The other day I noted some comments from the CEO of Vestas, a Danish company that is a world leader in the wind-energy sector. He (rightly) had warned that expectations of how cheap renewable energy might become had been overdone. He also warned that supply-chain issues and soaring raw-material costs were likely to push the company into the red in 2022, despite its having increased its prices by some 30 percent over the past year.
Well, the good news keeps coming.
The New York Times (November 22):
Europe’s wind turbine makers, the crown jewels of the region’s green energy industry and a source of manufacturing expertise, are reporting losses and laying off workers. Their problems stem partly from lingering supply chain issues and competition from Chinese manufacturers, and the issues could ultimately hinder Europe’s, and even the world’s, ambitions to quickly develop emission-free energy sources.
Laying off workers?
Chinese competition?
I don’t think that this quite fits in with the narrative of a prosperous green economy being pushed on both sides of the Atlantic.
And the problems are not confined to Vestas.
The New York Times:
This month, Siemens Gamesa Renewable Energy, a Madrid-based company that is the premier maker of offshore wind turbines, reported an annual loss of 940 million euros ($965 million). The company has announced a cost-cutting program that is likely to lead to 2,900 job losses, or nearly 11 percent of its work force.
Just those Europeans messing up again?
Well, no.
NYT:
General Electric, a large maker of wind turbines in the United States and Europe, has also struggled in its clean energy businesses. The company said last month that its renewable energy unit was likely to record $2 billion in losses this year…
[A]larms are beginning to sound about growing competition from China, where domestic turbine makers that have spent years catering to the Chinese market are beginning to sell their machines overseas. Some Western manufacturers of turbines fear a repeat of the bitter experience with solar panels, a technology first developed in the West but now largely dominated by China and other Asian manufacturers. . . .
While Chinese makers have made only modest inroads outside their home country, analysts say they have used the large volumes of sales in China to hone their manufacturing skills and train large work forces that can deliver turbines at prices well below those asked by their Western rivals.
“Europe is now facing the very real possibility that the E.U. energy transition will be created by China,” Siemens Gamesa warned in a recent paper asking for support from European governments.
Chinese companies already produce as much as 70 percent of the components that make up turbines used in the West, according to Mr. Lico. “China is the epicenter of the global wind supply chain,” he said, referring to makers of components.
Leaving aside the problem that wind-based energy (because of intermittency — the wind doesn’t always blow — and the lack, so far, of effective, sufficiently scalable storage technologies) is not ready for prime time, it looks as if Europeans may well, if they want to accelerate their decarbonization (and they are saying that they do), have to throw further massive subsidies in the direction of a technology that doesn’t really deliver the goods. Central planning is what it is.
These subsidies may be direct, or, if Europe erects high tariff walls, indirect, or, quite possibly, both. And if those tariff walls don’t go up, the likelihood is that Chinese manufacturers will obliterate Europe’s domestic wind-power sector, leaving the Europeans doubly dependent on China (for solar and wind; we can talk about electric vehicles later). Should that occur, Europe would have swapped reliance on Putin’s gas for reliance on Xi’s “green” hardware, not something that they should be looking to do.
So I’d bet on those subsidies, and greenflation will be what it will be.
As mentioned above, wind doesn’t always blow as much as it is meant to. But what if such shortfalls are set to be more frequent than in the past?
Eh?
Anjana Ahuja, writing in the Financial Times:
We tend to think of an extreme weather event as a moment of high drama. It is the waist-deep flood, the perishing heatwave or the famine-inducing drought.
One climatic extreme, called a wind drought, has largely escaped attention, perhaps because it is the very absence of drama. A wind drought — a prolonged period of slow wind — happened in Europe in summer 2021, with some countries recording their lowest wind speeds for decades.
The slowdown may have been due partly to natural variability but also tallied with predictions that climate change will cause wind speeds to drop over the long term, a phenomenon known as “global stilling”. As wind power spins its way into the European energy mix, operators will need to plan how to keep the lights on in a warming world girdled by lazy winds…
And Ahuja is not an outlier to believe this.
From September, Frank Jacobs in The Big Think :
Unfortunately for Europe, it doesn’t seem that last year’s “wind drought” was a one-off. In its latest report, the IPCC predicts a drop of 6% to 8% in average wind speeds across Europe by 2050. As wind speeds become increasingly inconstant, the cost of wind energy will become more unpredictable and its provision more unreliable…
I’m not sure that the central planners have thought this all through.
But do they ever?
I, for one, being a trusting fool, believe that we will not make the same mistakes over here.