Siemens Energy, the parent company of wind turbine manufacturer Siemens Gamesa, experienced a significant dip in its stock value last month following costly failures at the wind turbine division. Analysts are now expressing concerns about potential widespread issues within the industry.
Siemens Energy announced the scrapping of its profit guidance in late June, citing a substantial increase in failure rates of wind turbine components at Siemens Gamesa. Siemens Energy CEO Christian Bruch expressed surprise at the severity of the quality issues, stating that too much had been ignored.
As a result of the unfolding problems at Siemens Gamesa, Siemens Energy stock plummeted by approximately 37% on June 23, while other wind companies also saw their shares decline. Investors feared that the issues at Gamesa might signify a wider problem throughout the industry.
Nicholas Green, head of EU capital goods and industrial technology at AllianceBernstein, highlighted the sector’s rapid expansion and the relatively short period of time that many turbine components have been in use as factors that could contribute to inherent risks across the industry. Green believes these risks are uncharted territory due to the pace of change.
Siemens Gamesa’s board will now conduct an extended technical review into the issue, which is expected to result in costs exceeding €1 billion ($1.09 billion). Although the company has managed to recoup some of its losses, its shares remain down more than 33% in the past month.
The wind energy industry has experienced substantial growth over the past two decades, reducing costs to compete with traditional fossil fuel sources and increasing efficiency through the use of larger turbines. However, the industry was dealt a blow by the COVID-19 pandemic, as lockdowns decreased industrial activity and global energy demand. Supply chain disruptions and inflationary pressures from Russia’s invasion of Ukraine further impacted wind turbine manufacturers.
WindEurope, an industry body, denies that technical failures are a widespread concern, emphasizing that the problems at Siemens Gamesa are limited to the company itself. According to Christoph Zipf, a spokesperson for WindEurope, while the industry constantly faces challenges with the introduction of new turbine models, the European wind industry has a reputation for delivering highly reliable turbines.
Evgenia Golysheva, vice president of strategy and marketing at ONYX Insight, a company that monitors wind turbines, explains that most turbines are designed and certified for a 20-year lifespan, but certain components are expected to fail within that timeframe due to cost-reliability compromises. With wind turbine installations growing rapidly, the industry is facing the need for greater understanding of failure rates and maintenance costs.
Although the wind industry faces challenges, there is still optimism for the future. Wind and solar power accounted for 12% of the world’s power generation last year, according to the Statistical Review of World Energy report, with wind power output increasing by 13.5%. The industry’s ability to overcome obstacles and maintain profitability will depend on ongoing advancements in technology and the ability to effectively address reliability issues.
As the wind energy sector navigates the current challenges, it is crucial for industry players to promote transparency, invest in research and development, and prioritize reliability and quality in order to build a sustainable and efficient renewable energy future.
