Report: Rising costs threaten wind power industry’s viability
New research has revealed that the renewable sector is battling rising costs and higher interest rates; the eight largest renewable energy firms reported a $3bn decrease in asset value in the first half of the year.
This is based on a report published by the global insurance firm Allianz Trade, highlighting the rising struggles confining the wind energy sector including operating and financing costs, quality-control problems and supply-chain issues.
The report notes that inflation and global energy price fluctuations are sparking concerns regarding the feasibility of several wind power projects worldwide and causing major industry players to either halt or seek government funding for large industrial projects.
In October, it was reported that Siemens Energy, a major player in the wind power sector, is seeking approximately €15bn in guarantees from the German government as a rescue package to stabilise its financial position.
In June, the company revealed that it was experiencing challenges with its newest onshore wind turbine, Siemens Gamesa, due to technical challenges and inflation-induced higher repair costs.
Since then, Siemens Energy’s shares have fallen by nearly 70%, underscoring the need to seek a financial bailout.
The report is warning that large wind energy projects are at risk of being abandoned without necessary government support.
Last month, the European Commission unveiled its ‘Wind Power Package’ to assist developers in the renewable sector. The support measures in the package include a specific auction design, additional financial support, monitoring of unfair trade practices, activation of relevant policy instruments when necessary, addressing administration staff shortages, and streamlining long approval procedures.
While the EU has demonstrated a proactive approach to address the rising challenges faced by the renewable sector, the report notes that the UK is lagging in its response.
Rising prices impact the UK’s wind energy sector
In the UK, wind power projects are experiencing challenges related to inflation and energy cost volatility as well.
Moreover, Developer Community Windpower recently confirmed that it is putting its Sanquhar II onshore wind project in Scotland on ice after projected development costs rose from around £300m to £500m.
According to the report, industry players are urging the Government to raise the bidding limits for new offshore wind farms by 25-70% to offset rising supply-chain costs, while lobbying the UK Treasury to eliminate the windfall tax on offshore wind farms and to enhance subsidies and tax incentives to ease initial project costs.
© Faversham House Ltd 2023 edie news articles may be copied or forwarded for individual use only. No other reproduction or distribution is permitted without prior written consent.