August 12, 2021
General News

Lighter winds slow progress at offshore firms Orsted, RWE

By Stine Jacobsen, Christoph Steitz | Reuters | August 12, 2021 | www.reuters.com

Orsted and RWE, the world’s two largest offshore wind players, both suffered from lighter winds in the first half of the year, highlighting how profits in the booming industry remain tied to weather conditions.

Denmark’s Orsted said wind speeds in the April-June period were “significantly lower than normal” and ranked among the worst three quarters in over more than 20 years.

As a consequence, it said it would likely hit only the lower end of its guided core profit range in 2021.

Orsted was however confident that it wind speeds would return to more normal levels.

“Over time the wind speeds have been incredibly stable. We build wind farms that have an average life time of 30+ years and we have no reason to believe that this is something which will structurally challenge that,” CEO Mads Nipper told journalists.

Orsted said quarterly wind speeds amounted to an average of 7.8 meters per second (m/s) across its offshore portfolio, which was lower than the 8.4 m/s seen in the second quarter last year and the normal wind speeds of 8.6 m/s it had expected.

Germany’s RWE also cited much lower wind volumes in Northern and Central Europe compared with the very high level last year, reporting a 22% decline in core profits at its offshore unit to 459 million euros ($539 million) in the first half.

The results show that despite strong fundamentals, renewables continue to be an intermittent technology where swings in the level of winds and sunshine have a direct impact on earnings.

To mitigate some of the risks Orsted, mainly focused on the North Sea today, is expanding into new parts of the world such as the United States and Taiwan and has invested in technologies including solar PV and onshore wind.

“We also need diversification … because sometimes the business is volatile. And ideally it’s diversification across different technologies but also across different regions,” CEO Markus Krebber told journalists.

While Orsted’s Nipper said that so far there were no indications that more extreme weather linked to global warming would have an impact, Krebber struck a more cautious tone after its business was hit by cold spells and floods this year.

“Aside from the fight against climate change we also have to deal with these weather effects becoming more regular.”

The weather is not the only challenge faced by firms in the industry, after some of the world’s largest turbine makers, including Denmark’s Vestas and Spanish-listed Siemens Gamesa, pointed to high raw materials prices.

Denmark’s Vestas, the world’s largest wind turbines maker, this week cut its 2021 outlook, citing constraints in the freight market related to the impact of COVID-19 which have driven global supply chains towards breaking point.