Vestas CTO Anders Nielsen on turbine sizes, skills and retirement

[Music] Welcome to the Winpower podcast, with me, Ian Griggs, editor of Winpower Monthly. Today I'm very lucky to be joined by Anders Nielsen, Chief Technology and Operations Officer for the Danish Turbine Giant Vestus. Sadly, for the industry, if not for himself, Anders has announced his imminent retirement, so I was very glad to get the opportunity to speak to him about his career, as well as his views on technology and innovation in Winpower. Welcome to the show, Anders, it's great to have you here. Right, nice to be here, thanks for having me. So, Anders, the majority of your working life before joining Vestus has been in the automotive industry, specifically trucks. So, what tempted you to move into turbine development, and did you have any previous understanding of Winpower before you started? It's always life is full of coincidences, and actually I know I didn't have any prior connection to the wind industry. I was thinking about doing something completely different, at that point of my life, and I had a contact from Henry Kandishan, asking me if I would be interesting, and I was more thinking of stepping out of operational roles, so I was actually saying no for the first time, but then I met with Henry Kandishan, and as I said to him, if you don't want to get a dog, never look at a puppy, meaning that I should not, if I didn't want to go on board, of course, I shouldn't have listened to all the amazing things around the wind industry, so of course I got completely caught up in that and signed up. Of course, I mean, I can completely understand that. It's a captivating industry. Was there a single thing which Henrik said to you, which was a light bulb moment that made you think, actually? I'm missing out if I don't do this. But I guess the question you asked yourself is, what can I do in this industry? Given that I have no prior contact to it, but what he brought up was the industrialization that I needed in the industry and of getting it into a more mature, capital goods industry, where I've been spending most of my time, and of course, the fun thing is, in some regards, there is more income in between a truck and a wind turbine than a truck and a car. A truck is a business to business. It's a machine that people buy to make money. While a car is consumer goods, and it's much more, if I put a user word at some of my old colleagues from the car industry, it will probably kill me for, but it's more fashion. It's what do you want to be associated with? Of course, a lot of technology into it as well, but it's a completely different buying behavior, a completely different understanding of what a value proposition looks like. From that perspective, I could relate to the topics which Henry brought up. Of course, also the whole renewable sustainability agenda, which is close to my heart. I haven't spent the 35 years in the truck industry. Of course, you could argue it's going from the dark diesel valley to the green heights of renewables. That's how it felt. It felt a good purpose and a fantastic challenge to get into a very different business, which also had a sustainability agenda. Fantastic. So almost like a social payback for all those years in the truck industry. When you told your family and friends you were leaving the truck business and going into wind power, what was their reaction? The sequence was a little bit different. So I actually left before I joined. From a family side, my wife looked at me and said, are you going to be home the whole time now? When I left the truck industry. So that joke aside, it was the only positive reactions around my friends and families. Because of course, everyone understood the sustainability part and those renewable energy discussion, but also very few of them had any contact with the wind industry. I've been asked millions of questions over the years around it from friends, families, acquaintances. It's a business that draws a lot of attention to it. Yes, absolutely. I can completely relate to one's wife trying to get one out of the house as well. So you joined Vestas at a moment of transition for the company. Shortly before Vestas bought out Mitsubishi heavy industries share of its offshore business and then Vestas ramping up in that sector. Can you describe what that moment of transition was like for you and for the company? Of course, Vestas had been in the offshore industry earlier. I had gone into this joint venture with Mitsubishi. We had still been in contact with the offshore, but we also saw that this was an amazing growth opportunity, which also required quite tight decision making to make it happen, which is always a bit of a different challenge in a joint venture compared to if you have it in a house. So we embraced that full challenge to step on board on that journey and also with them bringing the V206-15 megawatt turbine into the market. Of course, it was intense. It's been a long row one to get it out there and the offshore business comes with a different complexity than the onshore building offshore. It's of course a challenge in itself, but it's been tremendously rewarding and interesting and I think we're very close to having it fully launched and getting up to speed. And looking back over that five-year period, what challenges do you think Vestas has experienced as a result of its work in the offshore sector? You said that offshore is inherently more complex than onshore as a business and I completely understand that with the engineering challenges. But what are the wider challenges that Vestas has experienced as a result of its work in offshore? We have embarked on this industrialization journey bringing the more industrialized, more mature products to market and scalable platforms to the market. The 236 is one of them in combination with the Mark 1 and Ventus platform and at the same time we were launching the V163 4.12 megawatt. So we're just coming out of that very very intense product development cycle and it's been the challenge in itself to create as much commonality between the onshore and the offshore and make sure it's worked a lot with modernization. I think we made some steps in this, but there's further steps to be taken where you actually can make sure also the technology on shore before you bring it offshore, which is a part of the validation. A mistake offshore is much much more costly than a mistake onshore, making sure you have the right product for the market and then you have the right quality of the product for the market. It's essential. We have put a lot of effort into that and to a certain extent it is connected with the work offshore, but of course it's also something that is very much needed for the onshore business, that maturation of the whole industry. And of course that technology journey continues. You also joined Vestas at a global inflection point as the COVID pandemic took hold in Europe. What was your experience of the pandemic on a personal level and from a business perspective? How did you go through that? Yeah, if I start on personal level, I have been commuting to Sweden during this whole period of time, every second weekend. I've had more COVID tests than I like to count, but I mean it also turned the world in my opinion into a darker place for the sake of both nationalism, growing strong, closing borders, mobility went down, the ability to meet physically people went away. And of course that put a lot of a constrain to how when you step into a company. On the other hand, it totals a lot about resilience, how do we keep working, how do we keep a business going, even though you're sitting in the middle of a pandemic and we actually managed to do that. So I think we came out a stronger company afterwards that we came out with the more understanding how you work with resilience and that's been a good lesson for the company and for us as individuals as well. However, I would have loved to be without that experience, I must honestly say. Of course, yeah, I think we all could have done without it, but I think you're right to put the finger on resilience. I think that's a lesson that we all learned actually coming through the other other side of that. Let's talk about innovation in the wind industry now. I mean the wind industry is characterised really for me by innovation in technology. How do you feel Vestas has contributed to that innovation and what platforms would you point to which were developed during your tenure which speak to that principle of innovation? So first, I fully agree with you that the wind industry has been a tremendous innovation industry. Just growing its turbines for the last 20 years to complete different sizes, complete different efficiency. I think that the interesting challenge that we've been standing in front of is that we are also coming to the end of that rope where different innovations are needed. Given that the size of the turbines in itself, in the onshore society, especially, becomes also hard to transport. Social acceptance is also not that easy with a size of the turbines. So I think that we're getting close to, I'm not saying at the end of it, but we're getting close to where it doesn't make a make sense to grow further. That also comes with the cost side of things. The cost of the turbines grow quite much faster than the AP. I think that inflection point is also very close to that. It's been interesting instead to drive innovation in a different term. If I allow myself to make an analogy to the truck industry, so there was many many years ago where there was put a standard in Europe that truck couldn't be longer than 18 meters because of infrastructure issues. It became, just say, a constraint that you're not allowed to go above that. And that was in no shape of form and the innovation that became a driver of different innovation where the simplest efficiency thing you can do is make the truck longer because the air assistant doesn't go up, so the fuel economy becomes better. So longer trucks are giving you a leg up directly, right? Once you're not allowed to go that route, then what do you do? Then you need to start working with all the internal components, all the internal systems to get the right efficiency out of those. And we're exactly in that point where just driving size won't cut it. You need to find innovation in other parts of the turbine and in the systems in the plant controls. We will see a lot of innovation in software, a lot of innovation in how you control your turbines and also in inequality and efficiency. That's a really interesting theme, which will explore more of actually in terms of where can you innovate and how we got to the biggest size or the best size. You previously pledged to standardize Vestus models such as the 15 megawatt V236. For a prolonged period, do you still believe this is the best strategy in light of Chinese turbine competitors knocking at the door with much larger models? 100 percent yes. We're not talking about just standardizing to one model, but talking to create a platform that sits in this size where you can actually adapt it to the specific sites in a very efficient way and create a good value. So of course, we're not religious in that sense that we don't look into what other things could be. And the interesting part in that those simulations and studies you can do is you see that the LCE, the value proposition doesn't really come with big turbines in the same way. Because of the cost, the growth of the turbine, the balance of plant, the infrastructure investments, we're talking big pieces of equipment already. And the big thing you make them, the harder it will be also for the whole logistics around installing manufacturing turbines. So I think we're at a pretty good point. As always, you can argue, is this the endpoint or is the steps on the way? Fair enough, but if you want to have a good value proposition to your customers, then the depreciation time of the development cost is also one parameter, right? If you want to have a health to business and you want to depreciate a very big investment like an offshore turbine development, then you need to have some time to do that. Otherwise, actually, the ones that has to pay it comes from the customer side as well. So I think we're balancing it on the right way and we believe very strongly that there's so much value to be created of this size of turbines still in optimization and then maturing them and making sure you get to more and more predictable projects, meaning you de-risk your projects by having a product that is well known and works. And that's where I think the where big value will come if you want to speed up the buildout of offshore. Because having new innovations in each and every project you go to means you start over again. And that kind of ends up with a lot of uncertainty, a lot of risk into it. And it seems to be that our Western competitors has a basis settle for roughly the same thing. I was just going to say, your view, and I agree it appears to be a viewer to shared by other Western turbine manufacturers, is in stark contrast to the Chinese turbine firms where the principle, as described by our technology market trends correspondent Isaac Vries, is more scale or die as in get bigger or just leave the game. So on the wider question of Chinese turbine firms competition with their European counterparts, what do you think European turbine firms should do to survive and flourish in the long term? Do you think they should hold this line which you're talking about, even in the face of competition with much larger potential models for developers to choose from? So if we separate a question a little bit. So first of all, if you look at our turbine scales and the cost of that scaling, the benefit of a bigger turbine just fact-based is very much in question how much more value do you get out of it. The second part of it is then the whole pricing strategy. I'm very much a fan of competition. I like competition but it has to be on equal terms. Right? It can't be that we have different playing rules for different competitors in how you source your steel in reality if someone can live with a running loss for years and years and being subsidized for it. And of course it's not a level playing field and it's someone buying the market. And that's a completely different discussion. So I think if I just stay with a fact-based thus a bigger turbine generate more value, then as far as we can see that's not really the case. So it doesn't matter if it's Chinese or a Western, the growth of the turbines in itself poses a lot of other challenges including the foundation part, the low-carrying structure, the cost of that giving the size of it. I've said before you could build a wind turbine that we could put on Bush Califa, right? That would just be an engineering challenge. But does it make sense? Does it make business sense? And that's what we are doing from a business perspective. There is not a lot of value proposition in just growing the turbines on and on. That will in itself in a functioning normal competition, not make sense. So I think that having low depreciation times and maturing your technology into a more predictable, safe technology for everyone using it is the right way forward. So we will continue driving innovation within that framework for sure and we will come with improvements over years. But just this pure size growth will be on that. Okay, so I mean if I read you correctly, the kind of scale or die principle which the Chinese OEMs appear to be pursuing is a product of the fact that they perhaps enjoy help. Is that basically what you're saying? So the scale of die I think is a dogma that it's not true. They raise a belief that the bigger turbine will give you the biggest value. And from a customer perspective, from business perspective, that's what we're challenging saying that's not true. Okay. Then of course if you price a larger turbine below the cost, then it would make sense. Yeah. Right. So that's why I want to separate is who. I mean in a fair market competition, we will see that you level out the site growth. They will not grow into eternity. There is a size that you size envelope or you say, okay, beyond this, the whole logistics installation, supply chain cost becomes so high that it actually doesn't make sense. Okay. You mentioned a theoretical turbine, the size of the Burj Khalifa, which is obviously something to behold in the mind's eye. But in theory, what is the biggest turbine platform that could emerge over the coming years and which company do you think is likely to make it? I know you're saying that actually it doesn't necessarily make sense to do that, but whether or not everybody shares your same kind of principles there is a different matter. So how far do you think it will go, whether it's Western turbine manufacturer or not, that builds it. I don't have a good answer to that question. We have seen a lot of all types flying around. We have seen very little built. We've seen breakage in some bigger turbine. So I think there is hopefully so we're going up already going on. This is not just scale or die. It's actually a business proposition. You need to have a value proposition to your customers. But I can't give you any predictions on where that will end and who will wake up first. I don't know. I think we're walking up and we see the business logic in what we do. We have a good order backlog. We have had a good success with our customers and we continue pushing and seeing improvements. Okay. You've touched on this next question already really, but perhaps you can elaborate further. Which areas do you think Western OEMs are still able to innovate or set themselves apart from each other, especially as they appear to be slowing down on power rating? So how can investors separate itself from Ennecon and Nordex and Simmsgamesh? So if you're all kind of converging on this principle of let's not go too big, how do you differentiate is it quality? Is it reliability? Is it in other areas? It's really the life cycle cost and the support you give your product over a full life cycle. We are putting up turbines there from 20 to 35 years and they're standing there and generating value for the customers. And the better support you can give your customers throughout that life cycle, meaning a lower life cycle cost for the customer. I think that will be really the differentiating factor. How are you able to do that? And how much value can you generate as well? Which wind speeds do you really want to produce? Is it just the average cost of energy that is interesting or is that actually at the do you want to produce at specific wind speeds? And how do you design turbines to really fit the consumption that you're connecting to the grid? Depending on the consumption pattern of the grid, I think there's a lot of interesting things to get your arms around how to create the best value for your customers, not just the lowest cost. Yes, all the highest AAP. All the highest AAP. In the early days of the war in Ukraine, also happened during your tenure at Vestas. Russia bombed the, I'm going to try to pronounce it properly, the Avostal steel plant, which led to shortages of this critical raw material across Europe. How did Vestas cope with that? And what lessons do you think the company learned in the wake of that moment? We saw directly after the pandemic a lot of supply chain interruptions, and it continued of course also across the Ukrainian war. But how do you create a resilient supply chain? How do you make sure you have a multiple opportunities of sourcing? And how do you set yourself up to be able to source to different parts of the world? That has been enhanced for sure during these years. What we have seen in the last five years is more disruptions than I've seen in my 35 years before that of working. So the last five years has been very intense with the Covid, with the Suez Canal crisis, the Ukrainian war. All of these disruptions that has come into the market. And I think we've actually learned a lot from it. And we are setting our self up in a much more resilient way. You can't put all eggs in one basket. I was just going to say this is about diversification of supply really, isn't it? So that you're not sourcing all your steel from one country or another country, but actually you've got a wider range to choose from. Yes, absolutely. And most of what you've described there in terms of the disruptions to those supply chains, apart from Covid, have been due to geopolitical tensions. And that of course is something which by its very nature is highly unpredictable. It feels to me and I don't know whether you agree, but it feels to me that we're all in for more of that rather than less of it as time goes on. You know, I started working in 1987 and that was two years before the Berlin Wall fell. And at that time we also worked with the completely different inflations. We had a much more global tensions that were in for a run for 20 years or more, where we actually went in the right direction with a more open trade, more focused on free trade, also opening up countries, less to your political tension. Unfortunately, it turned the other way for the last six, seven years, which of course I think is very sad. Of course, companies need to adapt to the reality and we adapt to the reality as well. So that means that this year, geopolitical situation, of course, there's still an opportunity to run your business in it, but you need to think a little bit different. You need to accept the surroundings you're in. And again, I think it's a sad story that we're moving in that direction. I think for the benefit of a lot of people on their own Earth, it would be better with more open free trade and free exchange of experiences and information. But unfortunately, that's not where we're heading currently. I'll mention that next time I'm in the White House. And please do. Let's talk about skills for a moment. There's a critical skilled labour shortage in the wind industry, in terms of turbine engineers and on the manufacturing side of the equation skilled factory workers. How has this affected Vestus and the wider wind industry in terms of ramping up the manufacturing and rollout of wind power? And what's the long-term solution to the sector's skill gap? We have been able to attract good talent to our company, so we haven't gotten stuck with it. But of course, you get also less skilled people coming in, which means you need to put a lot more time and effort into scaling the people and making sure they're actually learning the trade. So it is a challenge, but there's still opportunities for a company like us at least to attract good talent to it. So we haven't been running short on people, but we've been running short on scaling the people. I mean, it's uncomfortable for the individual. It's uncomfortable for the company when you have people that doesn't really know how to perform their task. And you need to get through that as fast as possible. So focus on training, getting the right people on board, and accepting that you need to put the right pace into your ramp ups. What would your message to the wider wind industry be regarding the skills gap? I mean, you said for you in a Vestus, it's about training us about getting them through that period of not knowing quite as much as they need to know. What can the wind industry do to attract a skilled talent, or indeed, trainable talent? Working with a wider society with schools, with universities to make sure that the wind industry as such is known and understood. And also, I mean, you are fascinated by the wind industry so am I. And once you get to know it has a peeling force on you, right? So I think it's a lot about communication, making sure we're out there and we're engaging with the schools, and other occasional training and just making sure that people understand, okay, this is actually business that makes a lot of sense. And it's an opportunity for me to be in that business. It's competition around labour as well. Of course, I'm doing my small bit here. My teenage son is interested in becoming an engineer, so I've said to him, you should work in the wind industry and you'll be employed for the rest of your life. So, you know, we'll see what advice. We may yet get one more. So talking of people, if you had to pick one or two people who are not from your company, who you think have helped to shape the wind industry, who would they be and why? And that's a really tricky question. First of all, all of them are coming from Vestus, so at Jokerside, I don't think I would dare to pick out individuals. I think there's a lot of people that has been a part of really pioneering this business from the 70s and onwards that really drove the whole, how do you create the energy out of a wind and creating the whole business? And it's fantastic that in a quite short period of time, it has become a global industry with high value creation. Also, in itself, and I had off to all my predecessors over the last decades. But I think it's also true to say that it's also a little bit of a time to get out of that pioneering at this point and understanding, we are a very sizable industry, which means we also need to run it as the sizable industry. It is an understanding how we work with risk, how do we make sure we have the right to quality in what we do. So I think this is an industrialization. You would find any no kind of industries would take the airplane industry. In the beginning, it was probably accepted that once the twice-a-air plane fell down, that was just a very pioneering thing, right? And you had to dare to get them up there. Today, it's completely unacceptable that anything would fall down. And that kind of notion you need to get into the wind as well, right? That it's time also to make sure that we're not just promising things that we can't deliver. We are actually delivering a high-quality, value-proposition to our customers. Yeah, I take your point. You're not the new kids on the block anymore. This is a mature, proper industry. It is. Let's talk a little bit about your retirement and as before we sign off. First of all, can you tell us when you're actually going to be stepping down? My last formal date is the end of December this year. Right. My successor is already in place. I've stepped down already today, but I'm now in more supporting Alex Ansler, who is my successor in this. Okay, I'm glad you named Check to your successor. So what, Anderson, will you miss when you stop working in the wind industry, or working in general and knowing your wife because you're around the house the whole time? I've said it a couple of times here in the company already. I'm going to miss the people I'm working with. The whole notion of being a part of a larger team and you work hard together, you have fun together and you actually solve problems together. And I have a lot of amazing colleagues in the investors that I will surely miss without starting to name them one by one that will take me a long time. Sure. But I will miss my colleagues. I will miss the company as such for sure. And I will be a follow-up them closely and wishing them all the successful future. I bet you will. Now you don't strike me as slippers in front of the fire kind of person. So how do you intend to spend your retirement? What have you dreamed of doing when you're no longer working? I need to spend some more time with my family as well. I've been doing this type of jobs for the last almost 20 years. Commuting to different countries, I've been leaving the family in Sweden for more than 10 years. So of course I have a bit of a depth to the family. I have four grandchildren and of course I want to spend time with them as well. On the other hand of course that's a necessary feel your full week. So I'm chairman of the board of one company and I will possibly take up something more in that direction. I love playing golf. I love having some physical training, I have time for that. So I have no anxiety whatsoever that I would be able to fill my day in a proper way. I'm sure you will. And it's just like fair period because you're not actually, it's just like you're not quite retiring after all. But it's a big difference from having an operation role where you spend six to eight hours a week, yeah. Really in full full year into supporting, advising people who have those roles. And I'm actually looking forward to a slower pace than I've had for the last almost 40 years. Getting into a little bit of a different rhythm, having a bit more slippers on the morning as well and having a nice cup of coffee in the morning without being stressed to get to a specific appointment. So I'm looking forward to that as well. I must honestly say. Absolutely. Quite right. You need to say that. Anders Nielsen, thank you so much for talking to us for the Winpapodcast. Thank you. Thank you very much for having me. Thanks for listening to the Winpapodcast. I hope you enjoyed it. Make sure you subscribe so you never miss an episode and do feel free to leave us a review. For ongoing coverage of the global wind industry, visit winpowermonthly.com.