The following article featuring Siemens was published by the Wall Street Journal, 23 June 2023 with regard to the dramatic plunge in Siemens’ share value due in part to problems with their massive wind turbine blades.
The ill wind blowing for clean-energy windmills just got stronger.
Siemens Energy shares fell 36% on Friday morning after the company withdrew its fiscal 2023 profit guidance late Thursday. Components in wind turbines made by its subsidiary Siemens Gamesa are wearing out faster than expected. The news isn’t just a blow for the company’s shareholders, but for all investors and policy makers betting on the rapid rollout of renewable power.
The problem appears to involve critical parts like bearings and blades. The average lifespan of a wind turbine can be up to 20 years, but the wear and tear has been spotted in both newly installed and older turbines.
The creaky components, which affect 15% to 30% of the installed onshore fleet, will be expensive to fix. Management thinks the cost could run upward of €1 billion, equivalent to $1.09 billion, effectively wiping out more than a third of the profit the company is expected to make doing maintenance on wind turbines it has already installed, according to Bernstein analyst Nicholas Green.
This component quality issue is hurting Siemens Gamesa’s onshore wind-turbine business. But there are also problems with its offshore turbines, which aren’t meeting their productivity targets due to rising material costs and manufacturing delays.
Siemens Gamesa has been a problem child for years due to cost overruns and supply-chain challenges. Siemens Energy recently took full control in a roughly €4 billion buyout of minority shareholders to turn it around away from the full glare of the public market—or so it hoped.
As recently as last month, Siemens Energy’s executives indicated that the wind-turbine unit could break even in the second half of the current financial year. They appear to be blindsided by how deep its problems run.
One risk for investors is that the same faults crop up at other wind-turbine manufacturers as a result of shared supply chains. Shares in rival Vestas Wind Systems were down 7% on Friday morning.
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.
Wind-turbine makers rely on the servicing side of their business to generate steady earnings. But contracts guaranteeing a certain amount of uptime are turning out to be costly. Earlier this year, Vestas said heavy losses in 2022 were partly linked to higher warranty provisions for repairs of installed turbines. Inflation in key raw materials such as steel and in transportation costs also hit the company last year.
The risk for the world’s leading wind-turbine makers, which were already struggling to turn a profit, is that the promising servicing part of their businesses turns into a headwind. For everyone else, it is further delays in the arrival of cleaner power.
According to Reuters, who appears to have published one of the definitive articles regarding Siemens current problems with shares taking a dramatic nose dive, it is much more than “creaky wind turbines.”
LONDON (Reuters) - Shares in Siemens Energy continued to fall on Monday following a record sell-off in shares last week that was triggered by major issues at the company's wind turbine division Siemens Gamesa.
Shares in Siemens Energy fell 5% to the bottom of Germany's blue-chip index, as several brokerages, including Citi and Jefferies, cut their ratings or price targets on the stock amid uncertainty over the size of the problem.
Here are details on the most pressing issues:
WHAT'S THE ACTUAL PROBLEM IN ONSHORE?
Most of the issues revolve around Siemens Gamesa's 108 gigawatt (GW) onshore turbine fleet, where the group has discovered quality issues in certain components, including rotor blades and bearings.
Siemens Energy said that 15%-30% of the fleet could be affected by the problems, which were exposed during a review which noted "abnormal vibration behaviour of some components" and unspecified problems around product design.
WHICH ONSHORE TURBINES ARE AFFECTED?
According to management, it's the more recent platforms, including the 5X model, where problems had already been communicated last year.
Bernstein also pointed to quality issues around the 4X platform.
Management said part of the challenge was to develop a statistical model that could translate fault rates into firm indications of how turbines are expected to perform over their life span of some 20 years.
ARE THERE SEPARATE ISSUES IN OFFSHORE?
Yes.
Siemens Energy has said that there is a separate set of challenges in the offshore turbine part of Siemens Gamesa's business, centred around a delay in the 30% ramp-up of production.
This includes slower-than-expected headcount addition, the delay of production site construction, including manufacturing halls, as well as supply-chain issues.
It also includes the lack of ramp-up quality of components, the group said, without being more specific, as well as higher than expected material costs.
WHAT'S AT STAKE FINANCIALLY?
Potentially billions.
Siemens Energy has said fixing the problems is expected to cost at least 1 billion euros ($1.1 billion), adding this was an initial assessment of an ongoing review and included estimates for repair work.
Quality issues had already caused a charge of nearly half a billion euros at Siemens Gamesa earlier this year.
Bernstein reckons that this translates into the risk that nearly a third of Siemens Gamesa's service orderbook could yield no margins for the "rest of its life".
Analysts at Jefferies expect costs of 2 billion euros in their calculation, 1.75 billion for onshore and 250 million for offshore.
"In our valuation, as well as rectification costs, we assume that investors price in potential litigation, general execution risk and corporate uncertainty to take (Siemens Gamesa) to negative value of -5.6 billion euros," they wrote.
Siemens Energy's cost estimate does not include any mitigation measures, which could include damages the company may seek from component suppliers.
WHO ARE THE SUPPLIERS?
Siemens Energy declined to comment on its supplier structure for bearings and turbines, but said suppliers would be made part of the review.
The world's top wind turbine bearings makers include China's Dalian Metallurgical Bearing Group, NTN Corp and NSK Ltd in Japan, Switzerland's Liebherr-International AG, and Germany's Thyssenkrupp (ETR:TKAG), IMO and Schaeffler.
WHAT DOES SIEMENS GAMESA DO?
Siemens Gamesa is a global company based in Spain which manufactures onshore and offshore turbines for the wind industry and offers services to wind power developers globally, with key markets including Europe and the Americas.
The company has provided more than 132 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.
WHO DOES SIEMENS GAMESA SUPPLY WITH TURBINES?
Siemens Gamesa has provided wind turbines to some of the biggest power companies and oil and gas majors worldwide.
In March, it announced an order from Scottish Power Renewables in Britain to supply 95 turbines to the East Anglia 3 wind power project in the North Sea, with a total capacity of 1.4 GW.
This would be enough to power 1.3 million UK homes.
In May, it signed contracts with Spain's Repsol (BME:REP) for the supply of 40 onshore wind turbines which would provide power to around 160,000 homes in Spain.
It has also agreed to tie up with Poland's PGE Group and Denmark's Orsted to supply 107 wind turbines for the Baltica 2 offshore wind project in the Baltic Sea.
WHAT IS SIEMENS GAMESA DOING ABOUT THE AFFECTED TURBINES?
Siemens Gamesa said it has launched a technical review of the installed onshore fleet and product designs, and that the announcement last Thursday of quality problems include problems uncovered so far.
The company is now evaluating measures to fix the problems and figure out the associated costs.
The company said that it would be able to provide a more accurate estimate of the costs from the problems when it publishes its third-quarter results on Aug. 7, after a full analysis of the situation.
($1 = 0.9173 euros)
The current situation with Siemens wind turbines is not the first time serious issues with them have been reported.
In February 2018, Net Zero Watch published the following information regarding problems Ørsted was experiencing with a huge number of Siemens offshore wind turbines.
Sunday 25th February 2018 | Dr John Constable: GWPF Energy Editor
Recent reports indicate that major repairs are required on 500 offshore wind turbines in United Kingdom waters, and nearly two hundred more at sites off the Danish and German coasts. Whether this is type failure or just normal wear and tear is as yet unclear, and is, according to Danish news reports, in dispute.
One of the principal disadvantages of rapid and inorganic technological deployment, such as that required by the European Union’s renewable energy targets, is that problems are very widespread by the time they are discovered. The prudent approach is to stay behind the learning curve, so that the consequences of type failure affect only a small number of installations. Dashing ahead of the learning curve is asking for big trouble.
Recent weeks have seen several reports that Ørsted, as DONG Energy is now called, is faced with the distressed repair of over six hundred offshore wind turbines supplied by Siemens. Five hundred of these are in British waters, and somewhat over one hundred are offshore Denmark, with a further 80 in German waters.
West of Duddon Sands, a joint venture between Ørsted and ScottishPower, is an offshore wind farm of 108 Siemens 3.6 MW turbines (SWT 3.6 MW) with a total capacity of 388.8 MW. It was officially opened by the then Secretary of State for Energy and Climate Change, Ed Davy, and began generating in February 2014.
It now appears that all 108 wind turbines have erosion problems on the leading edges of their blades, requiring removal and reconditioning. Renewable Energy News (renews, issue 377, available only to subscribers), is reporting that this will entail the application of a rubber covering, a process that will take three to ten days per turbine. Work is expected to start later this year and will stretch into 2019.
Renewable Energy News added that this problem was also present at Ørsted’s Walney 2 offshore windfarm, a site comprising 51 Siemens 3.6 MW turbines with a capacity of 183.6 MW.
In total, Renewable Energy News stated that the problem was found in 500 UK offshore wind turbines, and was probably also found in at least one, unnamed, German offshore wind farm, affecting some 80 turbines.
The Danish newspaper Jyllands Posten (Danish report here: and translated here) and RE News online are now both reporting that the problem also affects the Danish Anholt offshore wind farm, a site comprising 111 Siemens 3.6 MW turbines, with a total capacity of 400 MW. Some 27 of the wind turbines were repaired last year, 2017, and the remaining 84 are scheduled for repair in the coming year.
The Siemens 3.6 MW turbine which appears in all these instances entered the market in 2010, and there are, according to RE News, some 950 in European waters.
The cost of the repairs will almost certainly be very large. Assuming a repair vessel charter rate of about £150,000 per day, and, say, five days per turbine, this amounts £750,000 per turbine, plus additional labour and equipment costs. In total the cost seems unlikely to be less than £1m per turbine, which equivalent to between 5% and 10% of the total project cost. Even if it is only half that sum, this is a very expensive repair very soon after commissioning, to say nothing of the lost generation and income during the repairs.
It is not yet clear who is to pay for this work. The Jyllands Posten noted that Siemens was thought to have granted five year warranties, with the implication that many of the affected machines would still be covered, and they observed that the Danish subsidiary of Siemens Gamesa “has just provided 4.5 billion Danish Krone ($750 million) or 16% of its revenue to guarantee its commitments.” However, they added, there was “disagreement between Ørsted and Siemens Gamesa as to whether the problems are covered by the guarantee or are a case of ordinary wear and tear.”
There is a lot more at stake here than the allocation of a painful repair bill. If this is a type failure affecting the SWT 3.6 MW device only, then it is a very expensively learned lesson, bad news for Siemens, perhaps hitherto regarded as the premier manufacturer of wind turbines, and unlikely to be forgiven by investors, but of only indirect significance for the wider industry.
But if the need for these repairs is, as Siemens is apparently contending, just every day wear and tear, then this sort of problem is unlikely to be confined to the SWT 3.6 MW device, and will be strong evidence confirming long-held suspicions that developers and owners have greatly underestimated the normal cost of wind farm Operation and Maintenance (O&M).
When I took at further look at problems with the blades of Siemens wind turbines, I found more information, some of which follows.
On Monday November 21, 2016 a 500-foot-tall wind turbine at the Ocotillo Wind Energy Facility [in California] collapsed in the morning, spewing debris and three blades each weighing many tons across the desert floor. The cause of this failure is still being investigated. Perhaps a blade came loose and struck the tower - causing it to bend? Maybe the transmission/gears suddenly jammed and the force of the spinning blade suddenly stopping was too much for the tower to handle? Note that it was NOT exceptionally windy at the time of the collapse. Also, the tower did NOT bend at a seam.
The following video is a longer one of the Ocotillo wind turbine collapse taken with a drone which illustrates the splintering of the turbine blades and other components, including the generating parts from the nacelle which split open with the collapse.
During the morning of November 21 2016 I heard a loud boom. Minutes later a neighbor came by to tell me that one of the wind generators just a mile and half west of us had fallen down. So to see what happened I launched my DJI Phantom 4. What a bummer. That pole just folded like a beer can. Interesting footage.
This is a 17 second video of another wind turbine at Ocotillo, California from 8/04/2018 “They told us the turbine would be as quite [quiet] as a library.”
Blade failure is the likely reason for the collapse of one of the Siemens turbines at the 265-MW Ocotillo Wind power plant in California, the owner of the facility, Pattern Energy Group Inc (NASDAQ:PEGI), has said.
The turbine fell on November 21. Pattern said that a preliminary root cause analysis by Siemens (ETR:SIE) has narrowed the cause of the incident to a blade failure that caused the blade to strike the tower and the tower to collapse. The failure probably is a result of cracks in the structural member of the interior of the blade that Pattern said are slow to develop and can be seen via visual inspection of the inside of the blade. [Bold mine.]
Siemens is currently performing such inspections of all the blades at the wind park. The individual turbines will be returned to service after completing the checks and confirming the incident is unlikely to recur, according to the announcement.
Siemens has made more than 2,100 turbine blades of the same design and this the first failure of that kind, Pattern said. The company also said that the recent blade failure is unrelated to the blade failure experienced at the facility in 2013.
The Ocotillo Wind park has been operating in Imperial Valley since the end of 2012. It comprises a total of 112 Siemens turbines of 2.37 MW each. It sells its output to San Diego Gas & Electric Co (SDG&E) under a long-term power purchase agreement (PPA).
In this Bloomberg Television video from 23rd June the question posed was, “how bad is it?” The response includes the fact that Siemens has had problems for years with profitability and “now there is a problem with quality control” at “Siemens Gamesa Renewable Energy SA, the latest in a long line of costly problems uncovered at the Spanish wind turbine unit.” However, the company isn’t providing any information about “how they are going to fix this.”
In this CNBC video posted 23rd June, Siemens Energy wind farm issues could have implications across [the] whole sector: Analyst.
“Nicholas Green, head of European capital goods at Alliance Bernstein, discusses the impact of Siemens Energy's more-than 1 billion euro ($1.09) Gamesa wind-farm component issues.”
In the following video, “scientists and engineers detail the glaring mistake that rendered wind farms inefficient and costly” with particular focus upon the leading edge of wind turbine blades.
All of this information is extremely important especially as it relates to novice “wind developer” Bute Energy who have never before constructed any wind projects but are financially backed by global principal investment firm, Copenhagen Infrastructure Partners (CIP).
As an example of CIP’s stature, in February 2023 “Copenhagen Infrastructure Partners’ Flagship Fund’s interconnector portfolio was officially included amongst the short-list of projects assessed for regulatory approval in the UK, in the so-called Third Cap and Floor Window.”
During their September 2022 marketing event in New Radnor which they called a "public consultation” I asked one of the Bute Energy representatives what information they had to support the alleged 40 year life span they were purporting for the 36 x 220m tall industrial wind turbines with which Bute plan to desecrate and destroy the Radnor Forest, if they are granted planning permission.
In response I was told that the 40 year lifespan was what the manufacturers had told them. When I asked which manufacturer had said this, they replied that they were in discussions with both Siemens and GE with regard to using, purchasing their wind turbines for their proposed Nant Mithil Energy Park atop the ancient domed hills of the Radnor Forest.
I have looked in the past and once again it appears that the average lifespan of industrial turbines is at best 20 years. In order to arrive at Bute Energy’s purported 40 year life of the huge 220m tall turbines they plan for the Radnor Forest this would necessarily involve them being either repowered or replaced halfway through their alleged lifespan.
It is interesting to note that Siemens and GE recently settled a patent dispute over wind turbine technology.
"Siemens Gamesa stated in a 3 April 2023 press release that, “GE and Siemens Gamesa have reached an amicable settlement of all their wind turbine technology patent disputes in the US and Europe on confidential terms and have granted each other and their respective subsidiaries worldwide cross licenses under the asserted patent families, for the life of those patent families.” Read more at Energy Live News.
As I continue to keep a watchful eye on the situation with Siemens Gamesa and the world of wind developers in general, I intend to post in the near future specific information about the toxic nature of wind turbine components, particularly the blades and the great harm they potentially cause to the environment, human beings and other creatures.
Edit: This is the first of what will be a number of reports I will be posting with regard to the toxic microplastics which include BPA that are used in the manufacture of wind turbine blades:
