Nordex Q3 Orders Jump 30%, Vestas Bets on Australia

Allen Hall: Welcome to the Uptime Wind Energy Podcast. I’m Allen Hall, and I’m here with Matthew Stead, Yolanda Padron, and Rosemary Barnes, who is in Sydney, Australia, attending some business conferences. Rosemary?
Rosemary Barnes: Right now I’m in Sydney. I was at an ARENA innovation event last night, and it was matching up startups with investors. It was a great event, actually. I got invited because I was moderating a panel. Not all startups, though some of them were. I had the head of sustainability at Qantas there, Fiona, and then Katherine from Brighte. They do a bunch of financing, mostly for distributed energy and household consumer energy products like rooftop solar and batteries. And then Jack from Neara, and they do grid simulation. It’s pretty cool. If you run a network and you want to know how to best improve resilience while spending the least money, they’ll model things like, okay, if this particular pole falls over, then this will happen. And you can improve resilience by just adding a guy wire to this one asset, and you’re not going to take down any additional poles.
Anyway, we talked about the Australian energy landscape and investing in technologies in those areas. Some of the strengths we have in Australia have a lot to do with distributed energy. We’re really leading the world there, and there’s heaps of opportunity for innovation and for companies to solve problems in these spaces. I also talked about some of the categories that aren’t so easily decarbonized.
We had Qantas there, and they’re investing a lot in sustainable aviation fuel. I really enjoyed talking with Fiona before the event, because one of my problems is that I travel so much for work. I do make sure the travel I do is for the climate benefit, so I don’t ultimately feel guilty about it, because it has more impact than the emissions of the flight by a long way. However, I do want to decarbonize aviation. I love to travel, and I would like to be able to continue to do that in the future.
So I talked with her about that. I really want to be able to buy sustainable aviation fuel, because one, it actually does something, and two, it’s an industry that needs to grow and scale, and I would like to support some of that scale-up in an appropriate way. She let me know they’ve got a small business scheme now where you can get in touch with them and buy it. We also discussed maybe a collaboration with Engineering with Rosie, a video about some of the projects they’re investing in. So that was really cool.
Later in the evening, five startups pitched to investors, and it was a really great investor-to-founder ratio in the room. For every startup there trying to get money, there were probably five investors trying to find people to give money to. It’s definitely a good event to go to, and they do it annually, so it’s one to keep on your calendar.
Allen Hall: Did you break out your checkbook and invest in one of these companies?
Rosemary Barnes: I would really love to. My investment strategy is that I invest $1,000 to $5,000 in companies. I don’t do heaps of financial due diligence. I just do the technical due diligence: is this a real problem that’s going to need to be solved, do I trust the engineering, does the team seem like they get it? That’s as far as I go. And I invest enough money that if it goes wrong, it’s not the end of the world. I have lost all of my money on a few investments, and I’ve made 20 or 30 times on some others, so it works. I would love to give $1,000 to $5,000 to probably three of these five companies, but that’s not the kind of money they need. You’d have to add several zeros onto the end of that. I’m just waiting for my first big success so I get my $100 million in the bank, and then I’ll go around funding. Or if someone’s like, “I’ve got $100 million and I don’t have any technical judgment,” feel free to give that to me.
Nordex Q3 Orders
Allen Hall: Well, there’s a company over in Germany you probably should invest in right now, which is Nordex. Do you have any money in Nordex right now?
Rosemary Barnes: I don’t have any money in any wind turbine companies. I did early on, in 2010 or whatever. I was like, well, we know wind is going to grow huge, I’ll invest in this. And it did grow huge. I was right about that. But no one made any money. If I was going to invest in wind, and I do, because I have a wind energy company, so I guess all of my investment is in wind, it would definitely be in small individual solutions that I thought were needed.
Allen Hall: I think you’re missing out, because Nordex is expanding way beyond Germany. Third quarter orders jumped 30%. Thirty percent is a magic number. That’s amazing. They have about 2,800 megawatts in orders just in the third quarter. Turkey brought in more than 900 megawatts, and U.S. orders have topped about 1.3 gigawatts this year. So Nordex is really growing quickly. CEO José Luis Blanco expects the international share will keep growing, and I assume one place it will be pretty soon is Australia. And they have this new turbine they’re selling down in South Africa for moderate wind speed areas. It does seem like Nordex is taking the place of maybe a Siemens Gamesa onshore, maybe a GE in certain places, and that they’re actually competing against Vestas, which is hard to believe, because five years ago, if you mentioned Nordex, it would have been like, they’re a small player. They have some cool technology. But boy, have they ramped up.
Rosemary Barnes: Sounds like you’ve got an investment to make, Allen.
Yolanda Padron: From conversations we have with a lot of the owner-operators in the U.S., a lot more people are looking into Nordex or purchasing from Nordex, which is really good to hear, to have a bit more diversification in wind turbines and wind turbine owners.
Allen Hall: Matthew, are you putting sensors on Nordex turbines yet?
Matthew Stead: Yeah, definitely, probably more from an icing point of view. So definitely in the Nordics, optimizing power production. I would agree with what you’re saying, Allen. Within our team, the discussion around Nordex is, yeah, we’re always talking about Nordex.
Allen Hall: It’s crazy how much the industry has changed. If you see a Nordex representative, they have a lot of products to offer. Obviously, when Yolanda and I are talking to operators in the U.S., Nordex comes up most times. Right now it’s Vestas and Nordex as the two. GE is sort of a distant third, and I haven’t heard anybody say Siemens Gamesa’s name in months. Big shift.
Well, that’s the Nordex update. Next, Vestas CEO Henrik Andersen on why Australia now matters to Vestas.
Vestas in Australia and Local Manufacturing
Allen Hall: Are you overspending on lightning repairs? Most operators are, because solving lightning damage is complicated. Weather Guard Lightning Tech helps operators reduce lightning damage. Our StrikeTape lightning diverter protects over 20,000 blades worldwide. Now StrikeTape Ultra installs faster than ever. StrikeTape Ultra cures up tower in just 15 minutes, even in cold weather. Visit weatherguardwind.com to schedule a call.
Europe’s fleet is getting older, and someone has to keep it running. In this edition of PES Wind magazine, there’s an interview with Matthieu Dessailly of MDWind. He’s talking about how MDWind has changed its focus from doing a lot of installation work to major component exchanges and life extension, the things that keep turbines running for the longest time possible. He says owners must treat their turbines as industrial assets, not just financial ones. And that’s true. This is a really good article, because it touches on a number of points having to do with wind turbine maintenance and how to keep your turbines running efficiently, and not treating them as something that gets tossed away, as has happened in some places. So don’t do that. If you want to read this article or many of the other articles in this edition, you can go to PESwind.com and download a free copy.
Australia is turning into a big market for Vestas. CEO Henrik Andersen says so himself in a LinkedIn post. He points to three Australian orders this year, adding just about a gigawatt. Andersen links the orders to Australia’s push for energy independence and more stable power prices. And Vestas crews are busy in Australia right now installing turbines on two projects. So it does seem like there’s been a Vestas invasion into Australia. And most of the turbines in Australia right now are Vestas, right, Matthew? That’s the numbers today.
Matthew Stead: Yeah, I was going to say, what’s the difference? They’ve always been here. They’ve always been strong. Most of the turbines behind me are Vestas models. So as far as I’m concerned, they invaded Australia a long time ago.
Allen Hall: Are they offering bigger turbines in Australia than some other places? But more importantly, are they going to build any sort of factory in Australia to build blades, nacelles, or tower sections, for that matter? Anything in regards to turbines?
Matthew Stead: My guess is no. I don’t think anyone has seriously considered building factories in Australia. Rosie probably knows more than I do.
Rosemary Barnes: I don’t disagree with that. We would love for them to do it, and it could happen. It would just need to be a conscious choice, probably involving the Australian government. Not necessarily, but that would be the easiest way. I don’t see it happening. However, one of the sites I’m working on at the moment has quite old turbines getting somewhat close to the end of life, and I believe they have Australian-made blades on them.
Allen Hall: Really?
Rosemary Barnes: And it’s a slightly different design to the same turbine overseas. So I’m having a bit of trouble finding information. Usually when I see a serial issue at a site, especially an older site, I can reach out to my network around the world and say, hey, have you seen this before? And somebody always has, and they know how serious it is or what solution is available. But I’m struggling a bit with this one, because I’m told, and I haven’t verified it, that the blades are Australia-specific.
Allen Hall: Interesting. I think the issue for Vestas, and for anyone setting up a factory in Australia, is that there’s a lot of competition. There’s Nordex, there’s Goldwind, there’s Envision, there’s GE, there’s Vestas. So they would have to have a pretty decent order book to make it worthwhile getting that factory going.
Rosemary Barnes: Yeah, that’s it. It’s the reluctance to really set a pipeline in stone that is keeping manufacturing away. You really need to know you’re going to have something being made in your factory every week of every year for the next ten years, maybe 20 years ideally. For example, in the UK they’ve got those offshore auctions happening periodically, and it’s quite well known. You don’t know you’re going to win the auction or win the project to supply turbines for any particular project, but you know how big the size is, and you back yourself to be competitive. So it gives some confidence to actually bring manufacturing there. Wind turbine blades and other components are huge. The shipping costs are expensive, especially for somewhere like Australia. It’s a big part of things, not to mention down the line with maintenance. It’s so hard to get replacement blades in Australia, and most of the cost of a new blade is the transport. So it would be really helpful, and it makes some sort of financial sense. It’s not that you need so much financial assistance to get it competitive. The real thing is the pipeline.
Project Costs, Batteries, and Coal
Matthew Stead: Just recently, I believe the South Australia–New South Wales interconnector is being commissioned or has been commissioned. Certainly in the local media here, they’ve been talking about the renewables floodgates opening, no more negative prices during the day, more development, because now we’ve got the interconnector and the pricing signals are going to be right.
Rosemary Barnes: Yeah, but there have been some hiccups with the implementation. I think the market design is not quite right. Generators have to pay their local price, so they might have a negative price in South Australia even though they’re right near the interconnector and New South Wales has positive prices. There’s some weird stuff there.
I think the thing people don’t realize with wind and the holdups in Australia is that transmission isn’t the holdup in many cases. There are transmission projects where they’ve done a good job of putting the transmission in place, and overseas I know that is the issue for a lot of projects. The real issue is that wind is too expensive at the moment. And it’s not even that wind turbines are too expensive. It would be good if they were cheaper, but it’s all the other project costs: construction costs, cost of capital, all of that is really expensive.
I personally think there needs to be more focus on innovation in getting other project costs down. You can learn a lot from best practice on large infrastructure projects, and from getting teams that do the same thing over and over again, learn from it, and bring costs down. That’s one of the things China does really well: getting a good workforce, learning, and making small changes. You make a thousand small changes, and it adds up to some big changes. It’s boring stuff to think, oh yeah, we need better project management, better construction. But we’ve done it in Australia with rooftop solar and home batteries. That should be really expensive, because it’s distributed and you’ve got experts working on so many different sites, with regulations to deal with and customers to deal with. We have solved that same kind of challenging problem before, and I think there’s a lot of potential to get costs out of wind in ways I don’t hear people talking about very often. If I was in government, I would have some programs in place to encourage innovation in that space.
Allen Hall: It seems to me there’s one thing to wish for the perfect, and there’s another to deal with the realities of what’s going to happen on the ground. I think most finance people are pretty sharp about what’s about to happen. They understand all the fees and the percentages and how they’re distributed. They’ve got a pretty good handle on that. What I don’t understand is, if you have qualified companies like Vestas, or even Nordex and GE, all these big OEMs have developed sites. They know how to do it, and they know how to do it pretty efficiently. Why are we still wandering around trying to find the ideal way? What we probably should be doing is putting a little more leverage on the big OEMs to do it for a more reasonable cost. If you’re the developer, try to have a Vestas-type company come in, finish it on time, and put some penalties in place if they don’t. I just think the outcome is better at the end of the day. And if the outcome is the ultimate goal, isn’t that where we should be going?
Yolanda Padron: There should be a lot more communication between all parts of the project, and not just on a 30-year FSA with an OEM type of project. I think the communication has to happen from both sides, and I don’t know of anybody who does this 100% well, at least in the States. I don’t know if you guys know anybody. You go to an operator, or someone in operations, and you see a problem where it’s like, this could have been so easily avoided. Why did you do this?
Allen Hall: Why didn’t you call Rosemary six months ago?
Yolanda Padron: Right. But there are also so many factors that go into development that I can’t speak to and sound really smart doing it. I know a lot of factors go into it. I once saw a map of a small region, and it was like, build something there. And you think, well, I would just build there. But areas get excluded because you have landowners who maybe don’t want wind sites near their farm, or you have certain counties where you can’t do anything. The plot starts getting smaller and smaller, and you end up with these really weird areas you can use and weird back roads you have to go through. Everything had a reason to it. But I totally agree that sometimes it would honestly be easier to build something really, really well, even if it’s a smaller project, than to build a bigger project.
Allen Hall: Doesn’t the marketplace eventually even this out? The companies that do it poorly, you would think, take a financial hit and slowly disappear, never to be seen again. But the companies that at least make a profit on these projects will be hanging around. I think the one missing piece right now is how many batteries you’re going to tie to a wind project, because that does seem like the answer to some of these market fluctuations and some of the economics out there. I listened to a podcast today talking about this, and it seems like batteries are the quick, dirty, simple answer to fix some of the wind problems and solar problems, and to get rid of the old coal plants. It’s just batteries, and the more batteries you can get online.
Rosemary Barnes: Batteries don’t generate electricity.
Allen Hall: They don’t.
Rosemary Barnes: Batteries can solve problems you’ve got with the existing generation. They’ve made solar power go a lot further than it would otherwise. But we’ve got a stack of coal plants scheduled to close in Australia in the next ten years, and batteries aren’t going to generate electricity to replace them. So yes, we need new generation. The electricity grid is not some static thing, like our fossil fuels are all there and will be there forever at no cost.
There are coal power plants in Australia slated to close, and none of them are closing because the government said you have to close because we’re going to renewables. Not a single one. The reason is that these are super old facilities reaching the end of their life. We see it in Australia: some of the biggest shocks we have in our electricity system happen because a coal unit decided to explode, because it’s already on life support, past the end of what it was supposed to last for. You can’t prevent unscheduled maintenance happening every now and then, and it happens most when it’s super hot, which is very stressful for them. Also, they’re trying to ramp up and down more than they were ever designed to, and they’re super old. So electricity prices are going to go up, but that doesn’t mean renewables made it more expensive. It was always going to get more expensive. You always need to maintain existing plants, build new plants when old ones retire, and maintain and build new transmission and distribution.
Allen Hall: But isn’t part of that the way the bidding system is set up in the U.S. and other places? I think Australia is very similar, where everybody bids to contribute to the grid, and whatever the last one in costs is applied all the way down. So if wind was $10 a megawatt hour or whatever it is, that doesn’t matter. It’s whatever the last one in is, and the last one in tends to be gas, which is more expensive, or some sort of old coal-fired facility, generally speaking. So the cost of renewables is tied to this old, expensive generation, and if we eliminated that, we could get rid of some of this craziness where you’re applying the wrong price to the wrong product. If they changed some of the market conditions so renewables were on an even playing field with gas and coal, in Australia and outside of it, I think you would see some real pricing and have a better understanding of what’s actually happening on the ground. Because the pushback about solar and wind and some of the renewables in a lot of places is nonsensical. It really is.
That wraps up another episode of the Uptime Wind Energy Podcast. If today’s discussion sparked any questions or ideas, we’d love to hear from you. Reach out to us on LinkedIn or email us at [email protected]. And if you find value in today’s conversation, please leave us a review. It really helps other wind energy professionals find the show. And don’t forget to subscribe so you never miss an episode. For Rosie, Yolanda, and Matthew, I’m Allen Hall, and we’ll see you here next week on the Uptime Wind Energy Podcast.