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Wind-turbine makers struggle to profit from renewable-energy boom

Top wind-turbine makers are struggling with lower earnings as rising raw- material costs, problems shipping the hulking machines, and uncertainty over the future of U.S. subsidies pressure their businesses.

Rising raw-material costs, unpredictable U.S. subsidies and concerns transporting the giant machines are crimping earnings for companies such as Vestas and General Electric

The world’s appetite for green energy is greater than ever, but that isn’t translating into big profits for some of the companies behind the boom.

Top wind-turbine makers are struggling with lower earnings as rising raw- material costs, problems shipping the hulking machines, and uncertainty over the future of U.S. subsidies pressure their businesses.

Siemens Gamesa Renewable Energy SA and Vestas Wind Systems A/S, two of the largest global manufacturers, reduced profit forecasts for the remainder of the year. General Electric Co., another leading turbine manufacturer, reported year-over-year growth in turbine sales but hasn’t turned a profit in that segment this year.

Globally, wind production has been growing as the renewable energy source becomes more economically competitive with fossil fuel sources of electricity such as coal and natural gas and as countries begin taking steps to address the causes of climate change.

Demand for turbines this decade is expected to be roughly double... more [truncated due to possible copyright]  

Rising raw-material costs, unpredictable U.S. subsidies and concerns transporting the giant machines are crimping earnings for companies such as Vestas and General Electric

The world’s appetite for green energy is greater than ever, but that isn’t translating into big profits for some of the companies behind the boom.

Top wind-turbine makers are struggling with lower earnings as rising raw- material costs, problems shipping the hulking machines, and uncertainty over the future of U.S. subsidies pressure their businesses.

Siemens Gamesa Renewable Energy SA and Vestas Wind Systems A/S, two of the largest global manufacturers, reduced profit forecasts for the remainder of the year. General Electric Co., another leading turbine manufacturer, reported year-over-year growth in turbine sales but hasn’t turned a profit in that segment this year.

Globally, wind production has been growing as the renewable energy source becomes more economically competitive with fossil fuel sources of electricity such as coal and natural gas and as countries begin taking steps to address the causes of climate change.

Demand for turbines this decade is expected to be roughly double demand in the previous 10 years, according to estimates from the consulting and data firm Wood Mackenzie. But companies face an array of challenges in manufacturing and moving the increasingly large turbines, whose blades alone span more than 100 feet apiece.

A quadrupling of transportation costs and increases in steel, copper, aluminum and carbon fiber prices will likely drive wind-turbine prices up by 10% over the next 12 to 18 months, according to Wood Mackenzie.

“There is a logistics challenge in major harbors in the world due to Covid lockdowns," said Vestas Chief Executive Henrik Andersen. “You have a very high number of container ships and specially designed ships transporting our finished assets. They are held in queues. They can’t get access to the harborside."

Prices for the raw materials used in wind turbines started moving higher in mid-2020 as many pandemic restrictions eased globally, and those elevated costs are likely to last, Mr. Andersen said. But the transportation-price increases should eventually drop, he added, saying Vestas expects them to last through the start of 2022. Vestas shares have fallen around 15% this year.

Higher oil prices this year have boosted the cost of the fuels used to move wind-turbine supplies and equipment. At the same time, the turbines are getting larger and more complex to transport, said David Sale, chief executive of Goldwind Americas, the North American subsidiary of China’s state-owned turbine maker Xinjiang Goldwind Science & Technology Co.

“As we continue to push the boundaries of transportation, the specialized equipment that’s required to move these machines is not abundant," Mr. Sale said.

Another major factor weighing on turbine makers is a lack of clarity on whether and how the Biden administration will extend a federal tax credit for wind development in the U.S., a key growth market. The extension of the tax credit, set to expire this year, is being considered as part of a $3.5 trillion budget-reconciliation bill that proposes a number of spending measures to accelerate renewable-energy deployment.

With the details of U.S. subsidies in flux, some customers are unsure of whether to order new turbines now or wait to see if policies and potentially lower shipping costs make the purchases more attractive in the near future, analysts and companies said.

Abby Watson, Siemens Gamesa’s head of government affairs in North America, said she is optimistic that the industry will have a clearer long-term picture of U.S. policy by the end of the year. That, she said, would help the company better plan its manufacturing strategy without having to ramp up and down in response to tax-code changes.

“When we talk about price pressures that everyone has been dealing with, a not-insignificant part of that is inconsistency in policy," she said.

Siemens Gamesa, whose shares have fallen roughly 25% this year, said it is charging higher prices and taking other measures to offset the increase in raw-material costs. Though the company warned that the challenges will likely continue in the near term, it forecasts strong growth in coming years as governments around the world set carbon-reduction targets.

General Electric said that it expects the U.S. onshore-wind market to decline in the near term before stabilizing, in part because a potential extension of wind-tax credits could cause wind-farm developers to push out their investment decisions for years.

In a statement, the company said it sees long-term growth in the global wind industry as the technology becomes more competitive with other forms of power generation and as governments in the U.S. and elsewhere work to address climate change.

For now, turbine manufacturers largely must swallow higher logistics costs, said Deepa Venkateswaran, senior renewables analyst at Bernstein Research. Fixed-price contracts typically include a margin for inflation, she said, but it wasn’t enough of a cushion this time.

“The bottlenecks cannot be immediately passed on," Ms. Venkateswaran said.


Source: https://www.wsj.com/article...

AUG 23 2021
https://www.windaction.org/posts/52722-wind-turbine-makers-struggle-to-profit-from-renewable-energy-boom
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