After a bruising 2021, Wind Energy suppliers hope for a better 2022

2021 was a difficult year for the Wind energy industry.  Manufacturers were hit by rising costs, supply chain issues, and even low wind speeds. Heavyweights like General Electric (GE), Siemens, and Orsted, saw their profits dwindling in 2021.

Impact on Businesses

The impact on business in the wind energy  was best exemplified by Siemens Gamesa, whose  renewable energy business saw its market halve over the last year.

As per Siemens Energy, the company’s revenue dropped to $2.06 billion between October and December 2021, a year-on-year decrease of 20.3 percent. Overall, the operating losses totaled almost $353 million. The company believes its revenue could shrink by between 9 and 2 percent year-on-year.

Even as its stock took a pounding on the bad news, Siemens blamed volatile market conditions and ongoing supply chain issues – such as delays and higher raw material costs.

Last year, both Vestas and Orsted warned of difficult times for the renewable sector. Low wind speeds, ongoing challenges in the supply chain, and increasing manufacturing costs associated with wind energy operations were flagged by the Danish firms. Consequently, Orsted saw a drop in profits in 2021.

The industry performance in Germany, Europe’s biggest economy faltered too. Germany’s share of wind energy in its renewable mix went from 50.7 percent to 42.6 percent in 2021. The offshore and onshore wind energy dropped by a staggering 28 percent.

In the United States, General Electric’s (GE) renewable energy segment faces the same challenges of raw materials and transportation costs.

Rising prices of Raw materials

Although Europe experienced unusually low wind speeds in decades last year, other factors like rising manufacturing costs due to rising prices of raw materials also supplemented the slowdown of wind energy sector in 2021.

Steel forms a significant constituent material for wind turbines at wind farms. Steel prices soared by 86 percent in the United States and 53 percent in European markets in 2021. Further, operational delays also affected the prices.

Prospects of Wind Energy in 2022

2022 comes with the promise of better times. Many experts envisage a successful year for wind and solar power due to low prices. There are a few bottlenecks, like supply chain costs, tax policies, and delays, which need attention.

U.S. solar and wind deployments are on track to hit new records in 2022, as per a new report from S&P Global Market Intelligence. The firm expects a huge 44 gigawatts of utility-scale solar, and 27 gigawatts of wind to come online next year. For wind, 2022′s projections surpass the current annual record of 16 gigawatts, set in 2020.

Interestingly, the U.S. Energy Information Administration (EIA) has announced plans for 21.5 GW of solar and 7.6 GW of wind in the U.S. in 2022. The EIA experienced the most successful wind, solar, and battery storage development year in history.

A number of factors are fueling the upswing in the wind and solar power generation. This includes the expansion of state-level renewable requirements and the expected extension of tax credits for the industry. S&P hinted towards a jump in demand from corporations.

A wave of new targets at the COP26 climate summit , including US President Joe Biden’s  call for a carbon-free power sector by 2035 is expected to aid demand, and a recovery.

“If the current administration is successful in putting the U.S. on a path to 100% decarbonization of the energy sector by 2035, these record-setting projections are just the beginning,” S&P said of its 2022 estimates.

Yet the green energy firms have to take supply-side challenges into consideration at the time of scaling up their operations in the year ahead.

Of course, all these even as the world’s biggest wind market now, China continues to be ruled by homegrown firms that offer a real challenge in other markets too. In other important yet not so large markets like India, while offshore still remains an idea for now, domestic firms are holding their own, barely, even as contracts are farmed out to multiple players. The bright spot might be shift to hybrid projects this year, which will create more demand for wind suppliers by 2023 and beyond.