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It’s ‘Go Big or Go Home’ for Wind as Virus Has Energy Producers Poised for Battle

Stephen Bierman
May 25, 2020

Wind energy producers are doubling down on carbon-free aims as the coronavirus pandemic has set a new starting line for how future customers will buy and use energy.

Renewable energy producer Siemens Gamesa, for one, has gone big, with plans for the largest turbine ever built, showing its readiness for a fight. The Spain-based wind energy manufacturer unveiled a plan to build a massive 14-megawatt unit which will be commercially available by 2024, according to a May 19 press release.

Siemens Gamesa plans come even as a rout in energy prices mean the next 5-10 years will see the stiffest competition for consumer markets potentially in our lifetime. Lockdowns, halted travel, factory closures and work disruptions related to halting the spread of the covid-19 virus have walloped demand for traditional hydrocarbon energy producers such as oil, natural gas and coal. 

This has led to the Saudi Arabia-led Organization of Petroleum Exporting countries, a cartel of the world’s largest exporters of crude, and Russia, already from May, slashing crude production to levels unseen in a decade. Meanwhile, corporations tapping shale deposits in the USA have also responded, shedding output as the demand collapse briefly forced prices negative.

Siemens Gamesa turbine, designed for offshore use, will become the largest windmill ever built, at 222 meters of wingspan, a slim 2 meters bigger than the Haliade-X from General Motors Co. which debuted in 2018, according to a report from Bloomberg News. 

“We’ve gone bigger for the better,” states Markus Tacke, CEO of Siemens Gamesa Renewable Energy, “Safely and sustainably providing clean energy for our customers and society-at-large is at the core of all we do.”

Just one unit can power the annual consumption of 18,000 households while an array of 30 such units could power the equivalent of Bilbao, Spain, according to the release. Just one unit will avoid approximately 1.4 million tons of CO2 emissions compared to coal-fired power generation over the course of its projected 25-year lifetime, Siemens Gamesa said in the release.

Even as the hydrocarbon world has pared back its output, the measure is certain to be temporary, as corporates and governments that rely on petroleum exports will fight for capture consumers with low prices as demand returns. 

Companies such as Exxon Mobil have slashed investment budgets, and even investor dividends, in the case of Royals Dutch Shell Plc. At the same time they have begun pooling available cash to be ready when people return to their cars and jobs. Russia and Saudi were already in a battle for market share. Each will seek to assert its leadership position via its companies leveraging cheap production costs to gain returning concumers over the next several years. 

All this means a bit of good news and a bit of bad news for wind producers. The good news is that the cuts by hydrocarbon producers theoretically set a new starting line for how people buy and use energy after the pandemic. The bad news is that rock-bottom energy prices and populaces impoverished by the virus will make gaining that market very difficult. 

Proponents of carbon-free energy have long been supported by subsidy and other incentives in consumer states such as the European Union, United Kingdom, China, Japan and the United States. And producers are seeking for governments to stay the course in support. 

Wind power companies asked governments to ensure low-carbon efforts to fight climate change are maintained as funding becomes more expensive and budgets are strained fighting virus fall out, according to Reuters report on May 6, citing a statement seen by Reuters.

The letter was signed by companies including Vestas, Iberdrola, Orsted, Mingyang Group, Nordex and Siemens Gamesa Renewable Energy (SGREN.MC) , and industry groups such as Global Wind Energy Council, according to Reuters.

“The pandemic has created a temporary reduction in carbon emissions, but experience shows that these will quickly bounce back and it is vital that we redouble efforts to fix climate change for good,” the statement said according to Reuters.

“Wind energy is competitive around the world. We are not asking for a bailout, but we do need a level playing field,” the wind energy companies said in the statement.

With that said, Siemens Gamesa’s plan for the mega turbine may indeed represent the only route open to the renewables industry. More than ever it must now prove that it is capable of continuing advances in technology and efficiency to create more power per dollar of investment. 

On the other hand, the stakes for any fundamental gains in customer and market base could be huge – with the global energy market essentially up for grabs.

Stephen Bierman

Stephen Bierman is a finance and energy reporter with over 15 years of experience, including at Bloomberg News and Energy Intelligence.

Tweets at: @StephenBierman1

bierman@neweconomy.site

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