Quality issues could cost Siemens wind turbine division $1B to fix
Onshore

Quality issues could cost Siemens wind turbine division $1B to fix

Siemens Energy shares fell by more than 30% on June 23 as a result of the news of costly quality issues at its wind turbine division, Siemens Gamesa.

The hits keep coming for the beleaguered wind industry.

Significant quality issues at Siemens Energy's wind turbine manufacturing subsidiary, Siemens Gamesa, could take more than $1 billion and years to fix, according to the company's chief executive.

Siemens has launched a technical review of Siemens Gamesa's installed onshore wind fleet in response to a "substantial increase" in failure rates of certain components. Siemens Energy CEO Christian Bruch said the company is now working to establish a mitigation plan.

"The reason for this call is very unpleasant," Siemens Energy CEO Christian Bruch said. "The fact that we have identified more quality problems marks a significant setback for us."

Burch expected the integration of Siemens Gamesa as a wholly-owned division of Siemens Energy to be challenging, but the latest setback is "more severe" than he thought possible.

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As a result of the news, shares of Siemens Energy fell by more than 30% on June 23. Bruch said the discovery would also wipe out profit guidance for both Siemens Gamesa and Siemens Energy.

In addition to addressing the company's technical shortcomings, Bruch said Siemens also needs to revamp its corporate culture, adding that "too much has been swept under the carpet."

Wind can't win

Siemens Gamesa isn't the only wind turbine manufacturer under pressure. Recent years have seen deployment dip as financial turmoil and macroeconomic pressures plague some of the largest manufacturers.

Last year, GE laid off hundreds of workers from its onshore wind unit, including 20% of employees based in the United States, as part of a strategy overhaul, according to a report from Reuters.

Rising costs, supply chain constraints, and policy uncertainty in the U.S. market has plagued wind manufacturers over the past two years.

The risk of clean energy tax credits phasing down last year tamped down development activity, though those credits were restored and extended for 10 years in the Inflation Reduction Act.

Wind deployment dives

In the U.S., new wind power capacity additions fell 56% in 2022, according to S&P Global Market Intelligence. In the first quarter of 2023, wind developers energized 1,472 MW of capacity, compared to 2,785 MW in the fourth quarter of 2022.

The downtrend in wind installations has now stretched for nine consecutive quarters, S&P noted.

The last quarter when installations increased on year was in the final three-month period of 2020.