Published on June 15th, 2012 | by Andrew2
Vestas’ Wind Tower Factory Sale: The Shape of Things to Come in Wind, Solar Manufacturing?
Vestas, the world’s leading, though embattled, wind turbine manufacturer, announced that it had found a buyer for its wind energy tower factory in Varde, Denmark: China’s Titan Wind Energy (Suzhou) Co., Ltd.
The news was nothing if not welcome, particularly for the plant’s 120 employees, as Vestas had previously announced that it was going to shut the factory down. The sale also gives Titan, the world’s largest wind energy tower manufacturer and a longstanding supplier to Vestas and other leading wind turbine manufacturers, a European base from which to expand.
There’s another side to the story, an aspect that’s related to rising international trade tensions, government subsidies and a dramatic change in the line-up, and home bases, of the world’s leading wind and solar photovoltaic (PV) manufacturers, however.
Vestas Wind Tower Business Sale: Numerous Shared Benefits
No doubt, there’s a lot in the way of advantages and benefits to be gained by Vestas selling its wind tower factory to Titan. Vestas management themselves listed the following:
- Titan Wind Energy establishes European production of towers for both onshore and offshore wind turbines, leveraging on Vestas’ renowned expertise in tower-manufacturing
- About 120 highly specialized ”greentech” jobs are maintained in Varde, Denmark
- Based on Denmark’s leading position within the wind industry and excellent facilities for shipment of large turbine towers mainly intended for offshore, the facility in Varde is ideally positioned to support the further globalization of Titan Wind Energy’s operations
- The divestment of the towers facility in Varde will reduce Vestas’ fixed costs while increasing partnerships and knowledge-sharing with trusted suppliers such as Titan Wind Energy.
“This is an excellent agreement for all parties involved. Vestas welcomes the establishment of Titan Wind Energy in what might be described as the cradle of the global wind industry and we see a huge potential in the ongoing cooperation and co-development with Titan Wind Towers,” Vestas CEO Ditlev Engel stated in a press release.
”We have been cooperating with Vestas for several years, both in China and abroad, and we look forward to further utilizing our long-standing partnership within the development and production of technology-leading towers for wind turbines,” added Titan Wind Energy (Suzhou) founder and CEO Yan Junxu.
“Our new towers facility here in Denmark increases our possibilities of servicing and expanding our global customer base. The location of our European headquarters in Varde is optimal because we see Denmark as the focal point for the global wind industry. Europe is the region that offers the most promising outlook for the development of offshore wind energy.”
Having signed the sale and purchase agreement this past Tuesday, Titan and Vestas say they will sign a Memorandum of Understanding (MoU) on June 15 as part of a Chinese official state visit to Denmark. Titan is due to assume ownership of the Varde wind tower factory on September 1. Financial terms weren’t disclosed.
The Flip Side
Looking beyond the more immediate impact of the sale, Titan’s purchase is a testament to the effectiveness and success of China’s state-directed and -sponsored drive to dominate renewable energy and clean tech manufacturing. It’s taken just a handful of years for Chinese wind tower, as well as solar PV manufacturers, to rise to dominance in their respective industry sectors. Not coincidentally, these are the same two renewable energy manufacturing industries in which U.S. manufacturers have successfully brought illegal subsidy and dumping cases against their Chinese counterparts.
Yes, U.S. states and the federal government, as well as their European counterparts, do subsidize wind, solar, and other forms of renewable energy. Mind you, best estimates put fossil fuel exploration and consumption subsidies at five to six times the level of renewables, and fossil fuel companies, some of the largest and most profitable businesses in world history, continue to benefit and wrangle for more.
The crucial difference between China and the U.S.’ wind, solar and renwable energy subsidies lies in their very nature: China’s directly setting production and cost targets and subsidizing the manufacturing and export of wind towers and solar PV cells and panels.
These supply-side subsidies are predatory and damage competitors in World Trade Organization (WTO) partner nation markets, and that’s in direct contravention of agreed-upon WTO rules. Subsidies in the U.S. and E.U. are fundamentally different in nature: they’re primarily demand-side subsidies that do not convey advantages to any particular manufacturer from of any particular origin.
Again, Vestas’ decision to shutter the Varda wind tower factory and subsequent decision to sell it to Titan is a positive and welcome reversal of events with many benefits. But it isn’t the only recent example of Chinese wind and solar PV manufacturers deciding to buy up productive manufacturing assets abroad.
It’s surely not going to be the last, as final rulings from the U.S. on countervailing duties and penalties to be imposed on Chinese solar PV imports are due in the fall and the Wind Tower Trade Coalition’s case makes its way through the U.S.-WTO legal process.
It is testimony, however, to just how much the U.S., and to a lesser degree the E.U., have given up in terms of manufacturing as a pillar and driver of economic development and growth in recent decades, be it wind, solar, clean tech or another type of manufacturing. And that’s not a development with a lot of advantages, at least for the E.U. and U.S. economies and employment.