectively wind can compete with fossil fuel sources, and learned that wind has become extremely cost effective. In areas where energy consumption is increasing so that new power sources have to be built, there is a basic parity and in many cases, wind wins on cost alone. In mature markets where existing coal, nuclear, or gas power generation infrastructure is already built (often with years of subsidies), it is more challenging to build wind because new infrastructure would have to be created. There, new-build wind has to compete with the costs of maintenance of the existing energy source. However, even then, wind is an attractive option, aside from the fact it creates energy without greenhouse gas emissions.
With renewable energy technology changing so rapidly, I wanted to know what was in store in the near-term future. He told me that the cost reductions will continue into the future. There are three reasons for the cost reductions. First, turbines are becoming larger, with taller towers, and lighter construction. Second, increased efficiency in the supply chain and manufacturing systems are lowering cost. Finally, as the scale of wind installations increase, there are cost savings from the economies of scale that are realized.
Posted by John Abraham on Thursday, 10 December, 2015
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