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Siemens Gamesa's Quality Issues Raise Concerns Across the Wind Turbine Industry
Wind turbine manufacturer Siemens Gamesa recently faced costly failures that led to a steep decline in the shares of its parent company, Siemens Energy. The German energy giant cited a significant increase in failure rates of wind turbine components as the reason behind scrapping its profit guidance. Analysts have expressed concerns about the broader implications of these issues across the industry. The rapid expansion of the wind industry and the use of new, larger turbines have exposed inherent risks. The situation highlights the need for a comprehensive examination of quality and operational protocols.
The Challenges of a Growing Industry
Over the past two decades, the wind industry has made significant advances in reducing costs and improving efficiency. Larger turbines and innovations in technology have contributed to this progress. However, these developments have also posed challenges. The introduction of competitive auctions has been a driving factor in cost reduction. Wind and solar power accounted for 12% of the world's power generation last year, indicating the growing importance of the industry.
Inflation and Supply Chain Disruptions
The wind industry has faced challenges in recent years due to the COVID-19 pandemic, which caused disruptions in industrial activity and global energy demand. The subsequent supply chain problems further impacted wind turbine manufacturers. Additionally, Russia's invasion of Ukraine and subsequent market disruptions led to soaring inflation and input costs. Commodity price increases have raised the price of wind turbines by up to 40% in the last two years. OEMs have faced difficulties in sourcing materials, further complicating operations.
Unique Challenges and Ongoing Reliability
Industry experts emphasize that the technical failures experienced by Siemens Gamesa are specific to the company and not indicative of broader industry-wide issues. Turbine failures, while rare, can have significant impacts on project profitability. Components of wind turbines are designed and certified for 20 years, but some elements are expected to fail during this period due to cost-reliability compromises. The wind industry faces ongoing challenges in maintaining reliability and minimizing operational costs, which are projected to rise in the coming years.
Addressing Reliability Through Innovation
The wind industry recognizes the need to address reliability concerns and has started bringing these issues into the public domain. With the continuous growth of the industry and the development of larger turbines, there is a need for digital and diagnostic tools to ensure reliability. Wind turbine manufacturers are under pressure from the supply chain and inflation, making it essential to focus on addressing these challenges. The use of diagnostic tools can help identify and mitigate reliability issues, ensuring the long-term success of wind power.
Opportunities and Challenges for New Businesses in the Wind Turbine Industry
The recent quality issues faced by Siemens Gamesa have raised concerns across the wind turbine industry, highlighting the challenges and opportunities for new businesses in this sector. While these incidents are specific to Siemens Gamesa and not indicative of broader industry-wide problems, they underscore the need for a comprehensive examination of quality and operational protocols. As the wind industry continues to experience rapid growth and innovation, new businesses entering this market must be cognizant of the following factors:
1. Growing Importance of the Industry:
The wind industry has made significant progress in reducing costs and improving efficiency over the last two decades. With wind and solar power accounting for 12% of the world's power generation last year, the industry's importance and potential opportunities for new businesses are evident.
2. Supply Chain Disruptions and Inflation:
Recent challenges, such as disruptions caused by the COVID-19 pandemic and market disruptions from events like Russia's invasion of Ukraine, have impacted wind turbine manufacturers. New businesses must be prepared to navigate potential supply chain problems and consider the impact of inflation on input costs.
3. Reliability and Operational Costs:
While wind turbine failures are rare, they can have significant financial implications. New businesses entering the industry should prioritize addressing reliability concerns and minimizing operational costs. Investing in digital and diagnostic tools can help identify and mitigate potential issues, ensuring the long-term success of wind power projects.
4. Embracing Innovation:
The wind industry is recognizing the importance of innovation in addressing reliability concerns. New businesses should explore opportunities to contribute to the development of digital and diagnostic tools, which can play a crucial role in ensuring the industry's continued growth and success.
In conclusion, while Siemens Gamesa's quality issues have raised concerns, they also offer important lessons for new businesses entering the wind turbine industry. By understanding the challenges and opportunities outlined above and embracing innovation, new companies can position themselves for success in this growing sector.
Article First Published at: https://www.cnbc.com/2023/07/03/siemens-energy-wind-turbine-problems-could-be-an-industry-wide-issue.html
