AUGUST 8, 2023By Paul Homewood
h/t Paul Kolk
When Siemens announced a deal to merge its wind power business with rival Gamesa in 2017, executives saw only upside.
Then Siemens chief executive Joe Kaeser said there was “a clear and compelling industrial logic” that would make “renewable energy more cost-effective”.
Yet the turbine industry has proved as fickle as the wind.
Siemens warned on Monday that it was facing a €4.5bn (£3.9bn) loss this year as a result of issues within its wind turbine division.
Wrinkles in rotor blades and faulty gears are among the problems uncovered, which have led to operating issues and warranty claims from buyers. Inflation has only added to headaches.
The admissions of failures wiped as much as €6bn off the value of Siemens on Monday.
The German industrial powerhouse has been in the wind power market for almost two decades and Gamesa, which was until last year a joint venture, traces its roots in the industry back to the 1970s.
Yet a rapid expansion of its manufacturing in recent years has left the combined business over-extended.
Jochen Eickholt, chief executive of Siemens Gamesa, admitted: “We sold turbines too quickly,” describing the company as a “victim of our own ambitions”.
Siemens Gamesa manufactures blades for wind turbines, which can measure over 100m in length and are made up of many layers of material.
The technology must be highly precise and testing uncovered flaws causing “abnormal vibrations”, which could lead to damages and other issues.
Jochen Eickholt, chief executive of Siemens Gamesa, has put the issues down to “wrinkles” within layers of the blades and has blamed suppliers. Some have been cut off in response.
Hiccups weren’t picked up earlier because the company was focused on the rapid introduction of new turbines and the ramping up of capacity, Siemens Energy chief executive Christian Bruch said.
Kathryn Porter, an independent analyst at energy consultancy Watt Logic, said: “There’s been pressure from the developers to have bigger turbines, because then obviously it’s easier to build, but there have been a lot of warranty problems.
“Now you’re getting people saying behind the scenes, maybe we need to have a pause on this bigger and bigger turbine thing because they just keep breaking.”
Profitability has been weak in the industry for a long time, she said….
The German company is not alone in struggling: its competitors and its customers are also battling a more expensive landscape for the green energy industry.
Vestas, the world’s biggest wind turbine maker, lost €1.5bn last year after a surge in costs, particularly metal prices.
Chief executive Henrik Andersen said in May: “The wind industry remains challenged by political uncertainty, slow permitting processes and high inflation, which we expect to continue throughout 2023.”
Operators face significant challenges too. Energy giant Vattenfall last month shelved plans for a major wind farm off the coast of Norfolk after soaring inflation made the project unviable.
