The wind power industry is facing significant cost increases, ranging between 20% and 40% since February 2022. Siemens Gamesa, the wind power segment of Siemens Energy, has experienced substantial financial losses after selling turbines that were not adequately tested. In addition, big oil companies are making significant investments in the wind sector without government subsidies, putting pressure on traditional wind companies.
The chief executive of Danish wind turbine major Ørsted has called on the British government to provide more financial support for the wind industry due to rising costs. Siemens Gamesa has also issued warnings about its business performance, citing failures in the wind turbines it produced. Utility company Vattenfall has pulled out of a major offshore wind project in the UK due to soaring costs.
Higher costs, technology problems, and supply chain issues have become significant challenges for the wind industry. Wind and solar energy have been marketed as cheaper alternatives, but the recent cost increases have highlighted the need for the industry to also make a profit. Wind developers are unhappy with the fixed prices offered by the British government for electricity generated by wind parks, as these prices are no longer sufficient for them to stay profitable.
Siemens Energy has reported a loss of over $3 billion for the latest quarter, largely attributed to its wind turbine business. Executives from Siemens Energy expected moderate losses but were proven wrong. The wind industry sees more government support as the only solution to their challenges, potentially leading to higher electricity prices for consumers.
In contrast, BP has announced plans to build two offshore wind projects in the Irish Sea without government support, a move that is unusual for the industry. BP’s ability to invest without subsidies comes from its higher oil and gas prices and the potential for improved green credentials. This highlights the financial challenges faced by traditional wind majors. BP and TotalEnergies have also won a $14 billion tender for an offshore wind park in Germany, further indicating the inability of wind power companies to compete.
The implications of these challenges include a potential slowdown in new wind power capacity additions in Europe and a risk to ambitious renewable energy targets.