Apologies to the gentle hero of de Cervantes classic novel (which I’m supposing no one will soon be allowed to read, as it consists of a privileged white man, a servant, an oppressed beast of burden, and obsessive acts of violence against a renewable energy source).

This morning was rough on one of the biggest leaders in the wind turbine manufacturing sector.

Siemens Energy had more than a third of its market value wiped out on Friday after warning that the impact of quality problems at its Siemens Gamesa wind turbine business could cost more than 1 billion euros ($1.09 billion) and take years to fix.

WHOA When bad news comes in, it comes in…

I should feel terrible about it but I just can’t stop smiling, although I kinda had a feeling this was coming. If we hit the Wayback Machine for a second, in February I did a long post on manufacturing and warranty problems in the turbine industry, particularly as it related to both Siemen Gamesa’s (Spanish spin-off of the German Siemens parent) and Vestas, the Danish manufacturer.

Siemen’s loss for the Oct-Dec ’22 quarter had been almost a billion dollars and they have no idea, according to company executives, how to right this tilt.

…The group scrapped its 2023 profit outlook late on Thursday after a review of its Siemens Gamesa wind turbine division exposed deeper-than-expected problems affecting up to 15-30% of the more than 130 gigawatt worth of turbines it has installed worldwide.

Dealing with issues at the business could cost more than 1 billion euros ($1.09 billion), it said.

“This is a disappointing and severe setback,” Siemens Gamesa CEO Jochen Eickholt told journalists on a call.

“I have said several times that there is actually nothing visible at Siemens Gamesa that I have not seen elsewhere. But I have to tell you that I would not say that again today.”

That should concern everyone who is a stakeholder in all this renewable nonsense…

…”Given the history and nature of the wind industry, the profit warning was not a complete surprise, but what surprised us was the magnitude,” analysts at JPMorgan said.

…Fellow shareholder Union Investment called it a dark day for investors, worrying that Siemens had not yet got a handle on the extent of the fallout.

“It looks like the cat isn’t quite out of the bag yet,” said Felix Schroeder of Union Investment. “Part of the shocking news is that management itself has acknowledged that they can’t pinpoint exactly what it will all cost.”

…and the stakeholder pool at the moment, between investors, in-progress, and backorders on the books is huge.

…The company has provided more than 132 gigawatts (GW) of wind turbines as of the end of April this year to all global regions: 108 GW of onshore wind and 22 GW of offshore wind.

It generates revenue of 9.8 billion euros a year and has an order backlog worth 34.6 billion euros.

The prognosis for even beginning to clear the backlog isn’t looking so good. Besides addressing the faulty turbines and rotor component issues they’ve found, it turns out that they are identifying what might be integral design flaws in already installed units.

What does that mean for already spinning projects all over the world? Yech.

…On Friday, Siemens Gamesa said that while rotor blades and bearings were partly to blame for the turbine problems, it could not be ruled out that design issues also played a role.

It said the problems could affect as many as 15-30% of its turbine fleet.

That’s an expensive proposition staring them in the face. They are going to be bleeding cash in one of the most – if not THE most – subsidized industries in the world.

…Following the increase in failure rates of wind turbine components, the board initiated an extended technical review of Siemens Gamesa’s installed fleet and product designs.

“The current status of the technical review suggests that in order to reach the targeted product quality of certain onshore platforms, significantly higher costs will be incurred than previously assumed.”

The board said productivity improvements are “not materializing to the extent previously expected“ and in its Offshore business “we continue to experience ramp up challenges“.

That’s corporate speak for “We’re losing our asterisk.”

Now, Vestas shares took a bit of a tumble with Siemen’s today, even though they did manage a profit for the first quarter. Investors are spooked because these companies all share suppliers. It’s like that first kindergartner who catches the cold – all the rest of them have it by the end of the week. The market sees the contagion spreading, as it did this fall when the warranty issues first started surfacing.

The other problem is, again, something I touched on last month – the rush to bigger and bigger turbines, especially offshore.

The technology just isn’t there yet and these companies are eating the price of their promises, particularly when coupled with the servicing plans they bundle to sell a project.

…A fundamental design flaw is an even more worrying possibility. Turbine makers have been under pressure to make bigger, more powerful wind turbines and may have overstretched the technology. When things go wrong with such massive pieces of equipment, they are costly to fix. The nacelle that holds all of the turbine’s generating components can be as large as a house.

All of this must be music to Chinese ears, as their turbine manufacturer finally beat out Vestas for the No. 1 spot in March, once sales for 2022 had been toted up. The big yip was that this happened in a market that looks to be rapidly contracting before their very eyes.

Chinese wind turbine manufacturer Xinjiang Goldwind Science & Technology has claimed the top spot in BloombergNEF’s global wind turbine supplier ranking for 2022 after overtaking Denmark’s Vestas Wind Systems A/S by a slim margin in a shrinking market.

…In 2022, only 86 GW of wind turbines were commissioned globally, a fall of 15% compared to 2021 as additions stalled in China and the US. Most of the turbines were installed onshore, while offshore installations dropped 46% to 9.1 GW following the expiration of China’s national feed-in premium for offshore projects. China still accounted for more than half of total global wind additions in 2022 with 49 GW of new wind capacity.

According to BNEF wind analyst Cristian Dinca the data should be ringing alarm bells. “Governments around the world are increasing their ambition on decarbonisation and, at the same time, new additions are slowing on the ground,” said Dinca.

Even though analysts in that piece believe the Inflation Reduction Act (IRA) subsidies will reinvigorate the U.S. market, I wouldn’t be so sure. Material supplies been affected by warranty issues and procurement/delivery problems, not to mention that pesky, transitory Biden inflation, which has also bedeviled the contract terms many of the East Coast states signed with wind companies for these massive off-shore projects. Those companies are now balking at construction without renegotiations, if not petitioning to outright void the deals completely.

Toss in growing citizen and legislative revolts against state sponsored projects, like the one New Jersey’s verminous Gov. Phil Murphy is facing over the planned 3400 wind tower Ocean Wind 1, and wind has a real survival fight on its hands.

Dang near a Celebrity Death Match, right?

LET’S GET IT ON!!

There I go smiling again.