Europe’s wind industry stumbles when it is most needed | Popgen Tech

These should be great times to be in the wind energy industry, especially in Europe. Governments here have long promoted offshore wind projects, and those efforts have accelerated since Russia began cutting natural gas shipments in its war on Ukraine.

“We need clean, we need cheaper and we need home-grown power,” Ursula von der Leyen, the president of the European Union, said in August.

But Europe’s wind turbine makers, the crown jewels of the region’s green energy industry and a source of manufacturing expertise, are reporting losses and laying off workers. Their problems stem in part from lingering supply chain issues and competition from Chinese manufacturers, and the issues could ultimately hamper Europe’s, and even the world’s, ambitions to rapidly develop emission-free energy sources.

Siemens Gamesa Renewable Energy, a Madrid-based company that is the leading maker of offshore wind turbines, reported an annual loss of 940 million euros ($965 million) this month. The company has announced a cost-cutting program that is likely to result in 2,900 job losses, or nearly 11 percent of its workforce.

Vestas Wind Systems, the world’s largest manufacturer of turbines, recently reported a loss of 147 million euros (about $151 million) for the third quarter.

General Electric, a major maker of wind turbines in the United States and Europe, has also struggled in its clean energy businesses. The company said last month that its renewable energy unit was likely to record losses of $2 billion this year.

Several problems are plaguing the industry, including rising costs for materials and shipping, as well as logistical problems, some of which are a legacy of the pandemic. As a result, prices previously agreed for turbines, which cost millions of dollars each and can add up to hundreds of billions for large offshore wind farms, can result in huge losses for the manufacturers when they are delivered.

“Every time we sell a turbine, we lose 8 percent,” Vestas CEO Henrik Andersen said in an interview.

At the same time, a race to create bigger, more powerful turbines has caused manufacturers to spend hundreds of millions of dollars on new models, but not sell enough machines to recoup the costs.

And alarms are starting to sound about growing competition from China, where local turbine manufacturers that have catered to the Chinese market for years are starting to sell their machines overseas. Some Western turbine makers fear a repeat of the bitter experience with solar panels, a technology first developed in the West but now largely dominated by China and other Asian manufacturers.

“They are in trouble,” Endri Lico, a senior analyst for wind at consulting firm Wood Mackenzie, said of Western turbine makers. “We’re talking about a massive loss for the industry.”

The poor financial performance raises questions about the future of the wind industry in the West and whether the very ambitious plans by governments and energy firms to develop vast wind farms in Europe and the United States can be achieved.

Jochen Eickholt, the CEO of Siemens Gamesa, said in an interview that the industry needs to make money to develop, build and install turbines, including on the East Coast of the United States, which will help countries meet climate goals for the reduction of carbon emissions. .

“Our wind turbine manufacturers have to be quite profitable,” he said. “But at the moment we are not.”

Siemens Energy, the majority shareholder of Siemens Gamesa, which has been reeling from recent losses, is offering to buy the roughly one-third of the turbine maker it does not already own as part of an effort to cut costs and tighten controls.

European officials have also criticized parts of the Biden administration’s Inflation Reduction Act that encourages domestic investment, worried that the law’s substantial incentives for clean energy would draw manufacturers away from the mainland. However, European renewable energy executives whose companies plan to expand into the United States were very supportive of the Biden program.

Mr. Eickholt said on a recent call with reporters that Europe would be wise to introduce similar measures. “I think it is absolutely essential in Europe as well that we retain the related know-how and also the manufacturing and labor base,” he said.

While Chinese manufacturers have made only modest inroads outside their home country, analysts say they have used the high volumes of sales in China to hone their manufacturing skills and train large workforces that can deliver turbines at prices well below those charged by their Western rivals. become

“Europe now faces the real possibility that the EU energy transition will be created by China,” Siemens Gamesa warned in a recent paper calling for support from European governments.

Chinese companies already produce as much as 70 percent of the components that make up turbines used in the West, according to Mr. Lyco. “China is the epicenter of the global wind supply chain,” he said, referring to component manufacturers.

Mr. Vestas’ Andersen attributes much of the industry’s woes to competitors selling machines at low prices to win orders. “I think the industry here needs to wake up to our own responsibility,” he said, adding that some equipment manufacturers “have been selling turbines at loss-making prices.”

The problems come as European governments call for more wind farms. The European Union has recently already raised ambitious targets for wind generation by the end of this decade to nearly triple the amount available at the end of last year.

While companies have built many large wind farms off European coasts, and governments have awarded leases for large amounts of subsea acreage, particularly in Scotland this year, executives say political leaders are not doing enough to speed up approvals. These projects could take a decade or so to start generating clean power. Besides hampering the industry’s profitability, the delays delay environmental benefits and do little for countries seeking alternative sources of energy to Russian gas.

Executives also say windfall taxes on the profits of electricity generators, including operators of wind farms, recently announced in Britain and proposed by the European Union, create further uncertainty for their customers.

“Excuse the language,” mr. Andersen said. “It is perhaps a bit of nonsense to sit and adjust targets for 2030 and 2040 because they do not address the current energy crisis in Europe.”

Approaching that target would significantly accelerate current installation rates, analysts say. For an industry that may be in retreat, it can be difficult to pick up the pace.

Mr. Lico said that Europe finds itself with a dilemma: whether to support domestic turbine production, potentially prolonging dependence on fossil fuels, or to turn instead to alternative sources for equipment. It’s “a matter of priorities,” he said.