Vestas catching the breeze in Latin America's green energy push

Eduardo Ricotta, CEO of Danish wind turbine manufacturer Vestas in Latin America, spoke to BNamericas during Brazil WindPower 2024 to tell us about the company’s operations and the market outlook in the region.

He highlighted Vestas' focus on increasing product competitiveness through investments in its Brazilian facilities and supply chain, as well as addressing the challenges in Brazil’s wind energy sector, noting the recent market recovery and the need for a regulatory framework to support offshore wind projects.   

The executive also identified key markets in the region, including Mexico, Chile and Argentina, where renewable energy demand is growing, driven by factors like datacenter expansion and favorable government policies, while underscoring Vestas’ sustainability efforts, aiming for net zero emissions by 2030. 

BNamericas: How are Vestas' operations currently going in Latin America?

Ricotta: We serve all countries in Latin America, from Mexico to the Patagonia region. I’m based at our regional headquarters in São Paulo, and we have a production facility in Brazil, in Ceará state.

We’re investing a total of 130mn reais [US$23mn] in both our own facility and our suppliers to increase the competitiveness of our products. This investment will enable us to manufacture two types of turbines domestically.

BNamericas: In which countries does Vestas see the greatest business opportunities in the region?

Ricotta: In Latin America, we have a stronger presence in certain countries, including Mexico, Colombia, Peru, Chile, Argentina and Brazil. These are our largest markets, accounting for 95% of our business in the region, and from these countries, we serve others.

Among these, I see Mexico as a particularly promising market in the coming years, with suppressed demand of 10GW due to the lack of available projects.

For instance, datacenter companies are currently unable to proceed with projects in Mexico because renewable energy isn’t available. This is why we’re confident about the expansion of the Mexican market.

In Colombia, there's a temporary setback due to the lack of transmission infrastructure, and the complexity of securing project permits has been a significant challenge for our clients.

Peru is still in the early stages regarding renewable energy projects, but we believe it holds potential due to its mining industry, which could drive demand for renewable energy. That said, we understand it's not a huge market.

Chile is implementing policies aimed at having 95% of its energy come from renewable sources by 2033. This favorable policy environment makes Chile a strong market for us.

Argentina is showing significant improvement. We have had a large presence there, but doing business is now becoming easier with tax reductions and a more open economy. Previously, we faced major issues with importing materials, but we’re seeing improvements in these procedures now.

In Brazil, after nearly 18 months of stalled projects due to energy price issues, we’re seeing some recovery among our customers.

BNamericas: You first mentioned the opportunities in Mexico. Could you elaborate on your vision for the Mexican market?

Ricotta: This year, we signed a sales agreement for a 320MW project with Sempra in Mexico.

The challenge in Mexico is that energy projects are largely controlled by CFE [state company Comisión Federal de Electricidad], but we expect changes in this regard.

The country’s president, Claudia Sheinbaum, has indicated plans to revise the current model, introducing a mix of private and public sector involvement, with 46% of energy projects led by the private sector. This is why we anticipate significant growth in the market.

BNamericas: In Argentina, the government recently announced changes to the structure of the country's tax authority. How does that impact the business outlook there?

Ricotta: I haven’t reviewed the details of that measure yet, but what we’re witnessing in Argentina is rapid and substantial change, with new announcements almost daily.

In general, I see Argentina signaling a desire to improve the business environment, and the overall outlook is positive. Of course, we must remain cautious about any sudden changes and how they might affect our clients, but rising energy prices and new projects should help stabilize the market.

BNamericas: What about the current situation in Brazil's wind sector, which is experiencing a crisis?

Ricotta: Brazil’s energy matrix is still heavily reliant on hydropower, and after substantial rainfall in 2022 and 2023 that raised reservoir levels, energy prices dropped to levels I’ve rarely seen before.

Additionally, distortions caused by excessive subsidies for distributed generation also contributed to delays in wind projects. These factors have impacted the supply chain, which took over 20 years to develop.

However, we’re now seeing signs of recovery, with a sharp rise in energy prices in recent weeks.

BNamericas: Given the wind sector crisis, many companies scaled back activities and laid off employees. Could past bottlenecks affect the sector again as orders pick up?

Ricotta: As I mentioned, it took over 20 years to establish the supply chain in Brazil. The crisis led to job losses, and even though we’re seeing a recovery, it will take time to return to normal. This is something that concerns us. The pace of recovery will depend on how quickly new projects resume.

BNamericas: What are the key growth drivers for wind energy in the medium and long term?

Ricotta: First, it's important to remember that energy demand is growing by 5% to 7% annually.

Secondly, datacenters are a significant growth area. It's projected that globally, the number of datacenters will expand by 160% by 2030, and Brazil is in a great position, offering reasonably priced energy, water, and both solar and wind power. This makes datacenters a significant opportunity for wind energy projects.

Another growth area is green gas, linked to green hydrogen production. Brazil, Argentina and Chile are ideally positioned due to their strong winds, making wind energy very competitive.

While green hydrogen projects still face cost competitiveness issues, I expect, much like wind and solar, that they will become viable over time.

Lastly, the energy transition itself is a major driver for the expansion of the wind sector

BNamericas: Do you see offshore wind projects gaining momentum in Brazil?

Ricotta: Onshore and offshore wind power are complementary.

In regions with limited land availability, like Japan and the UK, offshore projects tend to progress faster. In Brazil, however, I expect offshore projects will take longer to develop, but the country offers excellent conditions for them. What’s needed is a regulatory framework for offshore wind projects, as they typically take about 10 years to develop.

Offshore wind has the advantage of proximity to coastal energy consumers.

I acknowledge that Brazil’s regulatory framework for offshore wind is complex, involving multiple government sectors and congress, but it’s probably better to take time and create a robust framework rather than rush into one that’s flawed.

BNamericas: Is there anything else you’d like to add?

Ricotta: Vestas has been focused on sustainability. We’re facing the major challenge of achieving net zero emissions by 2030, within scopes 1 and 2, and also the major challenge of achieving net zero with our suppliers, within scope 3. 

As part of these efforts, we recently partnered with Banco Santander Brasil to provide a credit line starting at 1bn reais and potentially reaching 2.5bn reais. This initiative allows suppliers who are independently certified for ESG practices to receive up to a 50% reduction in monthly interest rates.