Wind energy is a major factor across societies: not only in the fight against climate change, but it is becoming an ever more important contributor to economic and employment growth. In addition, with Russia’s war against Ukraine and the ensuing shortages and price increases of fossil fuels, renewable energy plays a central part in securing Europe’s energy independence.
We will, of course, continue to need natural gas, especially in Europe – for the security of supply amidst rising demand, and to maintain grid stability. But wind energy is the renewable future. The problem is: Europe’s wind industry faces various challenges that are keeping its players from living up to their full potential.
Permitting a problem
In their current complicated and lengthy state, permitting processes will make it nearly impossible to build enough wind farms and achieve the ambitious targets set by the European Union: from today’s 220 installed gigawatts on land and at sea – to 425GW until the year 2030.
Among other issues, these long processes create obstacles for factory production. Manufacturers simply don’t have enough visibility to determine their production needs. Plans are constantly shifting, which has a negative impact on the entire value chain. Bottlenecks in the supply chain and increased prices for most raw materials, including steel, are further complicating matters. We’ve been seeing delays and even the cancellation of projects, negatively affecting the financial results of manufacturers. Additional price pressure comes from a subsidised Chinese wind industry which undermines fair, international competition.
At the same time, it is true that wind turbine manufacturers have followed an unhealthy competitive logic for many years, with low prices and shortened product development cycles contributing to losses in the industry. In our case, at Siemens Gamesa, we are tackling homemade quality problems in parts of our onshore fleet, as well as ramp-up difficulties with our production of offshore wind turbines.
Collaboration crucial
A lot can be done to overcome these challenges. First and foremost, manufacturers need to solve their own problems. That is what we are doing at Siemens Gamesa. We are currently implementing measures to turn our business around.
But that is, of course, not enough to ensure a strong European wind industry capable of bolstering energy independence. We need the support of policymakers in Europe. The good news is that due to, at least in part, our intensive collaboration, significant developments have occurred this past year when it comes to initiatives around wind energy.
Take the European Wind Power Package, which was announced in October 2023 and which covers 15 different measures to facilitate the rapid expansion of wind energy. The European Commission wants to increase the visibility of auction schedules; speed up permitting; put greater emphasis on non-price criteria in auctions; help with inflation-related cost increases; and much more. In other words, the package goes in the right direction. But what is equally – if not more – important: The EU’s national governments need to swiftly implement these measures.
In this difficult market environment, we at Siemens Gamesa are intensifying partnerships with all our stakeholders. Take our suppliers, which will be crucial for us to succeed. We are moving them closer. In fact, we are making strategic suppliers part of our team by carrying out joint product development. Our goal is to create an integrated supply chain that is in constant exchange, one that proves resilient in the face of economic and political uncertainty, and a dynamic ecosystem that is consistently optimising our products’ quality.
There are strong reasons to support the expansion of renewables, and energy security is one of the most powerful ones, especially in Europe. Before the next crisis hits and our electricity bills return to alarming peaks, before we regret not having moved faster, we all need to pull in the same direction: our customers and suppliers, policymakers, investors, and society at large. That is how we can overcome our industry’s biggest challenges.
The good news is that we are on the right path. But we must pick up the pace.
- Jochen Eickholt is the CEO of Siemens Gamesa
