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Wind Power: Crisis: What Crisis?

09/03/2011

Until last year, wind power appeared immune to the worst ravages of an economic storm sweeping the globe. Then the world's biggest manufacturer of wind turbines took an axe to 3000 jobs in its native northern Europe. Did it signify not just a readjustment to a single producer's business model but a threat to the technology's continuing worldwide deployment? Or, as some believe, are fears of a decline in the sector's fortunes simply overblown?

Until last year, wind power appeared immune to the worst ravages of an economic storm sweeping the globe. Then the world's biggest manufacturer of wind turbines took an axe to 3000 jobs in its native northern Europe. Did it signify not just a readjustment to a single producer's business model but a threat to the technology's continuing worldwide deployment? Or, as some believe, are fears of a decline in the sector's fortunes simply overblown?


"You could say we have been too optimistic for too long," Ditlev Engel, chief executive of Vestas said last October as the company cut its workforce by 15%. He later qualified these words, saying it was right to study the markets before taking "tough decisions" to close four production units in Denmark and another in Sweden, but it was inevitable this phrase would make headlines, sending shockwaves across the industry.


Vestas' move was in response to shifting fortunes, and shifting global markets. "If you can make a turbine in Asia and deliver it to Europe at a comparable price to making it in Europe, we have a problem," said Engel. "So we have to make sure we can always compete with what we call 'Asia plus freight'."


Logistics has not been the only problem facing wind power unit producers in a worsening context as the global economic crisis strengthened its hold. In addition to fiscal constraints in Europe, demand for wind turbines has been hit by lower fossil fuel prices and credit scarcity since the onset of the financial crisis. Reduced political momentum has become another negative factor.


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Industry observers had warned of overcapacity in Europe for some time. Engel said his company was responding out of financial necessity, diverting production capacity where manufacturing is less costly, while retaining development and research activities in Denmark. It was a strategy, he said, essential to preserve Vestas' profitability in the years to come.


But if it was a "readjustment" that many had seen coming, is also represented a rationalisation that sent industry forecasters hurriedly back to their desks. Immunity is no longer a word being bandied about in wind power circles when the biggest multinationals are apparently preoccupied weathering the current economic crisis.


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