Stocks have fallen due to wind turbine problems. Fears are growing that the problem could be much larger.

Shares of the parent company dropped last month after a string of costly failures at wind-turbine manufacturer Siemens Gamesa


Siemens Energy








Analysts are worried about broader teething issues across the industry.

Siemens Gamesa, the wind division of Siemens Gamesa, has cited a “substantial rise in failure rates for wind turbine components”.

Christian Bruch, CEO of Siemens Energy, told journalists in a Friday call that “too many things had been swept beneath the carpet” by Siemens Gamesa. He also said that quality problems were “more serious than [he] imagined possible.”

On June 23 the share price of Siemens Energy fell by 37%. Other wind companies saw their shares fall as well, with investors concerned that Gamesa’s problems could be indicative of an industry-wide problem.

Nicholas Green, AllianceBernstein’s head of EU capital products and industrial technology, told CNBC the rapid expansion of the industry and the fact that some components of the larger turbines are still in development could mean that there are inherent risks within the entire sector.

He said: “We must acknowledge that the pace at which new equipment is being introduced, whether on-shore or off-shore wind farms are more challenging — and that brand-new machinery is being installed — has taken us to uncharted waters.”

“Although I can’t tell for sure at this time, my best guess would be that it is an issue that affects the entire industry.” It’s not that Siemens Gamesa was a bad operator, but that some of the standard protocols, time in use and operational data were relatively limited.

The board of Siemens Gamesa will now conduct an “extended review” on the matter, with costs expected to exceed 1 billion euros. Shares of the company have recovered some losses but are still down 33% over the past month.

Two tough years

Wind energy has grown rapidly in the last two decades. Costs have fallen to compete with fossil fuels – and even undercut them at times – while efficiency is increasing thanks to ever larger turbines.

“These cost savings have been achieved by innovations in turbine technology, and pushing the limits of engineering,” Christoph Zipf told CNBC, via email.

He stated that a typical windmill had a capacity of 1 million watts 20 years ago. Today, European OEMs are testing 15 MW generators.

This means that turbines are also bigger, which poses challenges for components (quality of materials, durability). Zipf said that the introduction of competitive auctions was also a factor driving this cost reduction.

The Statistical Review of World Energy report released last week showed that wind and solar energy accounted for 12% of world power generation in 2013, with wind power production increasing by 13.5%.

Covid-19 was a major threat to the industry, with lockdowns resulting in a reduction of global energy demand and industrial activity. OEMs were then affected by the supply chain issues that followed.

Since then, these manufacturers have been hit by soaring input costs and inflation as the Russian invasion of Ukraine has disrupted markets. This has also exacerbated disruptions in supply chains. WindEurope estimates the increase in commodity prices have increased the price for wind turbines up to 40% during the past two years.

“OEMs sourced some materials from Russia (mostly Nickel) and Ukraine(mostly Steel). Both prices skyrocketed following the invasion. The inflationary challenges that all European businesses face (i.e. This is on top of the challenging inflationary environment all European businesses are operating in (i.e. rising electricity prices etc.). Zipf clarified.

“A major problem for OEMs is the fact that not all countries have indexed their renewables. Wind turbine orders are not always indexed to inflation. It can take 18 months between placing an order and commissioning a windmill (especially if materials are in short supply).

Zipf, however, denied that the industry as a whole could face technical failures, insisting “the problems with Siemens Gamesa are only at Siemens Gamesa.”

The number of turbines in Europe makes it extremely unlikely that a big turbine will fail. The competition in this sector, however, is forcing OEMs to develop bigger and better wind turbines, perhaps faster than other sectors, he explained.

He also disputed the idea that the industry had entered “uncharted terrain,” arguing the changes to turbine technology were “incremental” and “evolutionary.”

“Naturally, every new model of turbine comes with its own challenges and requires rigorous testing. Zipf stated that the European wind industry had overcome these challenges, and has maintained its reputation as a provider of high-quality turbines with high reliability.

Facts and figures

ONYX Insight monitors and tracks wind turbines in 30 countries. Most turbines are certified and designed for 20 years, but they contain parts that will fail within that time frame due to “a compromise between cost and reliability.”

CNBC reported that Evgenia Glysheva is vice president for strategy and marketing, ONYX. “We’ve known about turbine failure rates in the industry, and we should be aware of them more, given their impact on overall project profitability,” she said.

“It is not that the turbines are poorly made, but now we have a compromise to achieve a balance between cost and reliability.” Anyone who finances, builds and operates windmills must have a realistic idea of the number of failures they can expect.

According to ONYX’s research, turbines constructed in 2023 will require more than 40% gearboxes to be replaced within 20 years, as well as more than 20% of the main bearings, and more than 5% for blades.

ONYX estimates that 65% of the costs associated with wind energy operations and maintenance are not planned. The company projects that the major corrective expenditures will reach $4 billion by 2029.

The growth of wind power installations was unprecedented. This forced the industry to scale up quickly, with very little time for digesting it. “It’s not an issue of capacity, nor is it a new one, but it’s good that OEMS, who are under pressure due to supply chain and inflation, are bringing the conversation into public domain,” Golysheva said.

It’s time to have this conversation, as the issues at hand are not going away. Wind turbine rotors and turbines are becoming larger, and development cycles are shorter. It’s important to have digital diagnostic tools and other diagnostic methods to address reliability issues.