Ongoing problems with Siemens wind turbines are frightening the entire wind industry as worries over quality and the cost of potential repairs of defective products sink in. Christoph Steitz and Nina Chestney of Reuters report:
FRANKFURT/LONDON, July 7 (Reuters) – Siemens Energy’s (ENR1n.DE) disclosure of quality issues in its newer wind turbine models has exposed broader challenges in a sector suffering from rushed development, soaring materials costs and a flawed market design.
Siemens Energy shocked the wind sector in late June when it warned of faulty components and possible design faults in its onshore wind turbines.
It said it could not yet quantify the cost, but anticipated the issues would take at least 1 billion euros ($1.1 billion) to fix. Company sources, speaking on condition of anonymity, have said the final bill could be even higher.
The losses also highlight structural issues in a sector that has been in need of reform for years, according to sector advisers, industry executives and analysts.
Last year, the four biggest Western wind turbine makers – Vestas (VWS.CO), GE (GE.N), Siemens Energy’s Siemens Gamesa and Nordex (NDXG.DE) made combined sales of more than 41 billion euros. Combined losses exceeded 5 billion euros.
Wind farm owners at the same time earned a 15% operating margin, data from consultancy Wood Mackenzie showed, evidence of an uneven profit distribution in the sector.
Given the nature of contracts agreed before the recent inflation surge, the sector has struggled to pass on the increased cost of materials.
Energy majors that had been moving into renewable energy have to an extent retreated, under pressure from shareholders focused on the more reliable profits generated by oil and gas.
In the wind sector, Siemens Energy stands out because its turbine division resulted from a botched merger of two original equipment manufacturers (OEM) that gave rise to a culture of cutting corners and insufficient quality checks, people familiar with matter said.
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