In late June, German company Siemens Energy surprised the wind energy sector by disclosing quality problems in its new wind turbine models. This revealed broader challenges in a sector suffering from rapid development, high material costs, and a turbulent market structure.
The German company has warned of the poor quality of wind turbine components and potential design flaws in onshore wind turbines, the agency reported. ReutersOn the 7th of July.
Siemens said it could not yet say the cost, but expected it would require at least one billion euros ($1.1 billion) to address the problems. The company’s sources indicated that the final bill may be higher than that, according to the information monitored by the specialized energy platform.
Infrastructure problems
Siemens Energy’s losses highlight systemic problems in a sector that has been in need of fixing for years, according to industry advisors, industry executives and analysts.
Last year, the top 4 western wind turbine manufacturers: Vestas, General Electric, Siemens Gamesa, a subsidiary of Siemens Energy, and Nordex had combined sales of more than €41 billion ($44.98 billion).
Combined losses exceeded 5 billion euros ($5.48 billion).
Flags of Siemens Energy in Mülheim an der Ruhr, Germany – Photo Credit: Reuters
Data from consulting firm Wood Mackenzie showed that at the same time, wind farm owners received an operating margin of 15%, which is evidence of an unfair distribution of profits in this sector.
Given the nature of contracts agreed before the recent inflation spike, the sector has struggled to pass on the increased cost of materials.
On the other hand, the big energy companies, which were transitioning to renewable energy to some extent, pulled out under the pressure of shareholders who focus on the more reliable profits generated by oil and gas.
The emergence of a culture of permissiveness
In the wind sector, the name of Siemens Energy has emerged. Because its wind turbine division was formed as a result of a failed OEM merger; This has led to a culture of permissiveness and inadequate quality checks, people familiar with the matter said.
“Everyone was surprised by the scale,” one such insider said of Siemens Energy’s disclosures in June, adding that the company was involved in too many parts of the value chain and that more outsourcing was needed to save costs and increase quality.
Analysts at brokerage firm Bernstein, who have seen Siemens Energy’s problems, said the company’s difficulties could be seen as “problems stemming from the race to widen the blade diameter.” They described the issue as potentially disastrous for wind turbines.
Some of the pressure to achieve this expansion came due to the European Union’s policy to increase the production of renewable energy to counter climate change, and to reduce dependence on imported Russian gas after the war in Ukraine.
In addition, the European Union wants wind power to account for 43% of electricity consumption in Europe by 2030, up from 17% now.
A Siemens Gamesa offshore wind turbine off the coast of Gran Canaria, Spain. Photo courtesy of Reuters
At the same time, supply chain disruption related to the COVID-19 pandemic has made it more difficult to produce enough turbines.
Elsewhere, equipment makers have raced to build larger and more efficient turbines to keep up with competitors, without necessarily allowing time for quality checks.
“Strong competitive pressure combined with the race for ‘newest and biggest’ has forced manufacturers to shorten development cycles and introduce prototypes,” said Udo Schneider, director of the Hamburg city office at Green Giraffe, which advises clients on large energy transition projects. .
Challenges of profitable production
Industry advisors say that even as demand increases; The need to modify turbines to meet the needs of individual markets and different wind speeds has prevented the sector from launching profitable mass production.
For example, Siemens Energy’s rival General Electric Co. posted a $2.24 billion loss in its renewables division in 2022, which it blamed in part on “corrective actions and overhauls” in its turbine fleet.
In an effort to standardize production, increase quality and reduce costs, GE announced that it will reduce the number of rotary turbine models it makes to 4 from 15, turbine housings to 4 from 9, and tower models to 4 from 40, according to the Specialty Energy platform.
Denmark’s Vestas has put in place quarterly warranty terms to cover increased turbine repairs and upgrades, Reuters reported July 7.
China, the world’s largest renewable energy market, is virtually closed to Western players, but industry sources say it is also affected by broader sector issues.
An industry-wide problem, a source at one of China’s largest wind turbine manufacturers, is that product validation tests are not enough.
related topics..
Also read..
Subscribe to the newsletter to receive the most important energy news.
2023-07-08 15:59:49
#Siemens #announce #defects #turbines #shock #wind #energy #sector #report #energy
