Share this @internewscast.com

Renewable energy firms are mostly suffering a dire earnings season as struggling supply chains, manufacturing faults and rising production costs eat into profits.

With the world trying to transition at pace toward cleaner energy, equipment manufacturers are struggling to keep up with soaring global demand, leading to rising production costs and questions over the economic sustainability of large-scale projects from the industry’s major players.

Manufacturing faults, most notably at Siemens Energy’s wind turbine subsidiary Siemens Gamesa, have emerged as companies race to build turbines at a greater pace and scale.

The problems at Gamesa led Siemens Energy to scrap its profit forecast earlier this year, and last month the company sought guarantees of up to 15 billion euros ($16 billion) from the German government.

Specialist wind energy firms are also often finding themselves outbid for seabed licenses by traditional oil and gas players. Should they win a contract, electricity prices are often too low to justify the manufacturing costs, leaving companies looking to their governments in Europe and the U.S. to deliver greater subsidies and restore balance to the market.

As a result, most wind energy stocks are down sharply since the turn of the year.

In a report published last week, Allianz Research noted that the eight largest renewable energy firms in the world reported a combined total $3 billion decrease in assets in the first half of the year, with wind projects in particular facing turbulent conditions. The firm’s economists said the past earnings season was a “learning moment” for the industry.

“The whole sector is grappling with rising construction and financing costs, quality-control problems and supply-chain issues. Inflation and global energy-price fluctuations have also led to increased costs for wind-power projects, casting doubt over the feasibility of many ventures,” Allianz Research economists said.

“Some projects in the U.S. but also in the U.K. are at risk of being abandoned if governments do not offer support. As these projects were initiated before the energy crisis, with guaranteed feed-in-tariffs that were low, they are now becoming more and more unprofitable.”

Although balance sheets remain solid, renewables companies have been writing down assets and cutting their earnings outlooks. Danish company Ørsted announced last week that it was scrapping the development of two offshore projects in the U.S., with related impairments totaling $5.6 billion.

However, compatriot Vestas offered a ray of hope. The company posted a third-quarter EBIT (earnings before interest and tax) before special items of 70 million euros ($74.73 million), well above the 31 million euros projected in a company-compiled consensus. However, it also warned that external factors clouded its near-term outlook, pulling back its full-year investment and margin guidance.

Its CEO Henrik Andersen told CNBC Wednesday that the sector was at an inflection point and that the market would eventually identify its “winners and losers” over time.

“We are very disciplined, we work with our customers and partners can rely on us, and governments can rely on us. That, I hope, creates the strong foundation for being one of the winners in the industry,” Andersen said.

“It’s not broken, but you can’t close your eyes and hope that any project you embark into discussions will always come through if the macroeconomic factors change.”

Jacob Pedersen, senior analyst at Sydbank, agreed that Vestas in particular was well-positioned to move forward, but that both companies and policymakers needed to rethink their strategies if the transition to net zero was to be realistic.

“We know a huge part of the problem is related to the projects that were won back in 2019/20 and at low prices. Since then, inflation and interests have gone up, it’s become much more expensive to realize these projects, and that has left an order book of deficits, and that order book is now being smaller and smaller as time goes by,” Pedersen told CNBC’s “Street Signs Europe” on Wednesday.

Pedersen added that there is a “huge need for recalibration of the political vie” on the cost of the planned energy transition, given that wind turbines have increased in price by on average 20-30% since 2020.

“The transition to wind turbines, to a greener energy portfolio around the world is getting more expensive, and as such, I think also we have seen some indications — we know that the U.S. is a huge problem for the offshore industry at the moment because of the rise in interest rates,” Pedersen explained.

“But we have seen the newest projects being awarded on much, much better terms and terms that should be good for companies to generate a profit moving forward.”

The European Commission announced a new Wind Power Action Plan last month, aimed at significantly increasing wind installed capacity. Pedersen said this was evidence that the necessary recalibration is underway, but that it would not be achieved overnight.

“This is a process that takes time and in order for project developers to invest in new projects, in order for wind turbine producers to invest in the needed capacity to get us to where the politicians have their goals, much more is needed, and these companies simply haven’t got the cash to invest as much as is needed at the moment,” he said.

Share this @internewscast.com
You May Also Like
As the Death Toll Rises in Texas, Democrats Choose to Be Black-Souled, Evil Ghouls

Watch: Flash Flood Alert in New Mexico as Videos Reveal Intense Flooding

In a post on X, ABC News Chief Meteorologist Ginger Zee wrote: …
Eric Adams seeks to register 1M new voters to defeat socialist Zohran Mamdani in NYC mayoral election

Eric Adams Aims to Register 1 Million New Voters to Challenge Socialist Zohran Mamdani in NYC Mayoral Race

It’s a million-to-one shot. Mayor Eric Adams wants to register 1 million…
A new twist on the flower scene: wood flowers!

Introducing a Fresh Take on Floral Decor: Wooden Flowers!

Berlin, New Jersey — It all started with a Facebook video and…
Tragic pics of youngest victims in Texas floods from twin sisters, 8, to family member, 9, of Kansas City Chiefs owner

Heartbreaking Photos Reveal Youngest Victims of Texas Floods: Twin Sisters, 8, and 9-Year-Old Relative of Kansas City Chiefs Owner

The flash floods that swept through Central Texas last week resulted in…
Plea deal of Ovidio Guzmán López, son of 'El Chapo', with feds to be revealed in Chicago over cartel, drug trafficking operations

Details of Ovidio Guzmán López’s Plea Agreement with U.S. Authorities over Drug Cartel Activities to be Unveiled in Chicago

CHICAGO (WLS) — The world could soon learn more about a plea…
DOJ Releases Mugshots of TX Extremists in Anti-ICE Shooting, and They Look Just How You'd Expect

DOJ Unveils Mugshots of Texas Extremists Involved in Anti-ICE Shooting, and They Appear Exactly As Predicted

On Tuesday, the US Attorney’s Office for the Northern District of Texas…
Netanyahu says he nominated Trump for a Nobel Peace Prize. From there, it's a secretive process

Netanyahu Reveals He Nominated Trump for a Nobel Peace Prize; Here’s What Happens Next

U.S. President Donald Trump has been nominated again for the Nobel Peace…
Patriotic ICE officer replaces American flag after protesters burned existing banner at Portland facility

ICE Officer Restores American Flag at Portland Facility Following Protesters’ Actions

The Department of Homeland Security (DHS) revealed on Tuesday that a new…
A blurred image of a person standing near the back of a car.

Tragic Incident: German Shepherd Dies After Being Dragged by Car, Owners Face Vigilante Justice

THIS is the harrowing moment a German Shepherd is dragged to its…
Red Bull fires longtime F1 team principal Christian Horner after 20-year stint

Red Bull Terminates Christian Horner’s Role as F1 Team Principal After Two Decades

Christian Horner, who has served as the Red Bull team principal for…
Large fire burning at night.

Trump Criticizes Putin’s ‘Empty Promises’ to End Ukraine War in Blunt Remarks

A RAGING Donald Trump has slammed Vladimir Putin for talking “bull****” about…
ICE agents targeted in 2 ambush attacks in recent days

ICE Agents Face Two Recent Ambush Attacks

U.S. Immigration and Customs Enforcement (ICE) agents and other federal law enforcement…