Turbine makers are still struggling to translate soaring demand into profit
Wind power heavyweights Vestas Wind Systems A/S, General Electric Co. and Siemens Gamesa Renewable Energy SA are reeling from high raw material and logistics costs, changes in key clean-power subsidies, years of pressure on turbine prices and an expensive arms race to build ever-bigger machines.
Western turbine manufacturers are now retrenching to shore up their bottom lines. The companies say they’ll compete for fewer projects in fewer markets, raise prices, streamline their product lineups and cut manufacturing costs. That comes just as surging fossil fuel prices should be making renewables more competitive.
It doesn’t help that the wind market is constrained by limited permitting for new projects. The process usually involves federal planning and local approvals, and both can get gummed up by people who don’t want the giant structures dotting their view of a horizon.Those dynamics have pressured margins just as turbine makers have invested heavily to roll out bigger turbines that can capture more wind.
Vestas briefly held bragging rights for the world’s biggest turbine when it announced a 15-megawatt structure, but in an example of China’s increasing muscle, it was quickly overtaken when Ming Yang introduced a 16-megawatt machine in August.Photo by REUTERS/Vincent West/File Photo The same factors that pressured Siemens Gamesa’s results could weigh on profitability at GE Renewable Energy, the largest supplier of wind turbines in the U.S., for the next several quarters, says Citigroup analyst Andy Kaplowitz. He expects the division to post a first quarter negative operating margin of 16 per cent, more than double what it sustained in both the prior-year period and last year’s fourth quarter.
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