01.27.11 6:39 AM ET
Winds of Change: Q&A: Vestas Visionary Morten Albaek
Daily Beast: How did you transition to the Danish wind industry from the banking community?
Morton Albaek: It’s actually a fairly complicated story. I have an academic background in philosophy and history, but through coincidence I entered corporate banking [Danske Bank] right after I graduated. I started as the youngest employee with the lowest title in my department, and seven years and six promotions later I ended up being the company’s youngest senior vice president.
Everything was looking as if I should stay in the industry, but three years ago, when I was 32, my dad died at 64, meaning that if I died at the same age as he did, I had half my life left. And that made me think about how I should use the next 32 years. A month later, the bank had its annual dinner for global senior management. I was late. And looking through the window at my colleagues as I arrived, I thought, “They’re nice people, good colleagues, but is this professional community the only thing you want to experience?” After dinner, I made up my mind that I simply needed to do something else with my life. I thought I might want to leave the country. And then a friend asked me if there was not one corporation in Denmark that I would like to work for. And I said, “Actually one. Vestas.”
Through a string of coincidences, I got a phone call from Ditlev Engel, the Vestas CEO. He had heard I might be interested in working for his company and that we should meet.
DB: It’s been two years since you began at Vestas. How is wind energy doing today?
A: Wind only represents something like 2–3% of the global electricity consumption. So it’s a fairly small energy source compared to the conventional sources. Globally, we could have easily 20–30% of all electricity coming from wind. So there’s a huge potential, but the uncertainty of political support to make wind fully realize its potential is hurting the business.
Wind needs to become as competitive as any other energy source, and so its cost is extremely important. We’re not looking for more support than anyone else, we simply need to know what to expect, not just for a 12-month period, but a 5 or 15-year period, so we can run our business like others do. In fact, the amount of money that has been given by governments to oil, gas, and nuclear over the last 20 years is several times higher than the energy subsidies that were given to wind in the same time period.
Everybody knows that oil is something that we only have for so long a time, whereas wind is something that we actually have forever if we have all the technology to harvest it. So wind has to continue to reduce its cost. Vestas has repeatedly reduced it in 5-year periods by 30%—and we continue to every year. And because of that, we expect that wind will be competitive with conventional energy sources around 2020.
The marketplace is also changing dramatically. Many new players are entering the wind market like GE, Siemens, Samsung, and some of the big South Korean and French industrial conglomerates. They see the potential economic upside, so it’s a business that will grow extremely fast. Vestas, however, is the only corporation that for 31 years has done nothing but develop wind technology. And it’s the only corporation where 22,000 employees wake up every day on 5 continents and only focus on that.
DB: Take me back to the A-ha moment for WindMade. What was the tipping point?
A: Vestas tried for years to communicate the benefits of wind to the general public: the investments we made were high; the results were fairly poor. So, we needed a new path. Before I came to Vestas, Ditlev Engel, had this vision of engaging with consumers and citizens. Then Cop 15 happened [2009 U.N. Climate Change Conference]. Its goal was to renegotiate a global agreement about CO2 emissions. Incredible hopes were built up, but few were realized.
After that we concluded that we no longer could solely depend on the political system to make the necessary decisions. We needed to go further up the value chain. At the end of the day politicians are motivated by what consumers and citizens, or what I call citi-sumers, expect from them. Now the question was how to engage with the citi-sumers. We recognized that Vestas was too small and we didn’t have the bandwidth or the communication channels to do it ourselves. We needed to activate the B2C [business-to-consumer] giants because they’re actually the ones that have the strongest impact on and direct access to the influential and growing global middle class. So how could we actually create a new design that could build a bridge between Vestas and the whole wind industry providing knowledge to the consumers about the benefits of wind?
On a Scandinavian Airlines flight to Beijing, I noticed that the airline was a sponsor for Save the Children. Then it came to me, “Imagine if they had gotten the idea sixty five years ago. Imagine if it actually was a corporation that had pioneered what later grew to become the world’s largest independent children’s rights organization. Why not?” Now I wanted to see if it was possible for Vestas to be, if not the first, then one of the first corporations on the planet that could create an NGO from the bottom and then give it back to civil society. For me, that would be a new order of social responsibility. So we conducted a survey and tested the WindMade idea.
DB: The Gallup survey.
A: Yes. In the States, 56% thought WindMade was a great idea; globally it was 76%. In China and India, it was above 80%. So, my CEO and I just said, “Fine, let’s see if we can do it.”
DB: Tell me about the new WindMade initiative.
A: WindMade is an NGO that “owns” a new consumer label of the same name and runs a foundation that through donations and membership fees will accumulate funds that will be donated to the deployment of wind energy in developing nations. Vestas got the idea, pioneered it, invested the resources in it, and made it come true. But it’s very important to us that this now is a shared initiative.
We are just one of its seven founding partners who have a vote and have endorsed this initiative [the others are Bloomberg, The Lego Group, U.N. Global Compact, PricewaterhouseCoopers (PwC), WWF, and GWEC]. What is interesting is that GWEC, the Global Wind Energy Council, represents the Siemens, the GEs, the Gamesas—which is 99% of all installed wind capacity on the planet. This means that all our competitors are now also involved in WindMade through GWEC.
DB: So as Vestas benefits, so too will everyone else?
A: Exactly. If this were just a Vestas initiative, it would never ever succeed because somebody would say, “We want to support the deployment of wind energy across the globe and be as much of an ally of Siemens, GE, and Gamesa, as we are of Vestas.”
DB: How does the WindMade label clarify for the consumer who is doing what with wind energy?
A: Very little about what a large corporation’s energy mix looks like is available to the public, so the consumer is currently blindfolded. With WindMade, you’ll be able to say how many products are based 100% on wind. There are some, and presumably many, but it’s not information that is currently available to the consumer. They may see some renewable labels, but there doesn’t exist any consumer label for a single energy source.
In our dreams, we want to have a label for WindMade, one for solar-made, one for thermal-made, and actually bring the percentage of renewable use up to as close to 100%. Why aren’t there any coal-made and nuclear-made trustmarks? If the consumer saw products with such labels, it would, for sure, change its preferences.
DB: Was there ever the idea to consolidate and create one global trustmark for all renewables?
A: If you want to succeed in what we were trying to do, it’s also about keeping something this big simple. I can tell you we are now extremely confident that we have created something that has the potential of being here in 30 to 40 years. There are now 6 global trustmarks like Fair Trade Certified and Not Tested on Animals, and this comes in the same tradition, but it’s very different in many ways.
What we are saying to our colleagues in the other renewable energy sectors is that they can take all the knowledge that we have created and use it to create their own trustmarks—free-of-charge from an open-source perspective. Because we need all other renewable energy sources to change the energy base to something truly sustainable for the planet. We can’t do it all with wind. But wind is like the caring big brother in the schoolyard, leading the way with the most mature renewable energy source, the lowest cost of energy, the least consumption of water, and so forth. But the others will come, and we will celebrate them when they do.
DB: Separately, Vestas has made its biggest investments in the U.S. on Ditlev’s watch?
A: Yes, and we’ve also made heavy investments in China and Europe. But the potential for wind in the United States is larger than large, and from the very beginning Ditlev has had the inspiration of creating a global footprint, with the United States as a cornerstone in that strategy.
In the States our local production has allowed us to keep the cost of wind energy down and to provide a more competitive offering to customers. But, the U.S. tax support scheme for wind energy will last only through the end of 2011. After that we don’t know what will happen, and no one can run a business with only a 12-month perspective, it simply creates too much uncertainty.
We’ve gotten a lot of criticism from many investors asking us why we are so focused on the United States, but that belief in the U.S. comes down to one thing: natural resources. We invested one billion dollars in America in 2009 and 2010, and we’ve created thousands of jobs over the last years.
DB: How is WindMade going to address consumer skepticism, for example, green washing?
A: Green washing is when you actually have so little renewable energy in what you do, and then paint yourself green. WindMade is, for sure, a way of reducing green washing because it is so simple, it is so focused; it’s just wind. The FTC [Federal Trade Commission recently revised “Green Guides”] is also stating that in moving ahead with all advertising, if you refer to anything as being green, you must be specific about what energy source it is that you are using. WindMade helps, because if you are green and if you are doing something, then you don’t need to say you’re green, you can just say, “we’re WindMade.” You can’t find any label more transparent for consumers. It’s just about how much wind has been used to produce a product. Soon we’ll be able say if it’s 12%, 80%, 100%, and the consumer can make up their mind whether they think 12% is a lot, or 100% is the only thing that matters to them.
DB: The criteria for the trustmark certification are currently in development?
A: Yes. There will be a public consultation starting in March, where we will invite corporations, NGOs, and citizen groups to give us advice and review the criteria for WindMade, after which we will launch the trustmark. To make it transparent, we are asking, “Have we forgotten anything? Is there something we should tweak?” At the close of this period, the founding partners will sign off on the final criteria and we’ll officially launch the trustmark.
DB: Will PwC be WindMade’s consumer watchdog along with WWF?
A: PricewaterhouseCoopers will be the first global certifier of WindMade certificates. The WWF, actually the world’s largest NGO in the sustainability space, will fulfill a very important role and has been offered a seat on the board. And everyone who knows WWF knows that they’re extremely independent; they’re there to ensure that everything is run by the book.
DB: You have some innovative ideas as to how to effectively communicate with consumers.
A: Well, I don’t think that running traditional consumer campaigns have shown that they’ve made any hit records in the last 20 years. They’ve either been too educational in their flavor or too glossy and bling-bling. There’s actually a third way.
Not to be confused with America’s Tea Party, there’s another kind of T.E.A. that the world needs to have and it stands for transparency, enlightenment, and activation. I really believe in the middle-class consumer community of the planet—whether they are in Beijing, Rio, Mumbai, Berlin. Because educational levels are progressing, there have never been more people on the planet with the ability to understand complex issues. Now, with that knowledge, the only thing you need to provide is transparency. And in that meeting between intelligence of the growing middle class and facts, enlightenment will occur and behavior will change.
WindMade is not going to save the world. It is simply to small an initiative to do that and no one action will ever succeed in that. But WindMade can hopefully be an inspiration to a new way for companies to think and innovate. What really is it? Is it PR? Is it a business development? Is it sustainability? Is it philanthropy? Is it marketing? Is it CSR? We could say it’s all of those things because WindMade is fundamentally a new design that we have developed that’s never been done before. I think it can be applied to everything, and hopefully create a thousand equivalents to WindMade in other areas besides energy.
DB: What are your greatest hopes following Davos this week?
A: My greatest hopes, while not being official targets, are that we have 100 corporate WindMade members by the end of this year and that the organization will be economically capable of sustaining itself after a couple of years.
The next column in the “Winds of Change” series will focus on green washing, transparency, and credible consumer labeling.