2022 will be a critical year for wind power

Both GE and Siemens lost wind energy revenue last year, so what is happening in the wind world and can we expect better results this year? With Germany and other developed renewable energy regions experiencing low wind speeds in 2021, many wonder if wind is the reliable form of energy it has so often been described.

Siemens Gamesa’s renewable energy business has seen its market capitalization nearly halve in the past year as supply chain disruptions and low wind levels negatively affected operations. Siemens said its revenue fell to $2.06 billion between October and December 2021, marking a 20.3% year-on-year decline. Operating losses totaled nearly $353 million.

Company estimates revenue could contract 9-2% year-over-year indicating“Given the results of the first quarter of FY22 and the fact that the company does not expect supply conditions to normalize in the remainder of the year, Siemens Gamesa has adjusted its guidance for the exercise 22.”

Siemens’ share price has fallen around 45% over the past year as it blamed volatile market conditions and ongoing supply chain issues – such as delays and rising raw material costs – to negatively affect its wind power business. Chairman of the Board of Directors of Siemens Gamesa, Miguel Angel López, Explain that the company “was facing significant challenges in its Onshore business in a very difficult market”.

It is not the only European wind energy major feeling the pressure, as Vestas and Orsted warned of tough times for the renewables sector late last year. Danish companies have expressed concerns about low wind speeds, ongoing supply chain challenges and rising manufacturing costs associated with wind power operations.

Orsted saw lower profits in 2021 coupled with lower wind speeds compared to 2020. Europe saw some of the lowest wind speeds in decades last year. This, combined with higher associated costs, from raw materials to transportation, has meant a tough year for renewable energy companies. Despite the optimism that emerged from the COP26 climate summit last fall, these are inevitably the kinds of challenges green energy companies can expect to face as they expand their operations. in the years to come.

On the commodities side, steel prices soared in 2021, with the benchmark price up 86% in the United States and 53% in Europe. With steel making up a large part of the structure of wind turbines, this means that the cost of new wind farm projects has skyrocketed. Uncertainties surrounding the costs and reliability of wind speeds have subsequently depressed the stock prices of many renewable energy companies.

In the first half of 2021, Germany declared its share of renewable energy fell to 42.6% of the country’s total power, down 8.1%. Offshore and onshore wind power fell 28%. While Germany is set to lead the way in the EU’s ambitions to rely entirely on renewable energy over the coming decades, by decarbonizing its national economy, it will have to show the world how it recovers from this volatile year to the future.

In the United States, General Electric’s (GE) renewable energy segment is also facing challenges due to rising raw material and transportation costs, which are negatively affecting its onshore wind business. Larry Culp Law Firm CEO declared, “I don’t see the edge of a resolution yet.” And “we will see a bit more inflationary pressure in 2022,” he said.

GE is battling rising costs and supply chain difficulties, researching alternative suppliers and sourcing alternative parts to try to manage prices. The inflation felt during and after the pandemic has hit businesses in all sectors hard. However, booming sectors like renewable energy feel worse as they try to take off, hitting several hurdles along the way. For GE, the doubt about the extension of US production tax credits for onshore wind adds to the uncertainty in the sector.

But several reports are still predicting record wind and solar results for 2022. Despite continued supply chain challenges, many experts foresee a successful year for wind and solar thanks to low prices. Supply chain costs and delays are also expected to decline throughout the year. However, American Council on Renewable Energy CEO Greg Wetstone said the need for greater regulatory certainty explaining“We are also at a time where we have critical fiscal policy uncertainty, and unfortunately this is a reality that the renewable energy sector has had to deal with from the start.”

Despite several challenges to wind power development around the world, the Energy Information Administration (EIA) has announced plans for 21.5 GW of solar power and 7.6 GW of wind power in the United States in 2022 , relying on the most efficient wind, solar and battery storage systems. development year in history.

Renewable energy companies face hurdles early in the game, following optimism surrounding rapid expansion from COP26. Siemens, Orsted and GE all suffered losses related to low wind speeds and supply chain difficulties. However, as supply chain challenges begin to ease and more onshore and offshore wind turbines come online, we can expect an increase in the level of wind power in 2022, which is expected to continue. continue from year to year.

By Felicity Bradstock for Oilprice.com

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