Is the business concept viable? 

To comprehend the vast folly of the wind power industry, we can ask one logical question: Is the business concept viable? 

Assessing business viability necessitates a comprehensive review of financial projections, operational feasibility, profitability and return on investment (ROI). 

Financial analysis demands meticulous examination of startup costs and operational expenses, versus revenue. 

Operational feasibility assesses practical aspects, evaluating the availability of resources and skilled personnel. 

And profitability and ROI requires the business to generate revenue in a manner that justifies investment. 

Successful businesses meticulously align these factors to achieve sustained success in the free market.

Keep this information in mind as we look at business cases from the wind power industry over the past year.

Financial Trouble 

Markbygden Ett:
The owners of the Markbygden Ett sub-project, part of Europe’s largest onshore wind complex, are undergoing financial restructuring in the Umeå district court, northern Sweden. Facing bankruptcy, the company’s financial struggles stem from an unprofitable 19-year Power Purchase Agreement (PPA) signed with Hydro in 2017. The fixed-volume PPA obliges the company to buy power on the spot market during insufficient wind production, incurring costs due to intermittency. Spot prices rise when wind power is low, contributing to substantial losses. 

This exit cost the Danish company $2.2-2.6 billion in penalties.

Siemens Energy AG: 
Siemens Energy AG is facing a substantial downturn, its share price having dropped nearly 70% since June. This is mainly attributed to issues within its wind turbine subsidiary, Siemens Gamesa. The company projects a €4.5bn loss for the year due to quality problems and offshore ramp-up challenges. Additionally, technical faults in onshore turbine models are expected to cost around €1.6bn to rectify. Siemens Gamesa’s CEO highlighted concerns including rotor blade wrinkles and bearing particles, posing risks to critical components. Siemens Energy aimed to address these issues, but struggled to secure guarantees for its order book. This contributed to a €2bn loss in Q3. Germany’s government approved a €15 billion financial package, including €7.5 billion in loan guarantees, to support Siemens Energy in delivering Germany’s renewable projects. However, the company’s challenges persist.

Cancelled Projects 

Ørsted:
The world’s biggest wind power developer received approval to develop wind power off the New Jersey coast in June this year. It terminated both developments five months later due to soaring costs. This exit cost the Danish company $2.2-2.6 billion in penalties. 

Avangrid:
Avangrid, a member of the Iberdrola Group, is terminating power purchase agreements (PPAs) for the Park City Wind offshore project in Connecticut, citing industry challenges like inflation and supply chain disruptions. This follows their similar move with the Commonwealth Wind project in Massachusetts, resulting in a $48 million penalty. Avangrid plans to rebid both projects. These decisions align with a broader trend of wind project cancellations and challenges nationwide, including requests to government for rate increases above those previously agreed.

Siemens Energy AG is facing a substantial downturn, its share price having dropped nearly 70% since June. 

Fortescue:
Fortescue Metals Group has abandoned its Uaroo Renewable Energy Hub project in Western Australia, once a key part of its green energy strategy. The multi-billion-dollar initiative aimed to build 340 wind turbines and a solar farm, generating up to 5.4 gigawatts. The project’s termination, marked by last month’s approval application withdrawal, signifies a shift in Fortescue’s commitment to achieve carbon neutrality by 2030.

Vattenfall:
Swedish energy giant Vattenfall has halted plans for the Norfolk Boreas wind development, a crucial part of the UK’s green energy goals. The project, intended to power 1.5 million homes, faced a 40% cost increase due to global gas price surges and supply chain challenges. After winning a government contract with a record-low bid, Vattenfall deemed the project unprofitable amid changing market conditions. The decision incurred a £415 million penalty. This is still seen as prudent, considering lack of future profitability. Vattenfall urged the UK government to adapt the financial framework, and the government capitulated, agreeing to increase payments for offshore electricity generation. This intervention raised hopes for the Norfolk Boreas project’s resumption.

Verdict

These examples highlight the vulnerability of wind power development projects. This is particularly evident in offshore projects. 

Wind power does not meet the criteria for a viable business concept.

Meaghan Whyte

Meaghan became a staunch anarcho-capitalist after a collection of life experiences that left her disabused of any vestige of goodwill towards the state and its attendant institutions. Notable experiences included university gender studies, and living under social democracy. Now, she writes to advocate for the abolition of the state.