From GE to Siemens, wind energy hopes its crisis is about to end

It’s been a tough couple of years for the U.S. wind energy industry. Despite mounting pressure to combat climate change by transitioning to renewable sources, a confluence of factors disrupted supply chains and upended the economics of project financing. Rising inflation and interest rates, the war in Ukraine, and reduced tax incentives have plagued wind turbine manufacturers and developers of both land-based and offshore wind projects.

Nonetheless, today there’s an air of optimism within the industry, driven in large part by billions of dollars in new tax credits and subsidies toward clean energy investments included in the Biden administration’s Inflation Reduction Act. Although 2023 is expected to remain sluggish, GE Renewable Energy, Siemens Energy and Vestas Wind Systems, the leading makers of wind turbines — outside of China, which has built the world’s largest wind energy infrastructure — and their suppliers are banking on growth over the next decade, particularly in the nascent offshore wind niche.

“The wind energy market is stuck in this very strange paradox right now,” said Aaron Barr, an industry analyst at Wood Mackenzie. “We have the best long-term climate policy certainty ever, across all the largest markets, but we’re struggling through a period where the whole industry, particularly the supply chain, has been hit by issues that have culminated in destroying profit margins and running many of the top OEMs [original equipment manufacturers] and their component vendors into negative profitability territory.”

Barr pointed to turbines that were sold to project developers back in the 2020-21 timeframe, when OEMs’ capital expenditures and pricing had been steadily declining. Then, over the last two years, as it came time to deliver the turbines, “the costs of raw materials, specialized logistics and labor skyrocketed through the roof, which has left those OEMs holding the bag on profitability,” Barr said.

And it’s a hefty bag. Last November, Siemens Gamesa (since absorbed into Siemens Energy) reported a net loss of more than $943.48 million for its fiscal year that ended September 30. In a November interview with CNBC’s “Squawk Box Europe,” CEO Christian Bruch said there were “challenges in wind,” especially when it came to supply chains.

In January, three months after GE announced it was laying off 20% of its U.S. onshore wind workforce, GE Renewable Energy posted a loss of $2.24 billion for 2022, compared to a decline of $795 million the previous year. Even so, CEO Larry Culp expressed a sanguine tone when speaking with analysts. “While the demand…