Andreas Nauen, the head of REpower Systems, which is one of the world’s largest wind turbine manufacturers and claims around one third of the Australian market – or about 1,000MW of wind turbines – installed or contracted, recently completed a week-long visit to Australia.
Here, he discusses the importance of the Renewable Energy Target, his surprise at the complaints about the claimed health impacts of wind energy, and the broader outlook for the wind industry and global energy systems. The following is an edited transcript.
RenewEconomy: Andreas Nauen, thanks for joining us. You have just spent a week in Australia meeting customers of REpower Systems, banks and regulators. What were the big takeaways for the market outlook in Australia:
Andreas Nauen: My main takeaway was that there is really some momentum building up. There are a number of large and very interesting wind energy projects, and after the situation over the last few years when there was just one project a year, now there are several customers pursuing several opportunities and in quite sizeable projects. And they seem to be very real – nothing that can be signed next week, but surely over the next year and this gives me optimism for the overall market.
RE: I presume though that the biggest threat that hangs over the industry is the review, of the Renewable Energy Target.
AN: You are right to say that the review and the uncertainty poses some question marks. And I think a number of these projects will await the result of the RET review. This uncertainty I see in other countries. When they know what the rules are, they go ahead. My impression from the various meetings is that most people expect that it stays the same, that would be the best outcome.
RE: Have you seen other countries where they talk about reducing a renewables target?
AN: Not in the way that it is being done in Australia. We have at the moment an interesting debate in Germany about the support mechanism for renewables, whether they are supported in the right way or whether they are supported too much. It’s not what the percentage should be in 2020, but how we support renewables in the best way to address climate change.
RE: There is a vocal resistance to wind energy in Australia, particularly around health issues. Are you seeing this elsewhere around the world?
AN: No. A blunt no. I am always surprised – I have been to Australia a number of times, and every time this comes up (and) I think to myself hmmm, the only country in the world where this gets discussed. You have in other countries very specific discussions about things like warning lights for high towers. It’s always a very solution orientated discussion, if it comes up at all, but this fundamental discussion of wind turbines causing illnesses, I don’t see it anywhere else in the world.
RE: Why do you think it happens in Australia?
AN: Honestly, I don’t know. In my last job (head of Siemens wind), we had a 1.5MW turbine in the parking lot where we parked the cars. We didn’t experience any discussion about these turbines and health. I’m very familiar with the Danish situation, where they have a lot of community wind farms which are very close to where people live. I have not seen any of these discussions.
RE: Maybe that has something to do with the community ownership structure?
AN: If there was a serious issue with health, people would not trade that off (for ownership). I’m not sure why that gets started in Australia. I can only repeat again that we don’t have this level of discussion in any other country.
RE: How is the integration of wind going in modern energy systems.
AN: The integration depends on the situation. We have reached 20 per cent of renewable generation in Germany last year, and it works.
RE: . You have said that fossil fuels will be relegated to supporting roles to renewable energy, there must be fierce resistance to that concept I’d imagine.
AN: That depends on the situation. In Germany we have a mix of nuclear, coal, lignite, and the strongly rising share of renewables. In Australia it is different. In France there is a lot of nuclear. It depends on the starting point and whether the incumbents can integrate their own business. In most countries you go through a phase of resistance, but I think in most places in the world we have overcome this. And now it is down to the fact that most large companies have their renewable divisions that drives that investment just like they do their traditional generation business. This is true for all the large generators in the world, whether you take E.ON, or RWE. We have large contracts with EDF, and we work with large utilities in the UK. This has become mainstream in all large companies.
RE: So are we talking about picking up the baseload/peak load model and turning it on its head, as you suggest?
AN: In the long run we have to drive the competitiveness of wind. Giving priority to renewables is a good start, but in the long run we have to build the competitiveness of wind turbines, and that is what companies like RePower can most contribute too, so this whole debate about who comes first and who gets priority simply gets overcome by a simply commercial discussion about who generates electricity in the most efficient and competitive way.
RE: Will we get to the point where wind generates electricity at more competitive rates than coal and gas?
AN: I am convinced about this, because the progress that the wind industry has made over last few years proves that. One example – we have just introduced a concept in Germany with high towers and a larger turbine, and by doing that we can get 50 per cent more kilowatt hours out of the same site. And this has opened up the whole southern German, central European market. Suddenly wind that was unattractive because we cold not generate enough kilowatt hours now becomes attractive for electricity generation.
RE: REpower Systems has the largest commercials offshore turbine at the moment?
AN: We have the largest operating offshore turbine, and we have installed 30 of these 6MW turbines in an offshore plant in Belgium. We are about to complete this 48-turbine project.
RE: How big can these turbines get, what will be the sweet spot?
AN: At the moment everyone focuses on 6MW, others talk of 7MW, 8MW, and 10MW is surely not out of reach. Then we will have a discussion whether 10MW is the limit or can it go further. I know there is research going on about 20MW turbine, but for the moment I think we should focus on available size, which is 6MW. The average wind turbine in industrial markets is only 2MW, so 6MW is three times the average of what we have now. The focus on the industry needs to be to make these turbines more reliable and improve the cost position, then we can move to next development stage. I don’t think we should overtake ourselves.
RE: So where will costs go on wind turbine technology?
AN: We and everyone else are working on getting costs down by a few per cent each year. This depends on technology development and other factors like steel, oil, fiberglass, and we are dependent on global markets for these commodities. And nothing helps more than competition, and at the moment the balance of supply and demand is on the supply side. So we are simply forced to work on competitiveness.
RE: Do you have a target where the LCOE (levellised cost of energy) of wind will come down to?
AN: We have different targets for each market, because we are competing in different ways. In the UK, there is a target, for European offshore there is a target, and separately for onshore turbines. But we do not share these targets externally.
RE: So where are the hot markets in the world at the moment.
AN: The hot markets are clearly the European markets, because of the stability of the policies – Germany, France and the UK. The new markets that are coming up are other European companies, Poland, Romania, Turkey, What is going slowly is the Mediterranean, because of the Euro crisis, and Scandinavia, which has lots of traditional sources such as hydro in Sweden and Finland, but there are a number of projects now for these countries. In the US, there is a question around the support mechanisms, Canada will continue like Europe, and provinces like Ontario and British Colombia will be strong. Australia after a slow few years will become more important. We have limited activity in China, and that will stabilize and maybe come down, and India also has good potential.
RE: You talked about the International Energy Agency and the importance that they ascribe to acting decisively in next five years. Has that warning been absorbed.
AN: A few years ago, the focus was very much on climate change. This has been overtaken by the discussion about the commercial and economic side, and now we are looking at the most commercial solution. Climate has stepped down in priority, so our focus is on not just clean energy, but efficient and viable energy. If we can drive forward and prove what a contribution can make, then the decisions will come.
RE: What will energy systems look like in 20 years time.
AN: There are better people to answer that than me. But the contribution of renewables will be there. I don’t know about the other energy sources. Ten years ago there was discussion about LNG that would be technology for the future, now we have focus on shale gas. You cannot exclude that these things happen, but the shift to renewables will continue. No other country is questioning the size of their target in a big way.
RE: So back to Australia, if the RET is reduced and changed, what happens then. Do you pack up and go?
AN: We began working on the integration of Suzlon and REpower Systems a year ago, and it has been a successful integration. So at the moment we have no emergency plan, because that would be too early. We have sized the organization for a successful mode, and we are not working on any other plans because that would be contradictory to my general impression (about the market).