Wind energy is key to renewable electrical generation. Green energy transformation plans all feature wind energy alongside solar and hydro as a key electrical generator. The rollout of wind energy is proving difficult. Expectations for results are likely to be missed. This piece is part of series of backgrounds on why wind energy is hard.
EkaLore has previously looked at wind turbine manufacturers and the structure of the global market. The manufacturers are faced with common problems globally. Taken together these factors will make expectations hard to accomplish.
Turbine materials and manufacturing costs are climbing. Resins for composites start from petrochemicals. Metals and electrical components are fabricated from materials whose volatile prices point to consistent cost growth. Manufacturing costs for more sophisticated large units see labor and process costs grow.
Total costs of ownership across all phases of deployment are under pressures leading to increases. Operational costs (blade erosion, bearings and gears, software) are eroding margins and payback assumptions. Installation, operations, and maintenance labor are especially short.
Crude prices have stabilized at higher levels since early 2022. The higher price levels directly affects the composites and resins used to produce wind turbine blades. Further energy costs in production directly affects all raw materials production (refined metals, rare earth production, specialty metals).
The on-and-offshore wind turbines use quantities of copper, zinc, manganese, chromium, nickel, molybdenum, and cobalt. Copper and aluminum can pass 20% of costs for grid connections, conversion transformers and rectifiers, and turbine units. Global production of copper is forecast to be in surplus for thru 2024 if Chinese demand doesn’t pick up. The global wind industry is sensitive to the copper pricing – stable or down slightly from historic highs in 2023. Drought conditions in China reduced aluminum production in Yunnan province due to low hydroelectric power generation in 2023. This helped support aluminum pricing reflecting expectations of global reductions in demand during 2023-2024. The mid-to-long term pricing in aluminum don’t reflect optimism for further price decreases as prices in mid-2023 reflect oversupply conditions. Multiyear trends for commodity and specialty metals don’t hint at sustained reductions in costs.
Manufacturing problems, reflected in write-downs and extraordinary operating expenses, at manufacturers as diverse as GE Wind Vernova (blades), Siemens Energy Gamesa (blades, bearings), Vestas (operating wear), and Oested (blade wear). Across multiple manufacturers the price increases above 30% reflect the additional operations, warranty, and manufacturing costs for wind energy systems.
Warranty (and “make good”) costs for manufacturers are increasing leading to losses. Field experience with wind energy shows first generation units have significantly shorter life expectancies than planned (turbine wear, blade degradation). Operating load-factors are 10-20% lower than model assumptions leading to less actual power generation for utility-scale operators. The combination leads to less return-on-investment for manufacturers and operators.
Global labor rates are edging up with political leadership promising “high manufacturing-scale” wages for green energy transformation projects. Skilled labor is a problem for an industry with short cycles (triggered by tax credits, available capital, and short term political objectives). The cyclic nature drives away workers when inconsistent demand pares workforces at all tiers of the wind energy enterprises.
For more analysis and notes on Alien Invaders to the global energy markets see http://www.ekalore.com
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