business

Denmark’s Green Europe Meets Chinese Wall on Vestas Cuts

Denmark’s push for a green Europe suffered a reality check as domestic wind turbine producer Vestas Wind Systems A/S cuts back one tenth of its workforce to survive Chinese competition and a slump in demand.

“When global development is lagging, we have a challenge,” Jan Hylleberg, chief executive officer of the Danish Wind Industry Association, said in an interview yesterday. “Most important for the Danish industry in these times are the political decisions that need to be taken, especially in Europe.”

Prime Minister Helle Thorning-Schmidt was confronted with the job cuts yesterday at her first press conference with European Commission President Jose Manuel Barroso. Denmark, which took over the European Union’s rotating presidency Jan. 1, this week called for an increased focus on green technologies to cut emissions and secure energy safety in the 27-nation bloc, in part to highlight the country’s prowess in wind technology.

“This is a very, very sad day for Denmark,” the 45-year-old premier, who was voted into office in September, said at yesterday’s briefing. “I still think this is the way forward, investing in new ways of doing things and new technologies, and despite this enormous setback we’re on the right path.”

Europe’s ambition of leading the world in clean energy and reducing greenhouse gas emissions by 20 percent through 2020 is suffering setbacks as leaders struggle to generate economic growth against a backdrop of over-indebtedness and tough competition from markets such as China.

‘Climate Crisis’

Officials from almost 200 nations agreed at Dec. 11 UN climate talks in Durban, South Africa, to seek a global climate deal by 2015, with legally binding emissions limits for the U.S., China and India for the first time.

Denmark, which generates more of its electricity from wind than any other country in the world, in December vowed to take action after carbon prices in the EU’s emissions trading system slumped about 50 percent amid an oversupply and on concern that the debt crisis will trigger a recession.

“Danish wind industry won’t be fatally damaged by this, but if the energy plan weren’t in the near future, I would be more doubtful,” said Peter Karnoee, a wind energy researcher and professor at the Copenhagen Business School. “The climate crisis isn’t forgotten.”

U.S. Job Cuts

The Vestas job cuts will add to woes in the Nordic nation, which is close to a recession after the economy shrank 0.5 percent in the third quarter. The nation is struggling to emerge from twin housing and banking crises that have sapped consumer confidence and undermined investment. Denmark’s unemployment rate will rise to 6.9 percent next year from 6.5 percent in 2012, Danske Bank A/S said in a Jan. 9 report.

Vestas, the world’s biggest wind turbine maker, said it will halt production at one factory and cut 2,335 staff, with 1,300 of the job losses hitting Denmark, as the company tries to compete with Chinese suppliers. The Aarhus-based company also said another 1,600 posts in the U.S. are at risk as a tax credit supporting the industry ends in December.

Chief Executive Officer Ditlev Engel has cut sales forecasts twice since October and announced job cuts three times in as many years as Sinovel Wind Group Co. and Xinjiang Goldwind Science & Technology Co. grabbed market share. Vestas also suffered from a delay in starting a generator factory as well as falling wind turbine prices. The company slashed 4,900 jobs in 2010 and 2009. After the latest round of cuts, its workforce will number about 20,400.

Vestas shares fell 2.8 percent to 56.85 kroner as of 4:28 p.m. in Copenhagen.

Chinese Demand

Still, China may also be a market for many of Europe’s renewable energy producers. Solar-energy companies, including Germany’s Solarworld AG surged yesterday after China’s National Energy Administration said the world’s second-largest economy plans to double installations this year.

Danish energy-related companies are losing market share and moving jobs abroad, according to the country’s Energy Agency. Danish exports of energy technology and equipment fell 10.8 percent in 2010, while the EU average of similar export rose 12 percent, according to the agency’s most recent data. Denmark still has a larger share of exports of energy technology and equipment than any other EU country, it estimates.

Denmark embraced renewable energy after the 1973 oil crisis sent crude prices up more than fourfold over two years. The country used 30 years of state-subsidies and climate legislation to turn green technology into its fastest growing export.

A Danish government bill in 1981 stipulated that 10 percent of total energy consumption by 2005 should come from wind. Denmark today has the world’s biggest share of wind power as supply accounted for about one-quarter of total electricity last year. Thorning-Schmidt’s government said in November it will spend $1 billion to boost that rate to 52 percent by 2020.

“There’s still potential that she’ll become the green queen,” said Karnoee at the Copenhagen Business School.

(Adds Vestas shares in 12th paragraph.)
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