Tommerup backs new CEOs to go beyond Europe

DENMARK: MHI Vestas' outgoing chief executive Jens Tommerup believes there is no business case yet for developing the next generation of offshore wind turbines, even though the technology is available.

“I remember when we talked about seeing the first €100/MWh levelised cost of energy target — that was only two or three years ago. I am surprised at how fast I have seen it happen”  Jens Tommerup, CEO, MHI Vestas
“I remember when we talked about seeing the first €100/MWh levelised cost of energy target — that was only two or three years ago. I am surprised at how fast I have seen it happen” Jens Tommerup, CEO, MHI Vestas

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Tommerup, who will step down as CEO of the joint venture as it reaches it fourth anniversary in April, argued it would be up to its suppliers to make the business case that will drive investment in the new technology, logistics and facilities required for the next generation of turbines.

Speaking to Windpower Monthly in a personal capacity ahead of his departure, Tommerup said: "If I look at the market, I think we will see competition for some years between existing technology platforms, which is now around 10MW.

"[For] the next platform, the problem is not from a technology point of view — we can build a bigger platform. It is: is there a business case for a new platform?

"A business case starts with our suppliers. They have to build new factories or update their factories for gearboxes, yaw drive and all the other technology.

"A lot of it will be a new supply chain, our factories will have to be upgraded, ships and harbours have to be built, so it’s the whole chain that has to support a new technology platform. We are struggling to make that business case.

"I think the trick will be to develop a new solution that can link into the whole existing supply chain. Offshore wind is becoming a very competitive business where you have to be very efficient to make a proper business case," he said.

Cultural exchange

Under Tommerup’s tenure, MHI Vestas has incrementally evolved the V164-8MW turbine, inherited from parent firm Vestas in 2014, to a rating of 9.5MW today.

He steered the company through the early days, integrating two cultures from Denmark and Japan, growing staff from fewer than 300 to 2,000, and generating a 2GW backlog, with a further 2.5GW in conditional agreements.

MHI Vestas has now installed more than 1.2GW of capacity in northern Europe’s waters.

"When we started, it was not known how independent we could make the brand, because we have two very strong shareholders with clear profiles, with the financial and long-term technical support from MHI, and Vestas coming in with turbines," Tommerup said.

The JV’s relationship model with developers and suppliers was also key to reducing offshore wind costs, Tommerup said.

"We, together with our partners, were open books. We were looking into the 20-25 year business case for a wind project and then deciding — together with a balance of suppliers, us as a turbine maker, and the developers — how could we improve? What value could we create, and how were we splitting this value over 20 years?"

Tommerup believes this concept is one of the reasons MHI Vestas was named preferred turbine supplier for the 860MW Triton Knoll project and the 950MW Moray East site.

Both North Sea projects won support deals in September’s UK auction, which saw prices fall on average by almost half in two years.

The reduction in offshore wind prices, which culminated in 1.38GW being allocated with zero subsidy in Germany last year, was "more aggressive than anyone expected", Tommerup observed.

"One of the reasons why I decided to take up this challenge was that I felt the wind industry, and especially offshore wind, had to become a more mature industry. Everything we have seen is a sign of it going from a very young to a more mature industry.

"I remember when we talked about seeing the first €100/MWh levelised cost of energy target — that was only two or three years ago. I am not surprised by what I have seen, but I am surprised at how fast I have seen it happen," he said.

Handover plans

Replacing Tommerup at the helm of MHI Vestas will be former Adwen chairman Philippe Kavafyan, supported as co-CEO by ex-Nordex CEO Lars Bondo Krogsgaard. Both have been in the renewables sector since the early 2000s.

Tommerup would not say what advice he will give the two new company executives, but he backed them to take MHI Vestas beyond the borders of northern Europe.

"We have made a very clear handover plan and found two very good successors with extensive knowledge of the industry.

"I think one of the challenges is to be focused on what we don’t want to do. For instance, we cannot go into all markets. We cannot put offices all over the world. This industry cannot afford to have somebody — not only us, but the whole industry — trying to do too much, which then creates doubts around business cases. So focusing on what we do and being good at what we do, is a big challenge," Tommerup said.


Much of the European offshore market is being dominated by Siemens Gamesa (SGRE). MHI Vestas was second in offshore installations last year behind the newly merged OEM, but ahead of further competition from GE and Senvion, which are struggling to make much impact in the market. 

The fact that much of offshore capacity is being divided by the two manufacturers does not worry Tommerup, arguing SGRE offers enough competition with the current level of deployment.  

"There is definitely competition. It's a very competitive place to be," he said. 

Should more capacity become available, it could herald more competition.

"First of all, the volume is now coming also outside of Europe. It will depend on a lot on how many new markets and how fast, especially the US, Taiwan and Japan will be growing.

"There is volume enough for the existing platforms in the offshore market for sure. But with the considerably lower cost of energy we also believe that offshore wind has to find its right place in the future energy mix.

"Then we will see more volume coming in. But when will the governments be ready to bring this extra volume in, we are not having a very clear picture of that yet.

"You're always open to new players and when it is clear how much volume the low cost of energy will eventually bring, then the market may be opened up.

"When the market is big enough for new players that will be up to them, the players, to decide. But players coming in with whole new big turbines we are again putting a question market against it as a business case," Tommerup added.

Wide experience

Tommerup has been in CEO roles for the past 25 years. Prior to launching MHI Vestas, he headed up the Danish manufacturer’s Asian business unit, based in Beijing, China from 2009 to 2013.

He also held executive roles at coatings specialist Hempel and shipping firm AP Møller-Maersk — sectors he is considering a return to after leaving MHI Vestas.

"I will take on the odd directorshipsand probably also some advisory roles. I am really looking forward to this," he said.

"I believe my ten years in shipping, 20 years in chemical industry and ten years in renewables will also be able to give me some broad industrial experience I can use on some of these boards."

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