Interview: MHI Vestas chief executive Philippe Kavafyan

“The enthusiasm for the globalisation, we have it.”

‍

MHI Vestas chief executive Philippe Kavafyan explained the offshore turbine maker’s approach to global growth at our Financing Wind Europe conference in London on 1stNovember. As you’d expect, the firm is highly active in emerging offshore wind markets in Asia and North America alongside established strongholds, which include the UK.

We are due to look at emerging offshore wind markets in greater depth in a report next month – and can point to plenty of recent examples of MHI Vestas’s global expansion.

Last week, the company announced it was setting up its US office in Boston, after it was named preferred supplier in November for the 800MW Vineyard Wind project by Copenhagen Infrastructure Partners and Avangrid Renewables. The US arm of MHI Vestas is being led by Jason Folsom, who moved to the company in November after ten years at Siemens Gamesa, and Vineyard Wind is due to be operational by 2021 – although some permitting meetings have been delayed by the Trump shutdown.

The company has also secured orders in the emerging Taiwanese market. In March, it was named preferred supplier to CIP and China Steel Corporation for schemes of 1.5GW in the Asian nation’s waters, and it plans to use its operations in Taiwan as an export hub for the rest of the region. This is set to happen faster if Taiwan’s politicians can address concerns from businesses about change to power purchase agreements.

But Kavafyan added that MHI Vestas was not planning to expand in every offshore market. He said the company was not planning to go into China, for example. He also said he did not want emerging markets to come at the expense of established nations.

“When we go global, we need to stay competitive,” he said. “We focus on Taiwan, we focus on the US, we focus on Japan, but by no comparison would I give up the UK – 50% of my business.” He highlighted Belgium, Germany and the Netherlands too.

In an interview with A Word About Wind after the session, Kavafyan went into greater depth about the company’s strategy, including how to strike a balance as more nations welcome offshore wind. He said there had been no major shift in its strategy since he took over as chief executive from Jens Tommerup, who stepped down in May 2018.

Unsurprisingly, Kavafyan said Europe is still at the heart of the MHI Vestas approach.

“There is no radical shift… The first projects have been successful, the technology and the platform is established and recognised. The second phase is how we leverage that position in the core market that are very strong still: the UK and northern Europe. We believe that we have a workhorse to deliver a massive quantity of offshore in these areas, where we can do more of the same and reduce the cost even further.”

Recent deals in Europe include the firm order of the company’s 9.5MW platform at the planned 950MW Moray East wind farm, which is being developed by a consortium led by utilities EDP Renovaveis and Engie. This focus on European giants make sense as they are happening now where offshore wind already has a strong business case.

MHI Vestas has recently increased its investment in production facilities in the UK’s Isle of Wight, and plans to use a similar regional hub approach in Taiwan and the US.

However, he adds that manufacturers, and companies throughout the supply chain, will also need to work hard to make sure their operations are optimised for conditions in those markets. Typhoon-proof turbines required in Asia is an obvious example.

But he does expect major growth worldwide: “Everywhere we went, we’ve seen faster and bigger interest for offshore wind. In Europe or the UK, we may feel like the topic is not new, but I don’t think we estimate enough the consequences of making offshore wind competitive. It is a potential mainstream technology for the energy transition.”

This interest from governments around the world in offshore wind is certainly exciting, but firms would also be wise to not blindly chase growth in these markets at the cost of established powerhouses. Political upheaval in Taiwan and the US in recent months again highlight the distance between politicians’ appetite and completed projects; and businesses will need to adapt wisdom from Europe for different regions.

“There is knowledge and experience that we need to replicate in new areas,” he says. “The expectation in terms of the cost of offshore wind is going to be very quickly the level we reached in Europe. How do you accelerate the learning curve and build similar productivity in Taiwan, the US or, tomorrow, in Japan? For us, that’s the real question.”

It’s one he isn’t alone in asking.