Impact Opportunities Equity team
Impact theme: Energy Transition
At an average cost of $44/MWh, wind is on a par with solar power as one of the cheapest alternatives to fossil fuel. Turbine manufacturers account for the majority of costs associated with onshore wind, and there are surprisingly few in the business. Compared to the plethora of contractors involved in installation and site management, the onshore wind equipment market is dominated by three key players².
Making wind power more accessible
Vestas is focused entirely on wind turbines: 84% of the company’s revenue is from the sale of wind turbines and blades, with 16% derived from servicing this equipment4.
Two things are particularly encouraging about Vestas’ product and service offering. First, Vestas’ 4MW platform accommodates a broad range of wind and site conditions, allowing users to mix turbines across various sites. Not only is this kind of solution becoming ever more popular as it delivers superior energy production5, Vestas also remains the supplier of choice, commanding over 50% of the product segment (ex. China)6.
Targeting ‘zero-waste’ turbines
Vestas’ production chain does have a somewhat negative impact, although this is more than offset by the company’s product offering. While Vestas emitted 5.4k MT of CO2 (Scope 1 and 2) in 2019, for example, the company’s wind turbines helped displace around 10.8m MT of CO27.
Vestas disclose production inputs in their Sustainability Report, alongside targets. Encouragingly, the company have pledged to cut their operational emissions by 45% come 2030, with the production of ‘zero-waste’ turbines earmarked for 20408.
2 Excludes China.
3 Vestas leads by a considerable margin. Nearest competitors – Goldwind Global, General Electric (GE) and Siemens Gamea – represent a market share of 14.4%, 13.1% and 10.3% respectively.
4 Source: Vestas Annual Report, 2020.
5 Platforms represented a market share of over 40% in 2019, compared to just 19% in 2018.
6 Source: Bloomberg, in reference to FY 2020 market sizing.
7 Source: Net Purpose, Federated Hermes Impact calculations, using data from fiscal year 2019. Proprietary calculation using data from fiscal year 2019.
8 Today, blades and hubs produced by the company are only 44% recyclable; the goal is to increase this to 55% by 2030.