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Major Western wind turbine manufacturers have seen heavy losses against a growing market, raising questions about how to manage the green transition.
All told, energy consultancy WoodMackenzie calculates that four major Western turbine makers — Denmark’s Vestas, America’s General Electric and Germany’s Nordek and Siemens Gamesa — lost up to 3.3 billion euros in the first three quarters of 2022.
Jon Lezamiz Cortazar, Siemens Gamesa Global Head of Public Affairs, says fDi that “although everything looks brighter than ever from the point of view of targets, the European wind industry is struggling.”
Under its REPoverEU proposal, which aims to end reliance on Russian fossil fuels by the end of the decade, the EU aimed to deploy 510 gigawatts (GW) of wind power by 2030. As of 2021, 189 GVs have been installed.
High ambitions, company mistakes
Despite these lofty ambitions, the European wind industry is plagued by rising commodity prices, logistical challenges and permitting delays. In this sense, wind turbine manufacturers are in a bind: they have been competing with each other to be the cheapest in recent years, and are now being squeezed by rising prices and a backlog of orders.
“We were cheaper than cheap,” says Mr. Cortazar, acknowledging that some of the problems related to wind turbine losses could be of their own making. “We are a private company. We can be wrong.”
But he stresses that “there is a mismatch between the competitiveness of energy sources and market design.”
“Basically, the problem is the changing economics of the wind industry,” says Andri Lizzo, senior global wind technology and supply chain analyst at consultancy Wood Mackenzie. “Since 2015, there has been a shift from subsidy schemes to competitive auctions, reducing the purchase price passed on to original equipment manufacturers (OEMs).”
European vs. Chinese OEMs
Meanwhile, the profit margins of Chinese OEMs, such as Goldwind and Mingiang, remained high.
Mr. Lico attributes this to “a different operating model and a different market” in that the Chinese government’s goals are to ensure security of demand and have a domestic supply chain from raw materials to manufacturing capacity and R&D. “That means they can take advantage of cost reductions and economies of scale.”
The next two to three years will be “extremely painful” for the western wind sector, Mr Lizzo predicted, adding: “We cannot discount the possibility of business failure.”
Many fear that a weakened set of European OEMs is giving way to opportunities for Chinese manufacturers to take over the market, unlike what happened in the solar PV sector a decade ago.
In September, Sweden’s Hekicon appointed Mingiang to provide turbines for its TwinHub project, the first offshore wind project in the Celtic Sea. The company is already supplying turbines for the 30 megawatt Taranto offshore project in Italy.
Elsewhere, permitting has disrupted the wind sector as a whole, prompting calls from producers and investors to reduce the timing of permitting.
Michael Hannibal, a partner at Copenhagen Infrastructure Partners, an asset manager that participates as a direct investor in greenfield renewable energy projects, previously said fDi that “time to obtain permits and consents takes an average of seven to 10 years for each project.”
The EU’s plans are already in jeopardy. According to WindEurope, in order to reach the EU’s 2030 targets, at least 39 GW wind turbines need to be installed per year. In 2021, only 11 GV were installed.
On November 10, the European Commission proposed emergency measures to accelerate the deployment of renewable energy, including wind and solar energy.
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