30 January 2023

Poor outlook for European wind industry profitability

High material costs and slow approvals for wind power projects have dragged back profitability in the European wind industry, despite rising demand for renewable energy from governments and customers. Danish wind turbine manufacturer, Vestas, informed investors that profits would decrease this year due to reduced installations. Vestas reported a revenue of €14.5 billion for 2022, and estimates that revenue could be even lower in 2023, despite rising turbine prices. Another Danish energy company, Orsted, disclosed a $365 million impairment of a major US offshore project due to project cost inflation. 

Vestas said that slow permitting processes in Europe have caused reduced installations, and have dampened the activity levels in the US, where the industry was preparing for a busy 2024. The US pick-up would be driven by the Inflation Reduction Act (IRA), which had designated $369bn to projects related to clean energy and climate. 

European offshore wind manufacturers “are under enormous pressure on the cost side and on the price side,” says the head of the European Investment Bank’s renewable energy division, Alessandro Boschi. Boschi expects this to result in further consolidation in the renewable energy sector. Furthermore, Boschi highlights that the European wind industry has to also compete with the Chinese wind industry, not only on cost, but also on a quality and technology basis. 

Elena Pravetttoni, the clean power lead at the Energy Transitions Commission think-tank, noted that fuel cost and steel prices were decreasing and shipping bottlenecks loosening. So, some challenges for the sector were being resolved. Nordnet analyst Per Hansen observed that "You would expect the green transition to speed up as a result of soaring demand and efforts to become independent of Russian gas. But these things take time."

Financial Times, Reuters

Norwegian Industry has no faith in nuclear power

The Federation of Norwegian Industries (Sw. Norsk Industri) believes Norway’s power production must increase by at least 20% or 30 TWh by 2030. In the annual report on the state of the federation’s member companies, they presented renewable power and not nuclear power as the solution. 

Norsk Industri wants to see more offshore and land wind power, solar cells on all commercial building roofs, and the forced expansion of the power grid. Its primary reason for not supporting nuclear power, is that they believe Norway has enough renewable power to reach targets, it just needs to be utilised. Secondly, Norsk Industri believes there is too much resistance to nuclear power, so Norwegian society will never accept it. Norsk industri says, “We can not waste decades upon decades on a debate about nuclear power that may not lead to progress.” Norsk Industri wants to focus on what is possible now, which is renewable power and not something that will happen in 20 years. 

The federation's managing director Lier-Hansen, also commented that the government's policy to reduce electricity prices by signing fixed price agreements with companies was a ‘nonsense scheme’. Instead, the federation is pushing for a Norwegian variant to the German scheme, in which German companies can pay up to 70% of gas at a rate of 75 øre per kWh, while the remaining 30% is paid at spot price. Even though the government has refused to provide electricity support for Norwegian companies, Lier-Hansen will continue to ask for support.

E24

Denmark publishes long-term development plan for its grid

Energinet is an independent public enterprise owned by the Danish Ministry of Climate and Energy. It owns, operates and develops the transmission systems for electricity and natural gas in Denmark. 

Energinet’s long-term development plan outlines the company’s vision for the future of the power system in Denmark. It aims to support Denmark’s green transition and meet its goal of reducing CO2 emissions by 70% by 2030. While Energinet will have to change, reinforce and expand its electricity and gas systems, safety and security of current supply will be maintained.  Moreover, the development plans are based on the Danish Energy Agency’s Analysis Assumptions from 2020 (AF20), which provides a prediction for future electricity and gas production and consumption. AF20 also takes political climate targets into consideration.

According to the needs analysis in the plan, Energinet’s work will have three focus areas; 

• Rapid pace pace and unpredictability will require new approaches
• Linking green energy production and consumption
• Continuous modification of existing systems

Currently, there is a rapid development of PV power plants in Denmark, which have considerable uncertainties when it comes to size and location. Planning the grid with this uncertainty in mind presents Energignet with a challenge. Another uncertainty that Energinet needs to plan for is how Power-to-X plants will be integrated into the whole energy system.  

Sector coupling of electricity and gas is a potential solution and opportunity to linking green energy production and consumption. For example, biogas methanisation can utilise the excess green electricity produced, so that the grid does not overload. 

Teknologiens Mediehus, Energinet

Green methanol plant planned for Näätäaava in the Finnish Lapland

yle

What we’re reading

• BP cuts long-term forecast for oil and gas demand (Financial Times)
• Europe’s wind industry flags further weakness in 2023 despite energy demand (Financial Times)
• Europe facing ‘water catastrophe’ following prolonged drought (Irish Independent)

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