Over the last two decades, the industry has grown fast, lowered technology costs to on a par or even cheaper than fossil fuels in some parts of the world and increased efficiency through bigger and bigger turbines.
According to the Statistical Review of World Energy report on Monday, global wind and solar power grew to a record share of 12% of power generation last year, surpassing nuclear.
The Global Wind Energy Council said earlier this year that a record 680 gigawatts (GW) of wind energy capacity is expected to be installed by 2027.
But the industry has had a tough few years.
SUPPLY CHAIN
The COVID-19 pandemic from 2020 led to lockdowns, decreased industrial activity and reduced global energy demand.
In the wind sector, as in other industries, restrictions on movement triggered supply chain disruption and delays in project construction.
Limits on the number of workers allowed on site and delays in components from China and elsewhere meant that some wind developers had to delay or even cancel projects.
Some firms also missed policy deadlines that meant that they lost out on government support or subsidies for which they previously qualified, the International Energy Agency said.
The war in Ukraine has also created logistics and supply chain issues, aggravated in some cases by the impact of sanctions.
ECONOMICS
Despite mounting pressure to combat climate change by moving to renewable sources, financing projects has been a challenge.
The war in Ukraine last year led to higher energy prices and this fuelled rises in inflation and interest rates.
But the expected revenues of those planning to build wind turbines have not risen in tandem. Many governments index the prices paid for wind energy, usually through auctions, which are often too low, analysts at Wood Mackenzie said.
The rise in commodity prices, such as steel, also increased the price of wind turbines by up to 40% over the last two years, industry body WindEurope said earlier this year.
Wind turbine manufacturers – unable to pass on higher costs to customers who placed orders two or three years ago – have tried to mitigate the impact of higher inflation and pressure on profit margins by raising prices.
COMPETITION
As more governments have announced ambitious climate targets, pressure on companies to increase renewables development has increased.
Established wind manufacturers, already competing with each other to drive down component and technology costs and increase wind farms’ efficiency with huge turbines, also face new entrants.
Traditional wind project developers, such as utilities, increasingly face competition from oil and gas majors seeking to diversify their portfolios, who have often outbid them in wind tenders and auctions.
Some oil and gas companies, however, are also struggling with poor returns from renewables while oil and gas profits have hit record levels in response to high energy prices.
COMPONENTS
Among the issues which arise from operating wind turbines, wear and tear on turbine blades over time can lead to erosion.
The increasing size of blades on turbines also raises the risk of lightning strikes and repairs.
For offshore wind, harsh weather conditions can also result in corrosion of foundations or of the turbine.
Leading wind turbine maker Vestas flagged quality issues with turbine blades in their onshore fleet in 2020 and provided an extra 600 million euros to fix them. Its shares fell more than 6% on Friday, while shares in Siemens Energy, the second biggest wind turbine maker, sank 37%.
Most of the problems of Siemens Energy’s wind unit Siemens Gamesa concern its onshore turbine fleet, where the group has discovered quality issues in certain components, including rotor blades and bearings.
Siemens Energy said that 15%-30% of the fleet could be affected by the problems, which were exposed during a review that noted “abnormal vibration behaviour of some components” and unspecified problems around product design.
Dealing with issues could cost more than 1 billion euros, it said.
($1 = 0.9170 euros)
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