Wednesday, June 28, 2023

"...Why the wind power industry has hit turbulence"

From Reuters, June 26: 

Problems in Siemens Energy's (ENR1n.DE) wind turbine division that could cost more than a billion euros ($1.09 billion) to fix have shaken investor confidence in the wider industry and last week prompted a sell-off in wind companies' shares.

Over the last two decades, the industry has grown fast, lowered technology costs to on a par or even cheaper than fossil fuels in some parts of the world and increased efficiency through bigger and bigger turbines.

According to the Statistical Review of World Energy report on Monday, global wind and solar power grew to a record share of 12% of power generation last year, surpassing nuclear.

The Global Wind Energy Council said earlier this year that a record 680 gigawatts (GW) of wind energy capacity is expected to be installed by 2027.

But the industry has had a tough few years.

The COVID-19 pandemic from 2020 led to lockdowns, decreased industrial activity and reduced global energy demand.

In the wind sector, as in other industries, restrictions on movement triggered supply chain disruption and delays in project construction.

Limits on the number of workers allowed on site and delays in components from China and elsewhere meant that some wind developers had to delay or even cancel projects.

Some firms also missed policy deadlines that meant that they lost out on government support or subsidies for which they previously qualified, the International Energy Agency said.

The war in Ukraine has also created logistics and supply chain issues, aggravated in some cases by the impact of sanctions.

Despite mounting pressure to combat climate change by moving to renewable sources, financing projects has been a challenge.

The war in Ukraine last year led to higher energy prices and this fuelled rises in inflation and interest rates.

But the expected revenues of those planning to build wind turbines have not risen in tandem. Many governments index the prices paid for wind energy, usually through auctions, which are often too low, analysts at Wood Mackenzie said.

The rise in commodity prices, such as steel, also increased the price of wind turbines by up to 40% over the last two years, industry body WindEurope said earlier this year.

Wind turbine manufacturers - unable to pass on higher costs to customers who placed orders two or three years ago - have tried to mitigate the impact of higher inflation and pressure on profit margins by raising prices....


Our thoughts, June 26:
Siemens Energy Shares Got Rocked On Friday As Wind Turbine Problems Persist
....We haven't had much to say about the wind business, either manufacturers or wind farm operators since their returns dropped below those offered by regulated utilities. If the U.S. offshore wind farms ever get started and then, if they can make any money we'll be back to them