Onshore


Transportation of onshore wind turbine rotor blades in Rheinland, Germany.


Elsewhere, the picture is much the same. Nordex reported a €103.7m loss in the first nine months of 2021, following a €107.5m loss in the same period the year prior. GE Renewable Energy lost $312m in the final quarter of 2021, compared with $86m in Q4 2020, while Vestas has said that supply chain challenges slashed €87m from its Q3 2021 earnings.


“Renewable energy remains a key solution to the challenge of decarbonising economies, and installations of wind turbines are expected to grow strongly to meet demand.”


Alessandro Mancino


50– 60%


The required new wind capacity that Europe needs to build each year to meet EU targets for 2030. EU Commission


26


The rise in steel and copper prices since the start of 2020. International Energy Agency


30GW


With billions already wiped from their market value, manufacturers are grappling with a perfect storm of challenges. Steel and copper prices are up 50–60% since the start of 2020, while component shortages have worsened. On top of that, lockdowns and border closures in various parts of the world have created bottlenecks in an already labyrinthine supply chain. “On the one side, commodity prices – the input costs for turbine components – have been increasing ever since our economy started bouncing back from Covid-19,” says Oliver Metcalfe, head of wind research at Bloomberg NEF (BNEF). “But it’s not just materials. Logistics costs have also increased drastically over the past 18 months. Between June 2020 and the end of 2021, the cost of a 40ft shipping container from Shanghai to Los Angeles increased by a factor of five.”


Another factor is the war in Ukraine, which has pushed up oil and gas prices to record levels. While that might sound like a good thing for the wind industry – after all, oil price volatility would typically boost demand for renewables – turbine makers have been feeling the pinch.


“If oil prices are high, that has an impact on all the commodities, whether that be steel, copper, aluminum fibres or resins,” says Shashi Barla, an analyst at Wood Mackenzie. “All the raw materials are already plagued with high inflation, and that has only been exacerbated by the Ukraine crisis.”


Paying the price


So, who should absorb these losses – turbine makers or their customers? On one hand, there is little that can be done from the OEM’s side in terms of the existing contracts they have in place.


“Siemens Gamesa, as an example, has €2bn worth of contracts in their backlog at zero margin because they can’t go back and renegotiate with their customers. That’s the magnitude of impact that the turbine OEMs are facing,” says Barla.


On the other hand, the newer contracts are starting to include a lot more indexation, meaning the final price offer is linked to commodity and logistics costs. The upshot is that turbine prices have been soaring, reversing a trend towards ever-lower costs of construction. Vestas has said its average selling price for turbines rose from €740,000/MW in 2020 to €830,000/MW in 2021.


“According to our data, onshore wind turbine prices have risen by 12%,” says Metcalfe. “While turbine makers have been passing these costs onto their customers, it can take six to eighteen months lead time between when a turbine contract is signed and when the turbines are delivered. So, we’ve seen turbine makers agree cheaper deals for turbines in the past, which they’re now having to deliver without having hedged fully for commodity prices.” Given the complexities at play, contractual negotiations may end up taking longer than normal, and many turbine makers are recording a lower order intake. Meanwhile, they are experiencing significant delays to the delivery of critical parts and materials, which can set back whole projects.


Reasons for optimism


So, is it all bad news for the wind industry? Well, the short-term hit is undeniable. On the other hand, the long-term outlook for turbine makers – and for onshore wind in general – remains promising. “We’re beginning to see many countries start to step up and make large net zero commitments,” says Metcalfe. “According to BNEF’s calculations, 89% of global emissions are now covered under some kind of net-zero commitment, and many countries are highlighting that wind is a key


World Wind Technology / www.worldwind-technology.com


Rumagia Bangun Setiawan/ Shutterstock.com


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