Science and Tech

Europe promised them very happy as the leader of the wind turbine industry. Until China appeared

China boasts its new record megaturbine to reign in offshore wind power: it supplies 36,000 homes for a whole year

Strong winds are blowing in the European wind industry. In a complex sector, marked by the transition to renewable energy, the war in Ukraine, the energy crisis and a market that forces them to fight copper on a global scale, firms from the old continent are facing a year full of challenges. warns him Financial Times and it has been hinted at by the sector itself, which over the last few months has not hesitated to recognize the harshness of the scenario. “The current crisis threatens Europe’s position as a leader in the renewable industry,” warned last fall Siemens-Gamesa.

Reasons they have to advance a hard 2023.

What do the figures say? That despite their crucial role in the energy transition and institutional support, large European manufacturers in the sector, such as Siemens Gamesa, Vestas or Nordex, face a complex scenario. At the beginning of November the Danish manufacturer Vestas reported of red numbers during the first nine months of the year of 1,031 million euros, far from the profit of 129 million that it had reached during the same period of 2021.

For the same dates Nordex admitted the complexity of the scenario and Siemens-Gamesa closed the fiscal year with a reported net loss of €940 million. The horizon also looks complicated. So at least Petra Manuel recognizes itan analyst at Rystad Energy, told Financial Times (TFT), who anticipates that 2023 “will probably also be a challenging year”.

What are the reasons? When exposing their situation, the companies point to a cocktail of different factors that can be summarized as Siemens-Gamesa strikes out, without beating around the bush, of “extremely complex macroeconomic and geopolitical context.” Why? Market imbalances, price drift and supply chain disruptions accentuated by geopolitics and the pandemic, which in turn interfere with the project schedule.

“After a difficult year, the 2023 financial year begins in an equally complex environment, characterized by high inflation and interruptions in the supply chain that significantly affect the cost of materials”, says the Spanish-German companythat claims for the European wind industry to achieve the “strategic” label. Delays in deliveries even sometimes result in penalties for the commitments assumed with the clients.

The price of raw materials and war. Due to its importance, it is worth outlining some of the reasons for this “cocktail”. One of the clearest cases is the price of energy and fundamental raw materials for the sector, such as steel, marked by inflation and the effects of the war in Ukraine. Its effect is clearly felt in the manufacture of turbines.

…And other factors that make up the picture. It is not the only reason, of course. “Industry profitability is currently threatened by slow permitting, auctions focused solely on price, and ultimately rising energy, commodity, and transportation prices,” warns Siemens-Gamesawhich recalls that the health crisis has led to a shortage of key components for wind turbines and throughout the year the war in Ukraine has “exacerbated” the problems in the supply chain.

The Asociation Wind Europe calculates that during the third quarter of 2022 orders for wind turbines fell by 36% compared to the same period in 2021, and issues a notice: “Europe urgently needs to resolve permits and strengthen its wind supply chain.”

Chinese shadow. Not all are trends or phenomena that, like war or the pandemic, end up affecting the sector. In the panorama facing the European wind industry there is also a leading actor with its own name: China. Competition from the Asian giant is increasingly palpable, as admits Giles Dicksondirector of WindEurope, to Financial Times: “China is starting to win some… orders in Europe for wind turbines. They are knocking at the door”.

He is not the only one to warn of this phenomenon. In October the Spanish-German company insisted on demanding greater protection for the European sector due to the strategic role it plays. What’s more, its CEO, Jochen Eickolt, demanded that the EU force the Asian power to compete on equal terms, with the same regulations as European firms.

On the table, a key fact. how to collect TFT, China has managed to increase its global market share of new turbines exponentially: if the main manufacturers in the country accounted for 36.6% of the new turbine installations worldwide in 2018, in 2021 that figure was already around 53, 5%. “We face Chinese competition in global markets and also increasingly in Europe,” stresses Eickholtbefore stressing that manufacturers in the Asian giant often receive “additional support, usually from national or regional sources.”

“At the end of the day, we feel like it’s an unbalanced battle, or at least we don’t have the same level of opportunity here,” stresses the managerwhich precisely against this backdrop claims “equal conditions” and urgently consider wind turbines as critical infrastructure.

What is the horizon beyond 2023? “Short-term pressures remain very high and are negatively affecting our profitability,” Nordex explained in November. Beyond and despite the multiple challenges facing the sector, the outlook would be more positive. “I don’t think there is an existential threat. The long-term drivers are as clear as ever. It’s a matter of looking at next year.” comment to Financial Times Sean McLoughlin of HSBC.

Companies negotiate better prices and favorable contractual conditions. The key, as the expert emphasizes, is the flow of orders. “What is missing are the volumes”, remark. The industry is confident that demand for turbines will have increased by the middle of the decade.

Cover image: Made From The Sky (Unsplash)



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