‘I'm more than fully satisfied with how Gamesa is developing in India'

Spanish wind turbine manufacturer Gamesa started operations in India a little over a year back through a subsidiary. It has set up an assembly plant near Chennai and has announced plans to put up three more facilities to make different parts. The additional investment in India (the company plans to pump in more than Rs 600 crore) demonstrates the importance of India in Gamesa's global plans. In 2010, India accounted for 8 per cent of Gamesa's total wind turbine sales.

“I can say that I am more than fully satisfied with how Gamesa is developing in India,” says Mr Jorge Calvet, Chairman and CEO, Gamesa. During a recent interview here, Mr Calvet spoke about Gamesa's operations, both in India and across the world, and the status of the wind turbine industry. Excerpts from the interview.

How is the market in India?

The two markets in the world that have been consistent for the last year are China and India. They are growing consistently, which is absolutely critical for any economy. You have been able to see this especially in the last couple of months with the upheavals in North Africa and West Asia, how important renewable energy is to the world of power. Oil prices have gone up dramatically in the last three months and will go further up. That is why renewable energy has always been important . India has done a tremendous job in the last year by supporting renewable energy, especially wind.

How about Gamesa's operations here?

I am more than fully satisfied with how Gamesa is developing in India. We have been in operation for a little over a year and it has exceeded our expectations. This year looks also nice. As I have explained to the team here, India is going to become a significant part of the overall sales effort and portfolio of Gamesa worldwide.

I am here reviewing and confirming all the investments that we are going to be doing in India, not only this year, but also next year. This is significant to us because we are going to have a big slice of the overall investment that we are going to do worldwide in India. The investments will be in three new plants to make blades, towers and nacelles. We will also introduce a 2 MW turbine and we will double the number of employees.

In 2010, China topped in wind power capacity addition. What has been driving this growth in China?

Three factors. One, they are conscious about energy independence. Obviously, renewable energy will not give them full energy independence, but it is going to be an important component. Second, the commitment the Chinese Government has made in reduction of CO2; renewable energy is a part of that. The Chinese Government has been intelligent in creating an industrial base of renewable energy that is also driving the growth trends.

Has Europe recovered from the slowdown in terms of the wind energy industry?

You have to distinguish between Western Europe and Eastern Europe. Western Europe has been suffering from some problem called Budget deficits. That has had a bearing in the development of wind industry. There will be growth in Western Europe, but perhaps not as steep as you can see in the rest of the world. Eastern Europe is a different situation. The growth there is going to be significant. It is in Poland, Romania, Hungary and perhaps Bulgaria. For Europe in general, for Western Europe in particular, something interesting is developing, it is a kind of a substitution effect for onshore wind, which is offshore. There are huge offshore plans for Europe based in the North Sea.

That is driven by the United Kingdom. Germany, Holland, Belgium and France are also looking at it. The North Sea basin is going to become a significant part of the overall energy supply that will be focussed towards Europe. The European Union plans to create a North Sea underground infrastructure so that Europe can bring all the energy that will be produced offshore into the mainstream. The North Sea basin potential is huge — about 50-70 GW.

And Gamesa is present in the offshore market?

We have developed an aggressive plan for being able to have the prototype of our first offshore turbine next year. That will enable us to be present when the round three in the UK starts, which will be 2013. That will be with a 5 MW turbine. It has been developed by Gamesa. We have a technological agreement with Northrop Grumman. They know a lot about marine environment and their support is going to be critical for Gamesa to have the best offshore turbine available in the market. Their expertise would be with regard to control systems, you need to understand the performance of a turbine 50 miles into the sea. And on issues related to corrosion, salt and humidity.

An overview of the Americas?

The US is a complicated situation because of the regulatory environment for one and because of the gas prices. The gas prices are low and the utilities do not have a lot of incentive to look at other types of energy. The US has been able to recover huge quantities of shale gas.

The other thing is the lack of regulation or visibility of regulation going forward. The Obama administration has renewed the 1603 section of the tax code, which for manufacturing in the US, you get tax breaks. But what you still need is a renewable energy standard on a federal basis to jumpstart the industry again.

It is a pity because the industry in the US could be the main driver of job creation and also to become an export driver. I am a bit cautious about that. Last year, the US was a market of just over 5,000 MW and it could be double that and this year at best would be 5,000 MW. My expectation is that next year it would be going down.

Could you elaborate on your 2011-13 business plan.

Other than what I have explained to you with regard to India, in China we have made investments for two assembly plants outside of our main plant. One is Inner Mongolia and the other in Jilin. We are also investing in a factory in Brazil. A lot of that investment has two major components. One is the development of a full new set of family of turbines that we will bring out in the next couple of years; 80 per cent of the turbines that we are going to be selling in the next two years are going to be new turbines.

The second part is the development of our offshore capability. We have opened an R&D centre for offshore in Glasgow. Our global headquarters for offshore will be in London.

We will have one or two factories in the UK, one in Scotland and one in England. But that will depend on the business.

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