Wind turbines are not getting cheaper; sector has had its worst year in two decades, says HSBC analyst

Siemens has warned of rising wind turbine prices that can be expected in the coming years. The reason is rising prices of materials needed for their production. The sector has been feeling the increase in material prices since 2019, Siemens Energy's chief executive told the Financial Times. According to some analysts, the sector has had its worst year in nearly two decades.

In addition to solar power plants, the European Union is also relying on wind power to meet its climate targets. However, voices from the industry are warning of rising costs per unit of installed capacity.

Among those highlighting these risks is the Siemens chief executive, who says supply-chain disruptions, as well as the price of raw materials and materials, are even threatening the competitiveness of wind turbines against fossil-fuel sources.

For a long time, the prevailing view was that wind turbines would continue to become cheaper, particularly thanks to rising efficiency. However, these forecasts do not take account of recent price developments and supply-chain disruptions, said Christian Bruch, chief executive of Siemens Energy.

"We must not forget that two years ago we assumed that by 2030 the price of wind power plants would be half that of 2021 or 2020. This logic falls apart if material prices double," added Christian Bruch.

The upward trend is also confirmed by data from Vestas, one of the market leaders. The company's average selling price rose to 830 000 EUR/MW for 2021 and reached an average of 860 000 EUR/MW in the fourth quarter alone. Vestas moreover expects price increases to continue this year.

Sector has had its worst year in the past 15 - 20 years

However, the problems are not affecting Siemens alone. Other companies in the industry, such as Vestas and Nordex, are also reporting higher costs. According to some analysts, the entire sector has even had its worst year in the past 15 to 20 years.

Like Siemens Energy, its competitors such as Vestas and Nordex are suffering from sharp increases in the prices of steel, copper and rare earths used in turbine manufacturing. Manufacturers are often unable to pass these higher costs on to customers due to long-term contracts concluded when the prices of these materials were lower.