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Vårgrønn’s Massive UK Offshore Floating Wind Project
In the Uptime Spotlight today is Stephen Bull, CEO of Vårgrønn, the company building the world’s largest offshore wind farm with a government contract: Green Volt. Stephen discusses the massive project’s progress, planning, and logistics to be completed by 2030.
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Allen Hall: Welcome to the Uptime Wind Energy Podcast Spotlight. I’m your host, Allen Hall, along with my co host, Joel Saxum today, I’m excited to welcome Stephen Bull, CEO of Vårgrønn, who is leading the charge in developing some of Europe’s most ambitious floating offshore wind projects. Stephen brings over 25 years of energy industry experience and currently oversees Vårgrønn’s Impressive portfolio of projects across Northern Europe, including Greenvolt, set to become the world’s largest floating offshore wind farm with a government contract.
Welcome to Uptime Spotlight, shining light on wind energy’s brightest innovators. This is the progress powering tomorrow.
Allen Hall: Steven, welcome to the show. Thanks so much, great to be here. Well, the Greenvolt project is one of the most important Impressive projects going on in the world right now, and you’re heavily involved with that, of course, as being the CEO of Vårgrønn and I want to understand a little bit about how that project came together and what problem Greenvolt is trying to solve.
Stephen Bull: Yeah, sure. I mean, it’s kind of neat to say it’s the most exciting project. I think it’s, uh, it’s quite a scary project in many respects for us as well when you work within the offshore wind sector at the moment, but definitely within floating offshore wind. Yeah. If we sort of dial it back down to the project itself, I mean, what we’re solving for here is, is the generic problem with offshore wind in deeper waters.
And, uh, and really when you start to push the boundaries beyond 60, you know, 60 odd plus, 70 meter water depths, you need to start to go into the floating territory. Um, and that’s something that you find distinctly within the coast of Scotland as well. There’s only so much of that seabed that is shallow and then it starts to push out there.
So, Scottish authorities, the Scottish Crown Estate, the guys who basically own the seabed license around there, want to have further developments within offshore wind, but um, they are inhibited in the sense that they have deeper waters. Um, at the same time, there’s still a quite large oil and gas industry in, of Scottish waters as there is in Norway, as well as the two largest producers in Europe.
They also have carbon issues, carbon problems of CO2 emissions from their own Scope 1 emissions. So the Scottish authorities have put together a concept which is called targeted oil and gas. And essentially they’ve been looking to lease out areas where we could develop offshore wind, both that go straight into the grid.
For the benefit of consumers, but also could help decarbonize oil and gas operations as well. So that’s the background around it. It’s happened pretty quickly. To be honest, we, we received our, uh, you know, essentially our lease just over a year ago, year and a half ago. Uh, we won a contract for difference from the UK government in September.
Uh, for 400 megawatts and we’re just basically right in the middle of procurement and developing the whole concept now so we could be online by 2030.
Allen Hall: Wow, that’s a really short timeline. There’s a lot to be done between now and then. In terms of the electricity for a minute, let me just walk through this.
Your plan, and the way it’s proposed, is there’s floating platforms with wind, there’s a HVDC line, I think is where you’re going, that will run to offshore oil and gas platforms, so it will power those oil and gas platforms, but it also runs onshore into Scotland. So, you can power oil and gas offshore, also power onshore, and then that’s sort of a bi directional feed that, in the event that the wind’s not blowing enough in Scotland, which is really important.
Pretty rare, honestly, then the power can come onshore to the oil and gas platform. So it’s sort of a redundant tool to offtake system.
Stephen Bull: Yeah, it is. So the, the, the, what underpins the project itself is, is the contract with difference. And this is the policy mechanism. The UK government has basically dialed down for, for some time.
Um, it’s, it’s a 15 year price you receive. So actually you go into an auction, you win a 15 years and basically it’s a, We received 139 per megawatt hour in 2012 prices. So that’s just shy of 200 per megawatt hour. Uh, and it’s, so it’s an inflation adjusted, uh, within that, that period. Um, and that’s great because what you can do with that one, you can use that to essentially underpin the financing of the project itself.
Um, and what we do on top of that one is that, you know, in outside of the 400 megawatts, then we have up to 560 megawatts that we could produce in the total area, uh, which can, you know, help towards oil and gas decarbonization. And it was the, you know, again, that, that has to be, that’s a direct relationship we will have with oil and gas operators with their, with the PPA.
But the idea being is that, If they obviously want to turn off their gas turbines, or if they’re using diesel, then they need 100 percent guaranteed power. Yeah.
Joel Saxum: So a question for you there then, um, you’re gonna be pseudo co located, right? You’re gonna be within, you know, within distance of these offshore oil and gas platforms, so you’re not running an export cable hundreds and hundreds of kilometers.
But what is, so how, how many of those platforms will you guys be able to feed? And what’s the actual power demand of those platforms?
Stephen Bull: It varies quite dramatically. So the area that we have, and we were in an area which is about 80 kilometers off the coast of a place called Peterhead, which is just north of Aberdeen in Scotland.
Um, there are some oil and gas installations in the area. Most of them are a bit further out. So what we did is we were awarded two licenses from Scottish authorities. One called Greenvault. Sinos is much further out. That’s, uh, that is within the HVDC territory, but it’s much closer to oil and gas operations.
And that’s actually quite close to the Norwegian border as well when it comes to, uh, the Norwegian border between the UK continental shelf and the Norwegian continental shelf. So that could be potentially an opportunity to decarbonize also outside towards Norwegian platforms as well. Um, it’s, it’s kind of, it’s, it’s when you put things in perspective, I mean, the most important thing is that this project has got a contract for difference.
We’re going to get it going. We hope we can find strong support from oil and gas who want to sign up for a PPA so that we actually can. Uh, work with them, decarbonize their, their emissions, and they’re not inconsiderable. They’re, you know, it’s between up to maybe 13 to 15 million tons of CO2 emissions come from the UK sector.
Uh, roughly about the same in terms of Norway, uh, as well. So, you know, 25 odd million tons of, of CO2 reductions is something which is quite considerable, which, which oil and gas needs to do in a, in a net zero context. So. There’s different drivers of this. Some could be complete cable from shore. Others could be that you just have don’t full, fully decarbonize, but you can reduce the amount that you use by having a gas.
Uh, turbine would also, uh, a ring fence system that you could have with offshore wind. They do that in a project in Norway already. It’s called Highwind Tampen. So it’s a, you know, an experimental project there, but it’s the largest floating offshore wind, uh, farm today, uh, in operation. So there’s, there’s different ways you can cut and slide this up, uh, in, in terms of that.
But the, the key one around it is that In many respects, you’re using oil and gas technology, for example, floating technology, deep water technology for spas or for semi submersibles, but you’re dialing it down into something which could be, you know, in a renewable context, and obviously repeatable as well.
Joel Saxum: So it’s saying that, Highwind Tampin, I think that was an Econor project, correct? That powered some offshore oil and gas platforms. But this being said now, 400 megawatt contract contract for difference permit, plus another 160 out there. So 560 total, that will put you guys in place to be the largest offshore floating wind farm in the world.
Stephen Bull: Correct? We’ll see, you know, China’s pushing things on Korea, boosting things as well. You know, so we’ll see. And then France has also threatened some 750 megawatt projects as well. I mean, the thing is that we want to see them all happening. And again, the hard bit about it, when you think of the 70 odd gigawatts of offshore wind probably commissioned today, 300 megawatts is in floating.
You know, it has anywhere near the scale and the repetition and the modularization that we need to get so we can bring the cost down. We’re all for as many projects as possible, but um, but us probably, we could probably safely say it’s the largest commercial project in Europe. A lot of people aren’t quite sure exactly what water depths that mean. What water depths are you guys in?
Joel Saxum: So we’re in about 110 meter water depths, which you know again, this sounds a bit weird, but you actually want the right kind of water depth. So you don’t want something under a hundred generally, because you have a mooring system that would be a quite cattery mooring system, which would be quite costly to have that.
That’s a lot of chain you need in there. Super deep is quite difficult, you know, so I think finding the right kind of, uh, the water depths then, and again, the site conditions are very different with all these projects as well. You know, the kind of site conditions you get off the coast of Norway or where you get off the coast of Scotland or France or Japan as well are very different.
So. In that sense, you also have to tailor make the mooring system, the floater itself, the integration of the tower, the turbine. Yeah, a lot of bespoke stuff. So we’re, we’re not on the standardization train yet.
Yeah. I had that conversation with someone the other day, we’re talking about offshore floating wind.
Who’s going to, what, you know, what technology is going to emerge as the, as the forefront, as that, as that front runner, who’s going to be the big one. And, and we got a little bit deeper into the engineering side of things. My background from offshore oil and gases. Exactly what you just said. Every water depth, every seafloor condition, every topside condition is different around the world.
So there, you’re not necessarily, you’re not necessarily going to have one type of technology that just dominates the whole market. There’s going to be specific ones. So if, if you guys are, building for, you know, specifically, you know, 80 kilometers off Peterhead up in that North Atlantic. Is there a certain kind of technologies that you guys are looking at right now in your, in your RFP for building this thing?
Or is it spars or what do you guys, where are you focused on?
Stephen Bull: We’ve dialed it down to, to a few designs already. Um, and the key thing about this is it’s generally, it’s, it’s, it’s actually water depth of the key. Uh, and when you start to do the assembly work is often some of the drivers. So. For example, the Highwind Tampon Project from Equinor, they used a spar.
And that’s a concrete spar. So it was, uh, it was a slip formed concrete spar, which is, you know, oil and gas technology. You’ve seen these in massive concrete floating foundations over time, but just, you know, much smaller. But you can do that when you’ve got water depths of, you know, a hundred plus meters right next to the quay here in Norway.
So you have some obviously deep fjords. Scotland doesn’t have that. So unless you wanted to build it out into Norway and you drag it across the, the North Sea, then that’s the other option you do. And it has been done. Harbour Scotland was built in that way as well, which, uh, which Equinor built, um, uh, you know, only about five years ago.
But what we can see for our one is, you know, we’re, we’re thinking more around the semi submersible type of space for the concept here. Again, we’re in the middle of a procurement system at the moment, so I won’t be giving away all the fun facts around that one, but again, it’s, it’s, it’s different strokes for different folks based on these, these kinds of conditions.
But I think if I was dared to bet on the technologies, the spar is great for Norway and the harsh conditions of the Norwegian continental shelf. You’ve got a, an oil and gas supply chain there that knows this business. It, it, it’s, it works. It’s good. Not to say that’s the only design there, but for, you know, Scotland, for France, for others, you’re probably going to see more of the semi submersible.
And you might see some tension like platforms. You might see some barge type solutions as well. But again, it depends very much on the bathymetry and the, you know, site conditions as well.
Joel Saxum: I think you guys have a great advantage up there of just being in an area that’s been an oil and gas hub. There’s been offshore infrastructure being built there for decades.
60 years now, so the port facilities are there, the vessels are there, the people that know how to get things done are there. Um, so that’s, that’s huge. Now, so my next question would be like, you guys get this thing into operation. Is who’s going to maintain this thing? Are you guys going to be doing all of the, the service yourself?
Are you going to build that out as a, as a capacity or we’ll, you know, we’ll go to the turbine OEMs or how are you going to operate
Stephen Bull: that? I think it’d be a hybrid of things, but we’re both with the turbine OEMs, uh, and how we would operate ourselves. So there’s different philosophies around this, as you know, you know, I’m, you know, there’s an outsourced market or third party market, isn’t it, for O and M operations, which.
Works great in mature areas. I think when you are doing this for a new technology, um, and particularly with more harsh conditions as well, you need a service operation vessel to run this, not a crew transfer vessel because of the distance from shore and also wave height as well to try and access the turbines.
So you, you know, need a different concept there. But these are things that we’ve seen already. We’ve seen it in the Dogger Bank project, which SSE and ourselves are owners in, we’ve seen it in other projects around too, but the key thing about it, and we’ll probably come on to the financing discussion is that to finance this and actually think of the, um, uh, risk management around that is that, you know, you want to have a very, very clear hands on operating concept.
So I think that that would be part of part of parcel of that. But again, when we start to think about more digital solutions and the idea is we want to be touching these turbines less. We don’t want to be out there all the time, especially in the winter months. That’s
Allen Hall: the key bit. And some of those lessons were learned from high wind Tampin, right?
Is that that was a really critical project. I know there’s been a lot of controversy about that project, uh, about the success of the project in, in the engineering world. However, that project led the way so that. Greenvolt can happen. You just, it’s continued on and on. And that happens in the financing world also, right?
That, that, the, the financing of how Equinor ran Highwind also rolls into how Greenvolt approached financing a little bit. Can you explain how this all comes together financing wise and how you’re trying to, With a new government in place and you have a new government, we have a new government, um, in the United States.
How that works together to push this project forward. I mean, you know,
Stephen Bull: there is this sort of standing on the shoulder of the giants, uh, thing going on here. And I think, um, again, I’m sort of kind of lucky enough in the sense I actually worked in both Noshkidro and in Equinor. So I’ve been involved in some of this for a personal level and, uh, of many, many hundreds or thousands of other people involved in floating offshore wind.
But. That first demo project in 2007 off the coast of, of Senga, which, uh, noro developed initially and then they came under the wings of EOR afterwards. I mean, that, that set up some fascinating DR and D work. And it was in, you know, pitch blade motion control. It was under understanding the spa, the interaction between the tower, uh, all the forces that you have at work, uh, within, you know, within these operations.
And then you came behind, um, Scotland on top of that, tampon built on the top and obviously. There’s the other Daikin Cardean has been developed, you’ve got, you know, demos that are in Portugal and, and, and other areas as well. So I think that the main thing is that to, you know, to take some of those learning and some of those projects, you know, help our project finance, but the majority haven’t been, you know, they’ve either been demos or, you know, having Tampin, you wouldn’t need to project finance.
It’s all in gas, so essentially, you know, essentially the sort of the licenses behind it. But what you do know is that we. When you do talk to banks and you discuss what’s going on here, I mean, one thing is there’s actually quite a strong appetite for banks to be involved in the project financing of floating offshore wind.
They see a lot of opportunities, particularly Japan, uh, not surprisingly, and a lot of Japanese banks are already deeply into the UK offshore wind market already as, as finances, um, and infrastructure anyway. And then what you do is you start to use references and, and essentially verification from the oil and gas industry.
So, one thing is you can, what we take, learning we can take from other projects like Kim Kardine or, or any of the, the Equinor projects. But you do use references, for example, mooring systems, suction anchors, technical integrity of steel, uh, operations and maintenance using SOV vessels, these kinds of things, stuff that’s been tested already.
You just have to contextualize it for that particular project for the lenders.
Allen Hall: And that’s a unique approach. I think bringing Japanese in makes complete sense to me. And you do see a lot of activity in Japan on floating wind. Obviously, that’s going to be where they’re going to go. So it’s a learning experience for everybody.
When you’re Building out now in, around Aberdeen, you have an office now in Aberdeen and you’re trying to grow that. How big does this become in and around Aberdeen in terms of the number of employees and the amount of funds that are gonna happen in that area? So the, I mean, the
Stephen Bull: numbers are, the gross value added, we say, total investment is about 2.
5 billion pounds. And a lot of that, so it’s, it’s, a big chunky change, no doubt about it. them. And then it’s around about 2, 800 people we’ve measured up there with jobs during construction. And obviously you have, you know, you’ll have probably 40 to 60 working operations and maintenance or office work to, you know, essentially go into office mode.
Um, we know, I mean, literally three weeks after we were awarded our contract, the difference of the government, we announced that we’re putting our office in, uh, in Aberdeen. So we’ll build on the office there with our partners, Flotation Energy. Um, and again, we, you know, we’re building a lot of from competence, from, you know, pure offshore wind background, but also many from the oil and gas sector as well, uh, including myself from that type of background.
So there’s, you know, there’s a great investment there, but the key one around this one is that when it comes to port infrastructure, when it comes to grid connections, all the rest of it in more remote areas, like the Northeast of the United Kingdom, is that this project does actually open up grid new investments.
And then they say, it’s not one port. Or yard that can fix this. You know, we’re talking about 35 plus floaters. They’re the size of a football field. Each of them were a football stadium, essentially. Um, you know, there’s a logistics play going on here is that, you know, we need to crack the code for this so that others can jump on the back of it as well.
And again, there’s a, there’s a whole wall of new investments and potential projects in something called ScotWind, which was a very large leasing process in Scotland, a lot of mix there between floating and fixed bottom. Um, But to, to have those investments in the ports and infrastructure that have, you know, previously oil and gas means that they can start taking those investments.
We can be part of an anchor investment there for them and then we can bring it on for others as well. You know, we hope that that drives investments, not just in jobs and skills, but also reduce down the cost of energy as well, and actually make it more competitive
Allen Hall: too. Right. That gives Scotland and the UK a huge advantage going forward, because there will be competition from France in particular.
Yes. So that’s going to be an impressive amount of effort. So what does your schedule look like now? And as a CEO, we’re going to need you. It must be schedules all the time. What happens over the next year or so? What, what, what’s the plans here? I know you have a lot of RFPs out there. What does the next year look like?
Stephen Bull: So we’re just, you know, again, working with the long lead items at the moment, which is offshore transmission. It’s the turbines in particular. That’s, that’s brick and mortar packages we’re working with at the moment. Um, and then we’d really, we’re looking at probably signing some pretty heavy contracts through 2025.
And then the FID will be taking 26. Bruce. And then the idea that would be, uh, you know, we hope first, first wind production by the end of 29. Again, but it’s actually, you’re on the clock when it comes to delivery in terms of the contract for difference. Um, you can do that. There’s, there’s some guardrails around how you can work with that one, but.
You know, you guys, you follow this up all the time. It’s a tough market in terms of the supply chain, availability, floating’s different and needs a little bit more bespoke engineering around it. It’s not off the shelf technology, a lot of infrastructure that needs to be invested in the UK to make this work.
So I think, uh, again, it’s, it’s a tough one, but I mean, that’s the exciting, this is why we do it, isn’t it? Because it is so motivating and exciting to work with these kinds of projects.
Joel Saxum: I think that what you guys are doing right now, that like the, first off, Allen and I kind of talking off air, the hedge between the two.
delivering power to the oil and gas platforms and shore. I mean, that’s, uh, innovation that makes things like this happen. That’s fantastic. But you’re doing a lot of, uh, there’s a lot of new, right? This is like, uh, we, we, you know, in the investment world, we call it folk, you know, first of a kind, but the whole project is like that, right?
So it’s, there’s kind of a lot of first of its kind things. How do you handle that role of leadership as you guys move forward in the industry?
Stephen Bull: No, it’s, it’s an interesting question, Joel. I think, um, Again, the background, I think, again, someone’s worked in oil and gas. Oil and gas is pretty good at sharing ideas and working together in terms of partnerships.
Offshore wind has been less good at that. It’s been a bit more secretive around how they, you know, how they feel that things are technically sensitive, commercially, R& D. I think for us, you know, we have to be a bit open here completely. Again, it’s if we want this to succeed for others as well. Um, then we know we have to, we have to play, play openly with others.
So I think we’re actually looking into some of that, how we actually think of the data sharing that we can use here as well. I mean, our team are out there, you know, conferences all over explaining a lot about how we’re thinking about working. We need suppliers, what we think in terms of actually infrastructure investments.
And when, when we start signing contracts for, for, for some of the major engineering packages, I mean, Others will be looking at it and thinking, okay, you know, what can I learn from this? And hopefully the smartest people will be the ones that look at it and actually don’t make the mistakes that we maybe end up or will be doing.
We know that happens in projects. Although they can start to think, how do we standardize? How do we reduce weight? How do we reduce costs? How do we bring uptime further? So, you know, there’s so many benefits that I think to, to build on this one. And, but I think, you know, you’re right. We, we have a responsibility, you know, both for not just to provide the right type of content for the UK as well for investment so that the UK can reach its floating offshore wind targets.
But, you know, again, this goes for a bit of the rest of the industry. And when you, you know, again, worked in this industry for quite a long time, but definitely the last few years have been pretty tough and a bit depressing in terms of headlines. And people say just, you know, you know, fantastic news. Love it that you guys won Greenville, you know, and it’s literally don’t screw it up.
So you feel that there, you know, they’re kind of staring over your shoulder, you know, to, to not make that mistake. But yet again, we, we, we, we take that fully on ourselves. And I think that goes for a stakeholder relationship between Scotland, the UK, local authorities as well. You know, you’ve got to play
Allen Hall: really well with everybody.
As far as hiring right now, it seems like you’re going to need a bunch of people to show up in Aberdeen. What’s the plan there?
Stephen Bull: Yeah, we are, we’re hiring pretty heavily. So we’re, we’re spamming LinkedIn with all our new positions out there. Yeah. Um, so some within our company, some, uh, our partner Flotation Energy are bringing in and then we’re bringing people directly in for the, for the Greenbelt project itself.
So definitely we’re hiring a lot. And also we, you know, our model is that we’re not going to be doing everything in house. You know, we have an outsourced model, we have a domain expertise within certain packages, and then we will be using engineering houses to work through those. So that’s, you know, Admittedly, we’re driving quite a lot of the volume within, uh, engineering consultancy at the moment, uh, across the, across the, across Europe.
Allen Hall: If you’re interested in working with Stephen at Vårgrønn, or even some of the suppliers going to be around in Aberdeen, you need to go check out Stephen’s website. Stephen, you want to give all the addresses of where they can find Vårgrønn?
Stephen Bull: Yeah, definitely. So it’s just vagron. com, uh, go in there, or if you just Google GreenVault as well, and you find that we have a supply chain, uh, So, I mean, literally, you’ll, you’ll see us all over.
We, we kind of spam as much social media as we can for a company like ourselves. But And then we’re out there also talking about these great to do this with you guys as well and tell about the project, but we’re definitely telling more about it as we as we develop it.
Allen Hall: Absolutely. It’s a wonderful project.
I know you have a lot on your plate at the moment and the best of luck to you. I’d like to have you back on the podcast to talk about how things are going in a few months because I think we’ll hear some more details coming out soon. So, Stephen, thank you so much for being on the podcast. It’s been a pleasure.
Stephen Bull: Thanks so much, Allen. Thanks, Joel.
https://weatherguardwind.com/vargronns-offshore-floating-wind/
Normally, “nihilism” means the belief that life is without objective meaning, purpose, or intrinsic value. Trump was elected by mean-spirited idiots, but they could hardly be called “nihilists.” For example, they believe very strongly in white supremacy, the dismantling of the federal government, saving people from the lethality of vaccinations, etc.
Now, there is a secondary meaning to the word, i.e., those who reject established social systems. In this sense, I suppose they are indeed nihilists, in that they reject lawfulness, honesty, human rights, truth, science, tolerance, and compassion.
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Allen Hall: Welcome to the Uptime Wind Energy podcast. I’m your host, Allen Hall, and I’m here with Rosemary Barnes, Matthew Stead, and Yolanda Padron. And three out of the four of us will be in Melbourne Australia talking to a number of operators and interested parties about WOMA 2027. Matthew, where will we be the couple of days we’re in Melbourne?
Matthew Stead: So, um, first of all, we’ve got the Pullman, uh, East Melbourne, which is, uh, where the venue will be for, for 2027. Um, so that’ll be our home base. Um, we’ve got around about eight meetings planned already. So what we’re doing is we’re talking to the operators and a few other industry, um, players about [00:01:00] what we need to talk about, how we’re gonna move the industry forward in Australia.
Uh, so it’s gonna be jam-packed, but there’s a little bit of time left on the Friday afternoon if there’s any late-minute, um, people that wanna get in contact and catch up with us, um, for next Thursday, Friday, or actually Friday. Uh, so yeah, it’s gonna be a, a jam-packed time. I think we’re gonna be tired, too many coffees, and talking to all the key, all the key operators, uh, about what they wanna hear about and how we can move the, the industry forward.
Allen Hall: And if someone wants to put an input into the WOMA panel about what will be discussed at WOMA 2027, Matthew, how would they do that? How do they get ahold of you?
Matthew Stead: Well, we have a wonderful website, and that’s got all the details you could ever want. Um, you can also register on the website, so please register.
Otherwise, um, I’m sure we’re gonna be a sellout this year for sure. So woma2027.com.
Rosemary Barnes: I just wanna add that when people talk to [00:02:00] me about the event, they always say how they love that the topics are so relevant, and the reason why that they’re so relevant is because we make sure to go around to operators and find out what are the issues that they’re really dealing with.
So anybody that’s thinking of attending, even if you can’t, you know, meet us up, meet up with us in Melbourne, get in touch and tell us what are the, yeah, what are the topics that you’re struggling with that you’re not, um, you’re having trouble finding enough information, having trouble finding the people that can help you.
And y- yeah, like we take all of that information, and that’s how we come up with our agenda each year. And yeah, I mean, for us, that’s the, the main thing is that this has to be really relevant, up-to-date information for the industry, and we need your help to make sure it stays that way. I
Matthew Stead: mean, that’s what we’ve done the last two years, so this is– we’re just repeating the formula, um, listening to the operators and getting the good topics and the good speakers.
Allen Hall: Well, Vestas has had a good quarter. Uh, the, for the last couple of years, honestly, s- [00:03:00] Vestas has been really thin on margins. There was questions about it continuing on. Rising costs mostly, uh, supply chains, especially during COVID, were bad. Uh, and, uh, but for the most part, the shareholders stayed attached.
Well, that story is changing rapidly. The world’s largest turbine maker posted second quarter operating profits of $400- €46 million, more than double what the analysts had expected, and it’s raised its full-year margin guidance alongside half-year results for the first time in a decade. The shares climbed about 20% in Copenhagen, adding roughly €4.7 billion of market value in a single session.
Now, the chief executive, uh, Henrik Andersen, ha- put it plainly to, uh, uh, in a couple of news sources that something much bigger is happening and Vestas is gonna be the, the leader in wind. That’s how I read it, that everybody [00:04:00]at Vestas was super happy with the, the change in direction and things were moving up steadily.
But a 20% jump in a day is remarkable. You don’t see that in large industrial businesses like wind energy. Matthew, this has real implications on what happens next for Vestas because success like this usually means more orders.
Matthew Stead: Yeah, I wonder what’s going on under the hood there. Um, I mean, Vestas is a quality company, although, although can I just do a quick segue?
How many turbines were installed in Denmark in the last, uh, two years? Like last year and the year before?
Allen Hall: I don’t know. How many?
Matthew Stead: I believe it was eight turbines installed onshore in Denmark last year, and the year before it was 12. So, you know, maybe, maybe Vestas needs to focus on their own backyard a little bit as well.
Allen Hall: I’m not sure there’s a lot of opportunity there. Yeah, onshore.
Matthew Stead: How can you ever be full? I mean, there’s always, um, [00:05:00] uh, you know, um, you know, resiting or, um, you know, upgrades and-
Rosemary Barnes: You know what? Allen and I are probably gonna get some time in Jutland, uh, later this year, um, and that area and the old wind turbines there was actually the inspiration for my whole YouTube channel.
It just, ’cause there’s, you know, there’s turbines there from, the earliest one is, um, from the ’70s and still going. I think it’s one and a half megawatts, actually huge for, for that time. Um, and it was like community made, um, at Tvind. But anyway, I’m interested to revisit the site and have a look and see are these, you know, all these old turbines still there.
It’s only, like six years since I went through and did the experience but for the most part, they don’t seem to be yet pulling down the, the small old ones and putting up big ones. There’s a lot of, a lot of them are community owned. Um, and yeah, I mean, Danish people love wind turbines, but there’s only so many that you can have onshore.
Like, people are happy to live near them by, you know, the standards of people in other countries, but you don’t want [00:06:00] one in your literal backyard. I think that there is, there, there is a, a limit to how many more onshore wind turbines that you can get in that area and offshore expansion is the more likely way to go.
Um, and also I think it’s, it’s, it’s good to recognize that if you have a domestic only or a domestic first strategy, that will only get you so far and then you have to expand, and I think Denmark did that really well. I think Germany a little bit less. I think that Enercon were a bit surprised, um, by their strategy.
It, uh, they had a real hard time anyway when they had to transition away from mostly Germany to getting overseas. And obviously, like if you look at China, they have most of their installations are in China. They are trying so hard to get outside of China because it’s not, like even a market as big as China, it’s got decades to go before it will be full.
Um, you can still recognize that that’s not your, like long-term strategy for growth has to involve expansion, I think.
Allen Hall: I think Vestas, regardless of what happens in Denmark, is making a play for the United States. That seems to be [00:07:00] where a significant effort is happening at the moment and on offshore. Their– Vestas seems very excited about the offshore opportunities.
Of course, there’s a ton of wind turbines gonna be installed in the UK and, and all around Northern Europe. Offshore, the opportunities to buy turbines, there’s only a couple that you could get today. Uh, uh, the GE Vernova offerings I, I don’t think are gonna fit the mold, and I don’t know if GE’s even actively selling.
So their competitor realistically is Siemens Gamesa, which does seem like the smaller player at the minute versus Vestas, which is heavily pushing the V236 and will fill order books like crazy, I think, uh, just based upon the, the history they’ve had and everybody knowing who they are. So Also on the move in Australia, right?
Vestas is huge in Australia right now.
Rosemary Barnes: I think it’s really good that their, um, yeah, finances, uh, are [00:08:00] looking a bit better ’cause it’s been funny. Like, I tried early on in my wind career to invest in, you know, wind turbine manufacturers knowing that there would be immense growth, and I was right. There, there was immense growth.
Not that that was so hard to figure out that there would be, but it did not lead to any kind of, um, return on, on anything, you know. Like, that did not keep pace with the just general market. Um, so I, I stopped trying to, stopped trying to invest to that. But it has been really, really hard for the companies to, you know, raise money or y- you know, do any of the things that they need to do because they’ve always, like, they’re growing, growing, growing, but finances has been so tight that it has been a real constraint on the amount of engineering that they could do, and I really hope that Vestas are gonna take this opportunity that they’ve got compared to, you know, a lot of the other manufacturers.
Vestas do have really strong, um, innovation and, yeah, engineering capabilities for doing– you know, developing new technologies and improving them, and I really hope that they’re taking this opportunity to build that up. There are a lot [00:09:00] of very good engineers with a lot of experience in the industry in that area that are working in other fields at the moment because, you know, there’s been a lot of contraction in Denmark.
So I don’t know, it seems like a really good time to hire back some of that really in-depth knowledge and, yeah, get a- get ahead of, you know, some of the future quality problems. We’re going through such a hard time at the moment from the fast development that happened in the 20-teens when there wasn’t a whole lot of money around.
We’re dealing with quality problems now, so, you know, maybe we can get ahead and not have the next round of them if we can invest in just a lot more, uh, engineering capacity.
Allen Hall: When you have success like Vestas has, usually the upper level management and some of the executive team starts getting pilfered, that they’ll get offers to repeat that success at another company, and it sounds like that process has started already.
There’s a couple of executives that have recently departing or are in the midst of departing from Vestas. [00:10:00] I would see that continuing f- at least for the next six months, uh, because everybody wants to repeat that, right? If you can get a 20% increase in your valuation overnight, uh, I can, I can list a number of companies, regardless of industry, that would love to participate.
Even in a 5% increase, that would be remarkable. So, um, Vestas is gonna have a hard time holding onto this. That’s just the nature of the business where things are successful, people will wander. And Rosemary, I, I think they’re– And Yolanda In, in my book, Vestas should sort of s-stand down and just make quality products.
I’m not sure you sh-should tinker too much at the time being and just make the good stuff better. That seems like a way to really increase profits.
Yolanda Padron: Yeah, I mean, solving a lot of the issues that– And, and that’s not just a Vestas exclusive thing, right? All of these OEMs have some sort of issue that maybe– I know Rosie’s touched a lot on, on it, where [00:11:00] you build this version A and then version B solves one of the small little issues, but now it creates another little problem, and then you have version C, and then everything just kinda has its own niche little issue, um, that really expands over time.
So if they could solidify what they already have in, in a, in a model that, that would help them just even keep a lot of their customers, I think that’d be great, and it would help, certainly help them, um, not continuously, like, rotate around the customers, ’cause it almost feels like, at least in the States, right, you, you get GE to be really, really strong and have a huge market share, and then GE starts focusing more on gas turbines, so then they all go onto Vestas, and then they all go onto Ontara now.
Um, and then just, you know, just kind of everybody starts cycling through them because they just kind of want something that’s better quality than what they’re getting in the long haul.
Matthew Stead: Allen, you, you talked about you think there’s something big under the hood. I think you, you [00:12:00] thought that maybe Vestas was angling towards something or being quite bullish.
Do you think that they might take over GE Vernova?
Allen Hall: I don’t think they’re gonna grab Vernova, and I don’t think Vernova is for sale at the minute, but I wonder if Siemens Gamesa is, or Nordex. I mean, Nordex has done terrific the last couple of quarters and is making inroads in places that I didn’t think possible three, four years ago.
Uh, the European marketplace is be- becoming really unique in that sense that there’s a lot of money being put out. But is there a sole perfect solution for Europe? Not at the minute, ’cause you got two competitors there, and then China trying to, to work its way in. Will the Europeans come together and form something more united, even if it’s just a partnership, a loose partnership, versus letting China on the shores?
We’ll see. 64 of the largest machines that Vestas has builds are standing off the German coast, but one blade is missing a [00:13:00] piece. We’ll talk about that when we come back.
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Allen Hall: Well, Germany’s largest offshore wind farm is now fully installed, and EnBW confirmed this, uh, past week that all 64 of the Vestas V236 15-megawatt turbines are s- standing at the He Dreiht wind farm about 85 kilometers northwest of Borkum. Uh, 960 megawatts, [00:14:00] 2.4 billion euros invested. Man, these offshore projects are expensive to get installed.
Uh, so it’s power for roughly 1.1 million households, and there’s no state subsidy behind any of it. And so this is a little bit of a u- unique situation. Uh, th- well, the one footnote about the wind farm is they had a V236 blade break and fall into the North Sea, and they had fished it out and I think I passed along s- pictures that I saw online of, uh, one of the police boats pulling the shear web out of the water I don’t know what to think anymore about some of these offshore blade issues.
Obviously, Vestas is very conscientious about it and will be doing RCAs and engineering reviews and all the above to go identify what the problem is. But it does just lead to a little bit of a pause of do– what is going on for some of these offshore [00:15:00] wind blade installations or, or whatever’s causing these blades to break?
Do we have a good handle on it? Yolanda, is– are we following up on all the design details so that we can prevent these things in the future?
Yolanda Padron: I mean, I’d, I’d hope you’d be following up on the design, right? Like, and, um, but I think there is still a little bit of a disconnect from, from what we’ve seen, and again, not just Vestas exclusive, um, between the people who are designing and the people who are manufacturing, the people who are in operations, right?
So, uh- The, from what we’ve heard, uh, this could have potentially been a, um, partially because of a transportation issue, which is what happens a lot in onshore. It’s a lot more common than we would like it to be. Um, and so that even goes beyond what would go on in the design studio and what would go on in the manufacturing and what would [00:16:00] go on even just for the people that are running the site, right?
So, so some sort of, um, in between, uh, EPC error. Um, but yeah, I just think that, like in a lot of industries, there should be a lot more communication between all of these teams on the lower level, so that way a lot of these problems can, can be avoided.
Allen Hall: I’m wondering if it’s actually an issue on the, the testing side.
And, uh, the one question that just popped up, and we saw from the ORE Catapult, uh, survey that’s being conducted at the moment, and if you haven’t participated in that, you just visit ORE Catapult and answer some of the survey questions. But torsion on a blade, which is very difficult to test for, and it really isn’t tested for today, but does happen during the move and the transportation of these big offshore blades.
Is it one area that we need to do a little more work in or maybe spend some more time focusing on it to see what is happening as blades are [00:17:00]moved?
Rosemary Barnes: The thing about te- torsion is that it is much more significant as blades get longer. I can’t, I can’t remember the equation off the top of my head, which is, um, bothering me.
But I think it scales with, like, the fourth power or something of, of length. And so whilst it was always a bit of a problem, it’s much more of a problem as it gets, as blades get bigger. I mean, they’ve never, like, fully tested a blade, and there was always a lot of reliance on, hey, y- you know, like we’ve tested certain things that is possible to test in a test facility on the ground.
But they also rely on their decades of experience of how blades actually behave in the field. But, you know, remember, that’s a real lagging, lagging indicator because y- you know, their decades of experience is mostly with lots smaller blades. Now, blades are really different because they’re longer and different effects are, are taking over.
It’s not just, uh, torsion, but it’s also the laminates get much thicker, and then y- you know, you, you have issues with the way that they’re curing, [00:18:00] and there’s a lot more just space for, um, defects to be present in a really thick laminate All of those things add up. Oh, yeah, then add in addition, like new materials, carbon fiber is new, and then new ways of producing it, you know, pultrusions, um, all kinds of different materials like balsa’s being replaced with foams and, um, like, you know, 10 times that number of what sounds like a small innovation, but all of these things have the potential for damage and don’t have a really long track record in the field to be able to kind of calibrate.
We do need to remember that, like, when you do something new, things are gonna break, uh, sometimes, they’re gonna fail sometimes. If they don’t, then you’re definitely being too conservative, and your product is costing more than it should, and nobody wants more expensive wind energy, right?
Matthew Stead: Rosie, Rosie, I, I know you’re doing some, some excellent work on, um, industry studies around erosion and temperature and so forth.
Um, I just wanted to let a little secret out of the bag that, um, in the future there will also be some [00:19:00] other studies on torsion and blade twist and blade dynamics. So, um, just a few things are in, in train at the moment, which I can’t share, share, but, uh, watch this space around better understanding blade twist.
Allen Hall: The Hydride wind farm runs on European turbines, but the next one might not. Two governments with two very different answers on who gets to build Europe’s wind fleet.
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Well, two countries and two decisions, one question. In Scotland, the UK government blocked plans for the Chinese manufacturer Mingyang to build a turbine factory, uh, near Inverness on national security grounds. 1.5 billion pounds of investment, up to about 1,500 jobs. And First Minister John Swinney has asked the new prime minister to reconsider.
And the UK energy secretary minister called that request irresponsible. Meanwhile, up in Denmark, Vattenfall has just won two offshore wind farms and will not say whether it will buy European turbines. Danish suppliers are not taking that quietly. So [00:21:00] the Scotland question about the Mingyang factory is at least being discussed again with the new prime minister in the UK.
It does seem like there’s a lot to do and get the government formed and make all this stuff happen. But I don’t see a Burnham administration changing the outcome for Mingyang, but I could be wrong. At the, the same time, Vestas is pushing for a more Eurocentric focus and to really keep out the Chinese.
Uh, something has to give here pretty soon.
Matthew Stead: I actually think Mingyang should, um, set up a factory in Scotland. I, I mean, what’s wrong with that? I mean, uh, why is that a security issue?
Rosemary Barnes: Set up the factory and put the, like, whatever you’re worried about, put protections in place for it, require it to be a local joint venture or whatever.
You know, we’ve seen the blueprint in many of what used to be, you know, less rich countries. That’s how they, you know, got a head start on some of these technologies. It’s not like, I don’t think that China [00:22:00] has a head start on wind, wind turbine technology, but they certainly have different ways of doing things that, um, yeah, we could, we could learn from.
But I think across the board, wind turbines, batteries, solar panels, whatever, let them set up factories, put the rules in place that mean that your country benefits from it and you’re getting the, you know, the information transfer.
Yolanda Padron: Do you think that’ll, like, impulse a lot of these more established European companies to maybe start fixing some of the issues that they’ve known about for, for a while, um, particularly regarding the blades and everything that we’ve talked about earlier?
Like, there’s enough competition there, so maybe they need to start looking a little bit more deeply into their problems.
Allen Hall: Do we think that Chinese operations have been out front, forward, honest, I’ll even use, about their blade issues?
Rosemary Barnes: No, but this is a good way to find out, isn’t it?
Allen Hall: Governments decide who is allowed to build a turbine after a discussion on Scotland.
Uh, but, but [00:23:00] occasionally, a court decides what a turbine legally is. India has just settled that question, and the reasoning should be of interest to anybody who ships machines across a border right after this. As wind energy professionals, staying informed is crucial and let’s face it, difficult. That’s why the Uptime Podcast recommends PES Wind Magazine.
PES Wind offers a diverse range of in-depth articles and expert insights that dive into the most pressing issues facing our energy future. Whether you’re an industry veteran or new to wind, PES Wind has the high-quality content you need. Don’t miss out. Visit peswind.com today. A tax fight in India has produced a definition every turbine supplier should read.
Is a wind turbine bolted to a concrete foundation movable goods, or is it immovable property? State tax authorities argued immovable, which would have [00:24:00] taxed erection and commissioning contracts at 18% instead of 5%. The Andhra Pradesh, uh, High Court disagreed, and on the 12th of August, the Supreme Court declined to interfere.
The reasoning rests on something this whole industry takes for granted. A turbine can be taken down, moved, and put back up. So a turbine is a movable object, and it has less taxation. Bonus. So this is a really interesting discussion that’s happening in India because it’s probably symptomatic of things we’re seeing elsewhere across the world about taxation for wind turbines, right?
That, um, if there’s a way to tax a wind turbine, we’re gonna try to do it. This is a unique way, uh, that happens in India where depending on if it’s permanent or movable, the tax rates are different. I, I guess that would apply to a lot of components inside a wind turbine too, Matthew, don’t you? Like the, the generator, the, the big heavy things, [00:25:00] gearbox, generator, blades, rotors, tower sections, would be taxed at a, a lesser rate.
Matthew Stead: I agree with the court case that it’s all movable and, uh, you can actually buy turbines on the secondhand market, can’t you? I mean, if I wanted to buy, yeah, whatever, whatever, I could buy one and, and put it up in my backyard if I had a bigger backyard. Um, so yeah, I vote for movable. I vote for lower taxes.
Yolanda Padron: The way that it would work a lot of times in the US is, I mean, it’s, you pay, the company itself pays a lot less than they would’ve over time, right? Just by pure, the, the regular kind of tax laws. Um, but the community, there’d be just direct donations to the community, so then they’d get, uh, like money would actually come into the community where the turbines were being built instead of just distributed around the state, which I mean, in a state as big as Texas, it gets, um, but easier for that c- um, that county to get a lot more, uh, funding than they would typically get if it was [00:26:00] through a big enough area.
Um, but yeah, no, I agr- I completely agree with you guys that, that this should be a movable good. I mean, how many times have we seen, uh, even just a blade, um, that it looks like it’s, uh, just a, a failed blade that they have to go in and replace, and then they take it out, fix it, and then just bring it back to the same site or take it to another site across the country.
And, and to that point, like if you were to h- judge it as something that’s immovable, would then any blade replacement just not be taxed? Because then it’s, you’re moving that one component and two, but it’s essentially the same turbine. Like, I don’t know how that all would make sense.
Allen Hall: I think the Uptime Supreme Court agrees with the Indian Supreme Court that wind turbines are movable, and that’s good.
Well, 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. [00:27:00] Reach out to us on LinkedIn. And if you found value in today’s conversation, please leave us a review. It really helps other wind energy professionals discover the show.
And don’t forget to subscribe so you never miss an episode. For Rosa, Yolanda, and Matthew, I’m Allen Hall. We’ll see you here next week on the Uptime Wind Energy podcast.
Can’t swear that the story here is authentic, but it sure rings true.
Vermont is a somewhat quirky state, but it protects its citizens very well. FWIW, this is where I want MY tax dollars going too.
Florida is a deeply red state that, true to form, wants as much ignorance as it can possibly produce. Educated people aren’t voting for people like Ron Desantis.
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