Europe is facing an energy crisis to which it is responding in different ways. It is focusing heavily on increasing imports of liquefied natural gas, even though it faces the problem of insufficient capacity at port unloading terminals.
We are also seeing a greater focus on nuclear energy, for example, with Poland planning to build its first nuclear power plant. However, we also need to look at renewables, which are a big issue in the drive toward zero-emission energy production.
Wind energy is not doing well
While solar energy is breaking records, wind energy is not doing well in Europe. The big problem is mainly in the supply chain, which has been hit hard by the constraints of the covid-19 pandemic in recent years.
Not many people realize that the whole apparatus of renewable energy production, especially wind, is very material-intensive and so is very much affected by supply chain failures.
Siemens Energy CEO Christian Bruch spoke about how materials-intensive the industry is in an interview with CNBC’s Squawk Box Europe.
“Never forget, renewables like wind roughly, roughly, need 10 times the material [compared to] … what conventional technologies need. So if you have problems on the supply chain, it hits … wind extremely hard, and this is what we see.”
The disruption in the manufacturing process greatly affects wind turbine manufacturers, who are often bound by contracts based on pre-pandemic prices that were still well below current prices. Conversely, the cost of materials, parts and labor has risen significantly. As a result, manufacturers often do not even break even production costs, which is not good for their business.
Wind turbine manufacturers are losing money
Across Europe, manufacturers report large losses and lay off workers. Denmark’s Vestas Wind Systems, the world’s largest wind turbine manufacturer, reported a third-quarter loss of $151 million.
Another loss of up to $2 billion is reported by the large manufacturer General Electric. Spain’s Siemens Gamesa Renewable Energy, which makes offshore wind turbines, has not escaped a similar scenario, with an annual loss of over $960 million.
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Moreover, companies have had to invest heavily to keep up with the competition and the latest European decarbonization requirements. However, these investments are not good for a business’s financial health at a time when costs are routinely higher than revenues.
Competition is mainly from China
China is the biggest competitor to European manufacturers as it is significantly expanding its wind power generation and production capacity. In 2021, China has built more offshore wind capacity than all other countries combined have built in the last 5 years.
The fact that China is not finished in this sector convinces us of the truly huge offshore wind project we reported on in an earlier article.
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