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Felicity Bradstock

Felicity Bradstock

Felicity Bradstock is a freelance writer specialising in Energy and Finance. She has a Master’s in International Development from the University of Birmingham, UK.

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Green Energy Firms Grapple With Profit Plunge As Market Conditions Sour

  • Supply chain disruptions and decreased demand have led to dramatic drops in solar and wind energy stocks, with companies like Solaredge experiencing significant losses.
  • High production costs and low incentives in Europe challenge the region's clean tech industry, leading to a heavy reliance on Chinese imports amidst talks of potential tariffs.
  • Major wind energy companies are incurring losses and operational delays due to costly innovation races and component failures, raising concerns about meeting net zero emission goals.

Stocks of both solar and wind energy companies are falling due to high supply chain costs, project delays, and weakening demand, according to several renewable energy companies. Despite a strong push from governments and international organisations for companies and consumers to support a global green transition, energy companies have been struggling to make a profit from solar and wind energy projects in the face of several challenges. 

In October, solar stocks dropped dramatically after solar product manufacturer Solaredge said that the demand for solar energy in Europe had weakened significantly. Invesco Solar ETF stocks fell by 6.57 percent on Friday, 20th October, experiencing its lowest trading price since July 2020. Sunrun stocks dropped by 5.7 percent, Sunnova by 8.9 percent, and Enphase Energy by 15 percent. Meanwhile, Solaredge stocks plummeted by 28.2 percent after it revealed that its revenue, gross margins, and operating income would fall below Wall Street’s third-quarter forecasts and could be even lower in the fourth quarter. The company blamed this on “substantial unexpected cancellations and pushouts” of existing backlogs from the company’s European distributors due to high inventories and slow installation rates.

In Europe, there has been increasing interest in expanding the region’s green tech industry. But there has been a myriad of challenges from high energy costs to supply chain disruptions. Early in October, solar industry representatives met in Madrid at an event hosted by the Spanish industry group Foro Solar to discuss the challenges. The European Commission and member state governments have been aiming to reduce imports of clean tech and decrease the region’s dependency on China while increasing Europe’s manufacturing capacity. 

Gonzalo de la Vina, the president for the Europe, Middle East and Africa region of Chinese solar energy firm Trina Solar stated at the meeting, “You cannot manufacture in Europe… Europe isn't profitable.” Trina Solarhas manufacturing operations in China, Vietnam and Thailand and has plans to invest over $200 million in a solar photovoltaic manufacturing facility in Texas, but has no plans to produce solar components in Europe. 

Several solar companies agreed that European products are more expensive and there are not enough incentives in place for consumers to invest in these products. Solar panels manufactured in China cost around two-thirds of the price of those produced in Europe, according to Rystad Energy. Despite industry leaders highlighting the challenges facing regional manufacturing, Spain’s acting Energy Minister Teresa Ribera did not rule out imposing tariffs on imports of materials used in solar power generation. At present, the EU relies on China for 90 percent of its ingots and wafers for solar panels. The potential for the introduction of tariffs on imported solar components could deter governments from making ambitious solar plans and further weaken the international solar energy industry. 

While the solar industry is suffering, the wind energy industry is also experiencing its share of difficulties. Shares of Siemens Energy, the German wind power giant, fell by 35 percent on Thursday 26th October, after the company sought $15.8 billion in guarantees from the German government. Siemens has been widely discussed following the scrapping of its profit forecast earlier in the year due to a “substantial increase in failure rates of wind turbine components” at its wind division Siemens Gamesa.

The company said in a statement, “The wind business Siemens Gamesa is working through the quality issues and is addressing the offshore ramp-up challenges as announced in the third quarter communication for fiscal year 2023.” 

In 2022, several major wind energy companies posted billions in losses due to a plethora of challenges such as the high cost of giant, innovative wind turbines, particularly following almost four years of supply chain disruptions.  Vestas Wind Systems, General Electric Co., and Siemens Gamesa Renewable Energy all faced extremely high raw material and logistics costs after the pandemic. At the same time, the companies were battling it out to develop the tallest, most powerful wind turbines to put them ahead of the competition. 

The race to develop these components has led many wind energy companies to report equipment failures and recalls, which has meant delays in getting wind projects up and running and billions spent on replacing turbines. Ben Backwell, CEO of the trade group Global Wind Energy Council, stated “What I’m seeing is a colossal market failure.” Backwell added, “The risk is we’re not on track for net zero [emissions] -- and the other risk is the supply chain contracts, instead of expanding.” 

Despite the growing worldwide demand for increased wind and solar energy capacity, the companies leading these industries are facing a multitude of challenges. While they are benefitting from the falling costs of solar and wind component manufacturing, growing demand and improved government incentives to roll out new projects, many companies are posting low profits and seeing severe delays in getting operations off the ground. 

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By Felicity Bradstock for Oilprice.com 

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