Business Case study. Vestas Wind Systems and Ditlev Engel, have made major strides in making wind power a more efficient means of powering our energy grids.

University Degree Business and Administrative studies

Ethical dilemma in Wind industry

Abstract

Which energy source has the least impact on the environment, depletes the least amount of natural resources, and has the least risk to human life? The answer to this question is wind power. There is an ethical dilemma within the energy industry as a whole in regards to whether or not it is ethical to provide consumers with energy that is produced in a less efficient manner than other possible sources. Fossil fuels and nuclear energy require less effort to create more energy then a renewable source such as wind. Vestas Wind Systems and Ditlev Engel, have made major strides in making wind power a more efficient means of powering our energy grids. These efforts not only help in correcting the unethical issue of efficiency but also save our natural resources and decreases risk to human life.

Wind power: Is it the best choice?

There is a debate within the energy industry as to which source should be used to power the largest part of our energy grids. Consumers want the most efficient source of production and distribution because that means the lower cost to them. This leads to the debate on whether or not its ethical for producers of wind energy to continue to move forward with trying to make wind a more dominate source of powering our grids. If there are more efficient ways to produce larger amounts of energy and distribute it to the population, then in the best interest of the consumer, is it the most ethical to use those sources instead of a renewable such as wind?

There are large corporations that are lead by individuals who believe that inefficiencies are not, and should not be, the largest concern when considering the production and distribution of energy. We must consider other, more relevant, issues such as the depletion of our natural resources, the pollution of our atmosphere, the risk to human health, and who is paying the overall “cost” of our energy consumption now. Ditlev Engel, the president and CEO of Vestas Wind Systems is showing the world that there are ways to make wind energy more efficient and a more viable source of energy for consumers around the world. While Vestas is the leading wind turbine production company in the world, it continues to make major strides in addressing the issues of inefficiencies with its constant dedication and commitment to the evolution of every step in the wind production process.

Description of Organization

History

Vestas was founded in 1945 by Peter Hansen as “Vestjysk Stalteknik A/S” (West-Jutlandish steel technology). At first the company produced household appliances and then focused on farming equipment, hydraulic cranes specifically, from 1950-1968. It wasn’t until 1979 that the company entered the wind turbine industry. The road was extremely rocky at the entrance to the industry and in 1986 Vestas was at the brink of bankruptcy. By 1989 the company was doing business exclusively in the production of wind turbines and wind turbine services. In 2003 Vestas merged with NEG Micon, which made it the largest wind turbine manufacturer in the world. Vestas was now “Vestas Wind Systems.”

(110 years of expertise, n.d.)

Mission

Vestas’ mission statement may not be very traditional, but it is powerful nonetheless. IT is simple. “Failure is not an option.” This mission statement helps show how dedicated Vestas is to constantly seeking improvements and consistently follows up on any errors they may occur.

One very apparent reflection of this mission is how Vestas takes on the issue of safety. They have an “uncompromising stance” on safety. They have reduced the number of industrial injuries from 25.3 per million working hours in 2006 to 5.0 in 2010. In order to achieve such amazing declines in injuries they have done several things. One is the “safety walks” in which managers physically inspect the work areas as well as behaviors of workers in its factories.

What is has currently done is partnered with its commitment to the future. By 2015 Vestas plans to attain a 6-sigma quality level throughout its value chain. They constantly partner with manufacturers that share this dedication. In 2008 they had achieved 4-sigma quality throughout the production process and in 2010 they reached 5-sigma. By showing its unwavering focus on safety and their pledge to constant improvements, Vestas demonstrates that failure really is not an option. (Failure is not, n.d.)

Values/culture

Safety is not the only way that Vestas shows the care it has for its employees. Employee appreciation is prevalent throughout their company and is deeply rooted in its core values and culture. Vestas has a company culture motto of “the willpower.” This phrase is placed throughout the company to show that the employees are what drive the company. It is the employees’ willpower, fueled by their imagination and ability to constantly develop new technologies that makes Vestas a leader in the industry. “In 2009, Vestas joined the UN Global Compact initiative and follows the ten generally recognised principles in respect of -human rights, labour rights, the environment and anti-corruption.” This outward facing devotion to its people is further illustration of the culture at Vestas. (Culture: the Willpower, n.d.)

Vision

“Wind, oil, gas. A greener future” is the vision of Vestas. This phrase expresses Vestas’ position on making wind an energy source that rivals fossil fuels. (Wind, oil, gas, n.d.)

Strategic Plan

This is a preview of the whole essay

Vision

“Wind, oil, gas. A greener future” is the vision of Vestas. This phrase expresses Vestas’ position on making wind an energy source that rivals fossil fuels. (Wind, oil, gas, n.d.)

Strategic Plan

As a main part of its strategy, Vestas wants to focus on what they are good at and be sure that the world knows what their core competency is. In 2010 Vestas wanted to emphasize that it was number one in the wind power industry by integrating, what they call, a “No. 1 in modern energy” strategy model. They creatively expressed this with a new slogan. “Wind. It means the world to us.” This slogan focused on the fact that Vestas is a wind power company and that is it. Many of Vestas’ large competitors include wind production products and services as only one piece to their product mix, but none deal exclusively in wind.

Vestas strategy is not focused on profit alone. The company believes that by concentrating efforts towards their customers and the environment that they can achieve increased profitability. They aim to provide their customers with the lowest cost per MWh produced and significantly improve customer loyalty. Focus on safety and citizenship, partnership, and the lowest cost of energy are achieved by attainment of “world- class safety standards at all Vestas’ locations, having the most satisfied customers, the best performing wind power plants and the most environmentally-friendly production” of its products. (No. 1 in modern, n.d.)

Stakeholders

Because Vestas has such a strong dedication to the environment, its employees, and the future, the scope of stakeholders is wide. Vestas list of stakeholders starts with its customers and employees and stretches to include its shareholders, creditors, government, suppliers, organizations such as the Global Energy Council and the World Wide Fund for Nature, and consumers of energy now and in the future.

Standard Operating Procedures

There are 5 steps in the implementation of a wind farm and Vestas has a part in everyone of those steps. The steps include: Wind Project Planning, Procurement, Construction, Operations and Service, and Power Plant Optimization.

“Wind Project Planning” is the first phase in which a customer needs to consider a wide variety of factors for the entire life cycle of the project. Just a few are financing, policies and regulatory frameworks, the decision of on or off shore, siting, grid support and government compliance, and technical advising.

The “Procurement” phase is next. In this phase we turn our focus to the options of which turbine will be the best for the particular project. For an on shore facility, Vestas provides 14 turbine options that have different capabilities based on low, medium, or high wind areas. For off shore farms there are now 3 turbine options. Vestas tests all its turbines at their own test centers. They also monitor 15,000 turbines around the world to help gather complex information that will make operations of turbines even more reliable and cost effective for different wind conditions in different areas of the world.

After “Procurement” comes “Construction.” This is the step in which the turbine is built and connected to the power grid. The details of this step are very different from project to project depending on the factors that affect the particular construction process. Though there is a mixture of options for the supply chain in the construction phase, Vestas offers options to provide anything and everything the customer may need if they so chose. Vestas can supply, install and calibrate the turbines for a customer or it can merely provide the turbines and let the customer do the rest.

The next step is “Operations and Service.” Vestas provides everything that a customer could need in order to operate and service its turbines throughout the life of machine. It has service options that range from hands on collaboration of finding the most optimum solution for operation of a wind farm to training programs that teach the customers own employees how to manage the turbines. Vestas also provides insurance and warranties as well as an option called the “Vestas Business Academy.” This course includes safety training, systems training, and technician certifications for operations of its turbines.

The last step in the cycle is what Vestas calls “Power Plant Optimization.” By monitoring a large majority of its turbines worldwide, Vestas is able to know the precise status of a customers wind turbine. With this information, Vestas is able to predict and prevent maintenance and identify potential problems before they arise so that the customer can take action to address them. This step is very important to Vestas as they believe so strongly in customer satisfaction and constant improvements on its products and services. (Wind power plant, n.d.)

Legal Restraints

The overall complexity of federal and state policy makes the legality of constructing a wind farm quite daunting. On the federal level there are at least five different departments of the government that have their own laws and policy requirements that a wind energy provider has to abide by. The Bureau of Land Management, the Department of Defense, the U.S. Fish and Wildlife Service, the U.S. Forest Service, the National Telecommunications and Information Administration, and the Federal Aviation Administration all have their own legal restraints applicable to the production of wind energy. As an example, the FAA requires a ten-mile radius from any airport when building a wind farm of any type. Another example is the the U.S. Forest Service requires wind producing companies to survey and monitor wildlife within the confines of the property that houses wind turbines. The combination of all these different laws makes the legal restraints extremely complex. (Wind and Hydropower, n.d.)

In addition to the federal legal restraints there are also state requirements that add to the complexity. Each state has its own renewable portfolio standard (RPS) that it uses to guide regulation and standards for wind production within that particular state. In the United States there is no 2 RPS that are the same. Some factors that differ among state RPS’s are cost recovery by utilities, penalties for non-compliance, and resource eligibility. Different states allocate different amounts of money to dedicate to renewable energy projects and states also set different goals. For example Arizona’s RPS goal is 15% by 2025 whereas Colorado’s is 20% by 2020. (Renewable portfolio, n.d.)

The four main differences among state RPS’s are zoning bylaws, safety and technical requirements, environmental assessments, and liabilities and insurances. Each state, or even county, may require different zoning permits for construction of wind turbines in a certain area. Along with land zoning permits, different states require different electrical inspections and have different electrical requirements. If operating large wind turbines, environmental surveys may need to be conducted prior to construction and possibly during cycle use, depending on what state you are in. There are also differences in the insurance that is required throughout states. Some require more and some require less. There is also a difference in the type of insurance that is needed to operate a wind farm. Some states require insurance for bodily harm others may require insurance for possible environmental issues that might arise. (Wind turbines and, n.d.)

Federal policies for wind energy are applied and enforced by the department of the government that is most relevant. For instance the U.S. Fish and Wildlife Service established a working group that set national guidelines for siting and constructing wind energy facilities so that it could help protect wildlife resources and avoid environmental concerns. These government agencies are highly affective with compliance standards of any wind energy company. Both federal and state compliance is required to even begin the process of procurement and construction. There is also an audit procedure that most large wind companies can be subject to at any time that measure safety standards and environmental compliances to federal and state laws. (Wind and Hydropower, n.d.)

Explain the Ethical Issues

Should wind companies continue to pursue the growth of the wind industry knowing the inefficiencies in production and supply relative to other forms of energy: keeping in mind that the provision of energy for our population and its growth are necessary for survival?

Different stakeholder positions

Consumers

The amount of growth in the wind industry over recent years is evidence that consumers demand renewables as a larger source of our energy mix. The growth is not only within government policies and company growth, but also investment banks and venture capital firms. Global investments in renewables have doubled from 2001 to 2005. New government policies have risen in number. Large corporations such as Vestas, GE, and Siemens as well as investment banks such as Goldman Sachs are seeing huge growth. As a result the production of wind turbines increased by 44 percent in 2005. (Renewable energy sources, 2010)

Wind Companies (employees and shareholders)

In terms of business, the large wind corporations are for the growth of the overall industry. But company views on the ethical issue of providing enough energy for growth and consumption while garnering the least environmental impact seem to be most evident in the expansion, growth, and development of more efficient technologies within the products offered industry wide. Whether or not wind power can be as efficient as other energy sources is no longer an issue to most wind power companies. In “a study done in 1991 by the Pacific Northwest National Laboratory found that land-based wind resources in just three states could theoretically meet all U.S. electric needs.” It is a matter of making wind more efficient with new technologies to compete with other energy sources. (Renewable energy sources, 2010)

Investment in new technologies has made wind power the world’s fastest growing energy source. Its growth averages 29% each year compared to 2.5% growth in coal, 1.8% growth in nuclear, and 2.5% growth in natural gas. Around the globe countries are generating more electricity with wind power every year. In Denmark they generate 3,100 megawatts of wind capacity, which meets 20% of the countries electrical needs. In Germany, the country with the most wind turbines, they now get 6% of its electricity needs from wind power. Investment in improving technologies has also dropped the price significantly since the 1980’s. The overall cost of wind power decreased by nearly 90% since then, to only .04 cents per kilowatt-hour in prime wind sites. (Florence, 2008)

My position

In my opinion the supplementation of wind energy as a more dominate part of energy provisions to the worlds population is of great benefit for all that are involved. When considering wind as a more dominant part of the energy grid we must consider two things. The first concern is what are the implications on the environment and humanity of the different energy sources we use to power our grids? The second is who is “paying for” the cost of our energy consumption now. That is, who will reap the affects of how we consume natural resources for energy consumption in the present?

We must compare wind to other sources of energy and what implications each have on the environment and human health. Consider first fossil fuels. Fossil fuels have major environmental implications, as they are the number one source of CO2 emissions that contaminate and degrade our atmosphere. Fossil fuels mostly have a negative affect on the natural environment. Now consider nuclear power. Nuclear energy has small impacts on the environment but have huge human health implications. In terms of incidents like Chernobyl and Tokyo Electric Power, the risk of human health is high. One major risk is that of cancers caused by the radioactivity due to a nuclear meltdown.

Now consider a renewable source of energy such as wind power. Outside of the initial use of fossil fuels used by equipment to construct wind turbines, they have absolutely zero impact on the environment and extremely minimal risk to human health. Wind turbines consume no fuel or water for continuing operation and have zero emissions directly related to electricity production. Wind turbines produce no carbon dioxide, sulfur dioxide, mercury, particulates, or any other type of air pollution like fossil fuels do. (Mielke, 2010) The energy used to construct and transport the materials used to build wind turbines is “paid back” within 9 months of operation. (Wind power plant, n.d.)

Affects on the natural environment are close to none compared to sources of energy from fossil fuels. As for human health, the only risk is either during the construction of a wind turbine or the maintenance. Neither of these two has anything to do with the operation of a wind turbine and is mostly safety accidents that can be avoided with increase attention in working conditions.

The second concern deals with who is “paying” for our energy consumption now. Our choices in how much energy we consume, as well as what types of energies we chose to consume, can be to the detriment of future generations of life on this planet. Essentially, the depletion of the planets natural resources and the degradation to the atmosphere are “costs” that our future generations will have to pay for our energy consumption right now. (Harper, 2002)

A Champion in the Industry

Ditlev Engel is the President and CEO of Vestas Wind Systems. He is a champion within the wind industry as he leads the number one wind power company in the world. Ditlev has held many high level executive positions such as President and Vice President of Hempel Hong Kong Ltd., President of Hempel Norge AS, and Group president and CEO of Hempel A/S Denmark. Outside of his executive positions at large companies, Ditlev has held positions on many boards that involve environmental issues. Some of these organizations are the General Council of the Confederation of Danish Industries, the Industrial Policy Committee of the Conferderation of Danish Industries, and the Industry Advisory Group of the International Energy Agency. (Executive management, n.d.)

He has been implementing change since he took over his position at Vestas in several ways. Addressing the issue of making wind systems more efficient in cost and production has been an ongoing struggle throughout the history of wind power. Within the last decade, under Engel’s lead, Vestas has become the leader in wind turbine technologies. Vestas constantly is correcting and innovating ways to harness wind as an energy source. Engel’s company now holds the highest number of wind turbine patents in the industry of 787. Engel has established transparency programs throughout the company that allows employees and other stakeholders to voice their concerns and ideas about their technologies.

Ditlev has been a major success in propelling the wind industry the constant research and development that has made their turbines more efficient in terms of cost and production also has lead to the ability to manage the entire process of constructing a wind farm. Under Engel’s leadership, Vestas has become the leader in testing capabilities, blade technology, smart controls, and research and development. By just a few of these measurements listed above, I can be sure that Engel’s efforts have been a success in solving the inefficiencies in wind power production. (No. 1 in modern, n.d.)

Action Plan

My desired vision would be an overall acceptance and implementation of wind power as the main source of powering our planets energy grids by 2025. Ideally I would have renewables completely replace all sources of fossil fuels (coal, petroleum, and natural gas) with wind power sourcing somewhere between 40-60% of energy grids. This would completely eliminate CO2 emissions into our atmosphere as well as discontinue depletion of our natural resources in terms of electricity production. If we do not make extreme strides in eliminating CO2 emissions and conserving our natural resources, the future generations of the life on this planet will inevitably pay for our inaction.

Accomplishing this goal would need several global efforts, occurring simultaneously. First we would need a governing document that outlines, in detail, the commitment from all country leaders to the elimination of fossil fuel use to power energy grids. This document would also contain accountability clauses outlining the guidelines for the implementation process and audit agreements for continued operations. Also included would be corrective actions for non-compliance. Every country would need to show adherence with this charter by 2015 to allow ten years for construction of wind farms and conversions of energy grids.

By 2015 we would also need to re-organize government funding for renewable energy projects. Government contracts would be created globally and bid out to wind power companies for construction, maintenance, monitoring, and upgrading of wind farms in different countries. A new global energy commission would be put into place with representative’s form each country. This commission would be used to regulate and monitor compliance of all global energy efforts.

Measurements in 2025 would be clear. Compliance of all countries around the world could easily be gauged by reviewing the governing document. The commission that will be created will measure success with initial audits that will begin in 2025 and completed every 2 years after to confirm that 40-60% of a countries energy is being produced by wind power.

References

Florence, J. (2008). Wind Power Is Affordable and Environmentally Friendly. In D. M. Haugen (Ed.), Opposing Viewpoints. Global Resources. Detroit: Greenhaven Press. Retrieved from
Harper, P. (2002). Why I Hate Wind Farms and Think There Should Be More of Them. In B. Passero (Ed.), Opposing Viewpoints. Energy Alternatives. Detroit: Greenhaven Press. Retrieved from
Mielke, E., Anadon, L. D., Narayanamurti, V., (2010). Water Consumption of Energy Resource Extraction, Processing, and Conversion, A review of the literature for estimates of water intensity of energy-resource extraction, processing to fuels, and conversion to electricity, Energy Technology Innovation Policy Discussion Paper No. 2010-15, Belfer Center for Science and International Affairs, Harvard Kennedy School, Harvard University. 35-37. Retrieved from
Culture. The Willpower. (n.d.). Retrieved from
Executive Management. (n.d.). Retrieved from
Failure is not an option. (n.d.). Retrieved from
No. 1 in modern energy. (n.d.). Retrieved from
Renewable Energy Sources Can Meet America's Energy Demands. (2010). In D. Haugen & S. Musser, Opposing Viewpoints. Energy Alternatives. Detroit: Greenhaven Press. Retrieved from
Renewable portfolio standards. (n.d.). Retrieved from
Wind and hydropower technologies. (n.d.). Retrieved from
Wind, Oil, Gas. (n.d.). Retrieved from
Wind Power plant. (n.d.). Retrieved from
Wind turbines and legal requirements. (n.d.). Retrieved from
110 years of expertise, willpower and passion. (n.d.). Retrieved from

Business Case study. Vestas Wind Systems and Ditlev Engel, have made major strides in making wind power a more efficient means of powering our energy grids.

This is a preview of the whole essay

Document Details

Related Essays

Cross country analysis of Suzlon Energy Limited - Indias first home-grown w...

A Report on the Selection of a European Country for the Location of an R &...

The business value of Information Systems. Case study: Amazon.com

Information Systems (IS) Failure Case study and Synthesis