Wind Power: Siemens Case Foretells Disaster

The third week of trading on the stock markets in June ended with a spectacular 37% drop in the shares of Siemens Gamesa. The company, a merger since 2016 of the former wind power division of Siemens Energy and the Spanish wind power system producer Gamesa, had been incurring losses for some time by then, which led Siemens Energy to retake control of it earlier in June, but that did not convince shareowners. On top of that, the news that Spain’s Iberdrola has supended the purchase of eleven 5.X turbines from Siemens Gamesa because of technical problems triggered an avalanche of speculations as to whether the entire 5.X turbine program of Siemens Gamesa would have to be repaired. Other turbine types have also shown technical deficiencies.

While Siemens Energy spoke of spending maybe 1 billion euros for the repairs, estimates by Bloomberg, Reuters and UBS were considerably higher, UBS even mooting a sum of 5 billion. And that may not be the final figure…

Since the German part of Siemens Gamesa is the global market leader in offshore wind turbines, and the Spanish part is a leading company in onshore wind turbines, this crisis is not to be taken lightly. Reuters hinted that up to 30% of the 29,000 turbines built into wind power facilities, with a total capacity of 132 gigawatts globally, might be up for repair or replacement. For offshore turbines, in particular, that is a challenging task, as they might have to be shipped onshore for repair aboard a massive ship.

The origin of the turbine problems has not been made public. But Christoph Zipf, spokesman for the WindEurope industry association, pointed to the push to make bigger and bigger turbines, at less and less cost, to be competitive with fossil fuels. Twenty years ago, he told CNBC, a typical wind turbine was 1 megawatt, while 15 MW turbines are being tested today, which poses significant challenges for the components.

In order to circumvent costly testing programs, new turbines such as the 5.X might have been only tested by computer, which underestimated the reality of the super turbines. Other wind power tech manufacturers, such Nordex and Vestas, have not reported problems like those of Siemens, but the latter’s woes are no good omen globally. The fear that the entire super turbine era may prove to be a costly technological dead-end, has entered the market.

Particularly in Germany, where the government boasts that “sustainable technologies” are the future, the Siemens Gamesa case is certain to be the prelude to a giant disaster, if wind power is not able to guarantee the few percentages of national electricity generation it’s now supposed to provide.