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Latin America helped drive a record-high full-year order intake of 10.5GW for Danish wind turbine manufacturer Vestas in 2016.
The trend appears poised to continue this year, as wind continues to capture market share in the region amid falling costs and government mandates to fight climate change.
BNamericas caught up with Javier Rodríguez Diez, senior sales VP for Vestas Mediterranean, to find out which markets in Latin America present the best growth opportunities this year.
BNamericas: Do you expect Vestas' Latin American order intake to grow in 2017 versus 2016? What will be the determining factors?
Rodríguez: Our forecast is good, since many of the projects awarded in the recent tenders will [materialize] throughout the course of this year. Some had longer timelines, as was the case with the tender in Chile, where projects must be finished by 2021, but there will certainly be a lot of activity.
Mexico, the Caribbean and Argentina present promising opportunities this year, with exponential growth expected in their respective wind industries due to their ambitious renewable energy goals. Growth in other countries, such as Chile and Uruguay, will likely remain more stable.
BNamericas: Will the costs of producing wind energy continue dropping at the same rate that we've seen in recent years?
Rodríguez: Many sources, including Lazard, BNEF and IRENA, demonstrate that the costs of producing electricity continue to fall in countries that bet on renewables. Wind technology has advanced in many aspects. Larger rotors, taller towers, improved maintenance services based on prevention, etc, allow maximum performance from generators and the ability to produce more energy at a lower cost.
Economies of scale favor this transition toward lower costs, as do energy auctions. The average price in Mexico's second tender is a good example of this. In general, as shown by the Lazard institute, the levelized cost of electricity [LCOE] of wind energy has dropped by 66% in just seven years.
BNamericas: Does Vestas plan to expand its turbine manufacturing capacity in Latin America?
Rodríguez: Last year we opened a factory in Ceará, Brazil. We're currently looking at possibilities to extend even more our manufacturing capacity in the region. Globally we have 18 factories and we'll continue building more, based on how the needs and demands of the different markets grow.
But additionally, Vestas generates new jobs and local development by closing agreements with local providers for the fabrication of Vestas turbine components, as we did in Brazil with [local blade manufacturer] Aeris.
BNamericas: Argentina has an approximately 1.4GW pipeline of wind projects that were awarded through the RenovAr national tenders. To what extent is Vestas participating in these projects?
Rodríguez: Vestas was the first company to install a large-scale wind farm in Argentina in 2011, and it remains the country's largest. After years of stagnation, the new renewable energy law is generating opportunities for the development of the sector. The auctions are helping to lower the cost of energy, and to diversify the country's energy mix.
What's more, financing conditions have improved dramatically. This new scenario, combined with a stable regulatory framework, is contributing in a very positive way to the flourishing of the sector. In just one month, we've signed 225MW of orders in Argentina, and we've reinforced our presence in the country with the opening of a new office.
NOTE: Since this interview was conducted, Vestas has secured an additional 100MW order for a wind farm in Argentina.
About Javier Rodríguez Diez
Javier Rodríguez Diez oversees all sales operations and business development activities for Vestas in the Mediterranean countries, the Middle East, part of the African continent, Latin America and the Caribbean. Rodríguez is an industrial engineer with an executive MBA from the Instituto de Empresa business school in Madrid.
About the company
Founded in 1898 as a blacksmith shop in western Denmark, Vestas started producing wind turbines in 1979. It has 77GW of installed capacity and more than 63GW under service globally.