By John Hugh DeMastri
Daily Caller News Foundation
The high-profile announcement by Siemens Energy that a large portion of its wind turbines could be suffering from faulty components sent its stock tumbling last week, but many industry experts are concerned that the problems it is facing may not be unique, CNBC reported Monday.
The company announced on June 22 that between 15% and 30% of turbines installed by subsidiary Siemens Gamesa are currently suffering from component failure, prompting the company to withdraw profit estimates and sending stock plunging 36% in the immediate aftermath of the announcement. Christian Burch, CEO of Siemens Energy, said in a call with reporters Friday that “too much had been swept under the carpet” at the energy giant’s subsidiary and that the quality control issues were “more severe than [he] thought possible,” according to CNBC.
“We have to acknowledge that putting brand new machinery — whether it’s on-shore or even more difficult off-shore wind farms — and the pace of change in that machinery has put us into slightly uncharted territory,” Nicholas Green, head of EU capital goods and industrial technology at AllianceBernstein, told CNBC. “Although it’s hard to tell at the moment, my best guess is that this probably actually is an industry-wide issue. It wasn’t that Siemens Gamesa is a bad operator as such, it’s that actually some of the normal protocols and time in use, operational data in use, is relatively limited.”
The sheer size of modern turbines — cutting-edge prototypes can generate 15 megawatts (MW) of power, compared to the 1 MW that was industry standard 20 years ago — can exacerbate quality issues, Christoph Zipf, spokesman for European industry group WindEurope, told CNBC. Despite this, Zipf said that turbine failures are “extremely rare” and that “the problems at Siemens Gamesa are limited to Siemens Gamesa,” CNBC reported.
However, he noted that “the competition in the sector is pushing [original equipment manufacturers] to come up with bigger and better turbines at a fast rate, maybe faster than in other sectors,” according to CNBC. While turbines are often certified for a 20-year lifespan, most turbines contain components that will fail during that time as a cost-saving measure, industry analytics firm ONYX Insights told CNBC.
“We have been aware for some time that turbine failure rates across the industry can — and should — be more widely understood, given the scale of their potential impact on the overall profitability of projects,” Evgenia Golysheva, vice president of strategy and marketing at ONYX, told CNBC. “It’s not that they are made badly, but we now have a compromise between the cost of energy and targeted reliability. Everyone who builds, finances and operates wind turbines needs to have a realistic picture of how many failures to expect.”
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ONYX expects that the industry will spend $4 billion on major repair projects by 2029, and notes that roughly 65% of maintenance costs in the industry are unplanned, CNBC reported.
“It’s a conversation that is overdue, because the underlying issues aren’t going away,” Golysheva told CNBC.
This story originally was published by the Daily Caller News Foundation.
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