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Wind turbine makers struggle to profit from wind energy boom as costs rise

GWPF Energy

The Wall Street Journal is reporting that wind turbine makers are facing a quadrupling of transportation costs and increases in steel, copper, aluminum and carbon fiber prices, making wind turbines ever more expensive.

In sharp contrast to claims by the renewables lobby, the costs of wind energy is not falling, empirical data shows.

Politicians, lobbyists and academics are in thrall to the idea that renewable generation must benefit from the huge economies of miniaturisation and scale that have characterised consumer and high tech electronics. Hence they believe that capital and operating costs will, indeed must, fall rapidly as the industry grows. The more intelligent (a small number) understand that such cost reductions don’t apply to the portion of costs that go to civil engineering works, etc which tend to account of more than 50% of total costs.

What the WSJ report emphasises is that wind turbines are little more than huge great assemblies of steel and other materials. Larger scale is the reverse of miniaturisation – the steel, etc has to be bigger and stronger to cope with the stresses. Neither has there been – or can there be – any major reduction in the scale of the generators required to produce the output; that technology is more than a century old.

The belief that the costs of wind generation will inevitably fall over time is about as reasonable as believing that hydro generation costs will fall. Anyone with any knowledge of electricity economics knows that hydro costs are a function of the geology and topography of the site, i.e. they are largely determined by site-dependent factors. In the longer term the same must be true for wind generation. While there may be temporary – and relatively minor – reductions from adopting more efficient technologies the fundamental physical and engineering factors cannot be repealed.

The world’s appetite for green energy is greater than ever, but that isn’t translating into big profits for some of the companies behind the boom.

Top wind-turbine makers are struggling with lower earnings as rising raw- material costs, problems shipping the hulking machines, and uncertainty over the future of U.S. subsidies pressure their businesses.

Siemens Gamesa Renewable Energy SA and Vestas Wind Systems A/S, two of the largest global manufacturers, reduced profit forecasts for the remainder of the year. General Electric Co. GE 0.21% , another leading turbine manufacturer, reported year-over-year growth in turbine sales but hasn’t turned a profit in that segment this year.

Globally, wind production has been growing as the renewable energy source becomes more economically competitive with fossil fuel sources of electricity such as coal and natural gas and as countries begin taking steps to address the causes of climate change.

Demand for turbines this decade is expected to be roughly double demand in the previous 10 years, according to estimates from the consulting and data firm Wood Mackenzie. But companies face an array of challenges in manufacturing and moving the increasingly large turbines, whose blades alone span more than 100 feet apiece.

A quadrupling of transportation costs and increases in steel, copper, aluminum and carbon fiber prices will likely drive wind-turbine prices up by 10% over the next 12 to 18 months, according to Wood Mackenzie.

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