World’s top renewable firms reel even as installations surge
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European wind turbine makers have been particularly hard hit, with giant Orsted ceasing the development of some projects as it announced a third-quarter net loss.
PHOTO: REUTERS
NEW YORK – The biggest manufacturers of wind turbines and solar panels are facing their most serious financial challenges in years even as deployments of clean-energy equipment head for an annual record.
About 500 gigawatts of renewable generation capacity will be added in 2023, the International Energy Agency said, and at least US$1 billion (S$1.4 billion) a day is being spent on new solar additions alone. Yet the sector’s firms are being squeezed by volatile costs, snarled projects, high interest rates and – in the solar sector – a rush to add new capacity that has overwhelmed demand.
Xinjiang Goldwind Science and Technology, the world’s No. 1 wind turbine maker, just reported a 98 per cent slump in third-quarter profits. The head of Longi Green Energy Technology, the top solar manufacturer, said on Tuesday that panel prices were at “irrationally” low levels.
Even as installations rise, “wind and solar equipment companies are not a good exposure to this trend”, said Ms Vicki Chi, a Hong Kong-based portfolio manager at Robeco, which managed about US$197 billion globally as of June and invests in energy companies. The two sectors are both highly competitive and there are “more attractive exposures” in electricity grid equipment and software, where demand should exceed expectations and entry barriers are much higher, she said.
The renewable industry’s travails are being reflected in a rapid drop in company share prices. The S&P Global Clean Energy Index has fallen 30 per cent this half, while the broader S&P 500 Energy Index has risen over the period.
At the moment, the wind sector is faring worse than solar. After falling in 2022 for the first time in four years, wind installations are on pace to rebound in 2023, but they will barely surpass 2021 levels outside of China, according to BloombergNEF. Projects from New York to Britain are at risk as developers ask for more money and tax breaks to ensure profitability amid rising costs.
European wind turbine makers, which account for up tp 300,000 direct and indirect jobs, are particularly hard hit. Orsted, the world’s biggest builder of offshore wind farms, said it was ceasing the development of some projects as it announced a third-quarter net loss. Siemens Energy has been forced to seek government guarantees due to ballooning problems with faulty turbines.
European wind companies are facing increased competition from Chinese firms, which are targeting overseas markets and offering discounts of about 20 per cent to European and US producers, BNEF said.
In the solar sector, the main problem is overcapacity. Global demand for panels is on track to rise 55 per cent in 2023, according to BNEF. But the around 400 gigawatts of expected installations is dwarfed by nearly 1,000 gigawatts a year’s worth from module factories that are operating or being planned for construction.
While the surge in output has removed supply chain kinks that caused rising prices in 2022, it has pushed panel prices down to record lows, squeezing margins and threatening a wave of bankruptcies and consolidation.
The combined third-quarter profits of seven major manufacturers in China, where over 80 per cent of global production is based, were at the lowest since the end of 2021. Longi has warned that over half of the firms in the sector could be forced out of business in the next two to three years.
Panel prices are likely to continue falling through the end of 2023, making it difficult for even the best companies to make healthy profits, BNEF analyst Youru Tan said in a note. Smaller, non-integrated firms will struggle to make any money at all, he said.
Jinko Solar was optimistic conditions would improve next year. Major projects in China would buoy demand, high inventories in Europe are gradually falling and consumption in the US remains strong due to the Inflation Reduction Act, Mr Gener Miao, the Chinese company’s chief marketing officer, said on an earnings call on Monday.
In the US, solar panel maker First Solar has been relatively resilient, with its outlook buoyed by the Inflation Reduction Act, which promises to pour billions of dollars into domestic clean-tech manufacturing. The firm’s third-quarter earnings expanded by almost 300 per cent in 2023.
Still, rooftop solar in the US has been pressured by rising interest rates that make it more expensive for consumers to borrow for the upfront investment. Inverter makers Enphase Energy and SolarEdge Technology posted disappointing third-quarter results, while SunPower, which reports earnings on Wednesday, has dropped by around three-quarters in 2023, making it the worst performer on the S&P clean-energy gauge.
“Current prices make it very hard for anybody across the supply chain to make a profit,” Longi president Li Zhenguo said on an earnings call on Tuesday. Some companies may soon start abandoning plans to build new solar plants, he said. BLOOMBERG
