April 14, 2022
By Paul Homewood
h/t Joe Public
More evidence that low wind prices at auctions are unsustainable:
Material and logistics inflation coupled with downward price pressure from auctions has led to an unsustainable situation where wind OEMs are selling at a loss, where the sector cannot deliver triple the wind capacity. Europe’s plan by 2030, industry leaders have warned.
“The state of the supply chain is ultimately unhealthy,” GE Renewable Energy CEO Sheri Hickok told a panel at the WindEurope 2022 conference in Bilbao on Tuesday.
“That is not healthy because we have an inflationary market that exceeds what people predicted even last year. Steel is tripling.”
Mr. Hickok gave an example as steel for offshore wind towers is currently being purchased for more than $2,000/ton.
“It’s really ridiculous to think how can we sustain a supply chain in a growing industry with these kinds of pressures.”
After a terrible price hike last year due to the Covid-19 pandemic “everything is higher but steady,” said Hickok, but added that with Russia’s war in Ukraine, the whole system had “shut down.” again over the past eight weeks, making it unsustainable to an unprecedented degree of uncertainty.
The GE CEO said she feared for the entire ecosystem of the wind industry.
“Currently, different suppliers in the industry are reducing their footprints, they are reducing jobs in Europe,” she explains.
“If the government thinks that for a penny, this supply chain will be able to turn around and meet 2-3 times the demand, that is not reasonable.”
The European Commission’s recent REPowerEU plan, launched in response to Russia’s invasion of Ukraine, wants wind capacity to increase from 190GW today to 480GW by 2030.
Loop of Destruction
Nordex CEO José Luis Blanco emphasized that even before the Ukraine war, the economy in the wind industry was destroyed due to price pressures from competitive tenders coupled with low visibility of the wind industry. wind capacity pipelines due to failed government policies.
“We are investing in volume to trust market dynamics, then volume doesn’t come in, then an empty factory, [and then] preferably [to have] some cash flow rather than no cash flow – and [consequently] The field goes into a self-destructive loop. “
Blanco also said that if Europe wants to triple its wind power capacity, it needs to better support supply chain independence.
Currently, however, about 85% of the industry’s composition comes from China, he said.
“Energy independence is supported by a policy of dependence on the supply chain. This is a huge risk.”
Blanco not only mentioned rare earths, but also said “ordinary things” like metal shafts in turbines, 95% of which originate in China.
All domestic OEMs in trouble
Enercon’s new CEO, Jürgen Zeschky, went even further, saying that “all the OEMs in the country of Europe are struggling”.
Over the past eight years, he told WindEurope 2022, cost has been the sole driver of growth, with low stabilized energy costs and low turbine prices driving the entire business.
Zeschky admits: “We have reached a low-cost base, but with outsourcing to low-cost countries.
“If you look at Europe and Germany, we are continuously losing jobs in the industry due to relocation to other places.”
But the situation has changed fundamentally, he pointed out.
Due to Russia’s war in Ukraine, “we are facing a situation where not only in terms of costs, but also in terms of independent, resilient and reliable energy situation in Europe”.
In order to create sustainable energy, he explains, Europe needs a sustainable industry, and therefore must overcome constraints to the lowest cost.
“That needs to change.”
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