Renewable energy giants Vestas and Orsted warned of tough times ahead for renewable energy after record low winds and supply chain constraints hit projects in Europe. Vestas, particularly, warned this Wednesday about the “increasingly challenging global business environment for renewables.”
Moreover, Vestas trimmed its full-year operating profit margin forecast for the second time this year. Notable, the cut was to 4%, down from the initial 6-8 percent. The company blamed a range of factors; including global supply chain blockages, shortages of components, and higher raw material and transport costs.
After the news broke, Vestas’ shares were down 14 percent at lunchtime in Europe this Wednesday. The company had also reported a 21 percent fall in third-quarter earnings to 325 million euros before interest, compared to last year’s same period.
On the other hand, Orsted announced it took a $389 million hit from lower wind speeds in the first nine months of the year, compared to 2020s. Its third-quarter operating profits were also slightly below analysts’ estimates.
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Switch to renewable energy has never been more urgent
Furthermore, the news comes out just as the COP26 is taking place in Glasgow, the most important climate change summit. There, countries and companies are making pledges to reach net-zero. In contrast, oil majors like bp, Valero, and other companies had posted increased earnings and strong financial performance as oil prices surged.
In addition, the US and European benchmark prices for steel have surged 86% and 53%, respectively, this year. Steel makes up about 70% of a wind turbine. With commodity prices like natural gas going up aggressively, which hits industrial activity, precisely to steel makers, the panorama is indeed complicated for renewable energy firms.
Furthermore, Vestas CEO Henrik Andersen said the supply chain problems and higher costs were “expected to last throughout 2022”. According to a report by the Financial Times, Andersen will travel to Glasgow to participate in COP26 tomorrow. He insisted that switching from oil to renewables has never been more urgent.
Finally, he urged global leaders to speed up permitting processes, the most common blockage to project in renewables. “Stop talking about what you want to do in 2040, 50 or 60. This is about what you need to do in November, December in 2021,” he said.
