Orsted, a Danish power company, and Vestas, a wind turbine manufacturer, have warned of difficult conditions in the renewable energy sector, citing low wind speeds in Europe as well as supply chain delays and increased costs. Vestas decreased its operating profit margin for the full-year prediction for the second period this year, citing an “increasingly tough global economic climate for renewables.”
Orsted, the world’s largest offshore wind farm builder, said weaker wind speeds cost it DKr2.5 billion ($389 million) in the first 9 months of this year contrasted to the same period in 2020, as it repeated estimates that profits in 2021 would be at the lower half of a set range. Its operating results in the third quarter were likewise marginally below analyst expectations. The pessimistic evaluations came a day after world leaders recognized clean energy technology as vital to attaining global warming objectives at COP26 in Glasgow.
Wind power’s intermittency has been highlighted throughout Europe in the recent months, as some of the weakest wind speeds in years have worsened a reliance on coal and gas for electricity – notably in the UK, which has the world’s largest offshore wind market. Vestas has lowered its full-year profit margin target before exceptional items to 4%, after cutting it to 5-7% in August from a previous range of 6-8 percent. The turbine manufacturer cited several causes, including worldwide supply chain disruptions and component shortages, as well as increasing raw material and transportation prices.
At midday in Europe, the company’s shares were down 14% after it reported 21% drop in 3rd quarter earnings to €325 million before interest, taxes, and special items compared to the corresponding time a year ago, lowering its profit margin to 5.9% from 8.6% last year. Despite a 16% rise in revenue to €5.54 billion, demand for turbines as well as related services remained strong.
Steel costs in the US and Europe, which account for more than 70% of the weight of a wind turbine, have increased by 86% and 53%, respectively, this year. Even though Vestas’ latest full-year revenue estimate was unchanged, chief executive Henrik Andersen warned supply chain issues and higher costs were “likely to last throughout 2022.” He said his company and its clients had been looking for solutions to alleviate some of the issues, but that they would ultimately cause delays in project completion in some regions of the world.