The world is seeing wind energy projects to meet climate goals. However, the largest manufacturer of turbines is finding that supply chain problems and pandemic lockdowns are preventing wind farm construction and affecting financial results.
“It is troubling and challenging out there,” Henrik Andersen, chief executive of the Danish company Vestas Wind Systems, said on a call with analysts on Wednesday.
After 20 Covid-19 cases were found, Mr. Andersen stated that the company had to navigate the disruption caused recently by the compulsory mass-testing of 14 million Tianjin residents.
“This is actually what causes some stop and go, and simply just disturbance,” he said. The company warned that profit margins could drop to zero in 2022.
Vestas is an example of the problems facing all wind industries. The rising costs of components are a result of the high prices of steel and other materials. Meanwhile, factory operations are being hampered by slow delivery times and Covid precautions. This is causing delays in the completion of wind farm construction.
Because of the volatile electricity prices in Europe, Utilities and other developers of wind farms are reluctant to order new machines. It is also difficult to do long-term financial calculations that are necessary to secure electricity supply contracts.
Andersen stated that developers could find themselves in a position where they are unable to bring their wind farms online on schedule and so were forced to purchase power in Europe at prices that could be 10 times higher than they were 18 months ago.
These problems seem to be widespread in the industry. Siemens Gamesa Renewable Energy, Europe’s other giant turbine maker, also recently warned that profits would be lower than expected for similar reasons.
Analysts believe that wind energy is a viable source of clean electricity for the long term. However, there are risks associated with some component manufacturers becoming unreliable and causing delays to projects. Long-term, higher electric power prices and oil and natural gas prices could spur the shift to renewables.
“The mid- to long-term outlook for wind energy is unchanged,” Deepa Venkateswaran, an analyst at Bernstein, said in a note to clients after the Vestas announcement.
Vestas’ preliminary results on Wednesday, ahead of the detailed report scheduled to be published on February 10, do not seem to be so bad.
Vestas’s revenue from making and servicing the giant wind machines rose 5 percent in 2021 to 15.6 billion euros, or about $17.6 billion. Operating profit, though, fell 38 percent, to €461 million.
Vestas, a company with around 30,000 employees, delivered turbines all over the globe in a year that had a generating capacity equal to five modern nuclear power plants.
Source: NY Times