Clean energy’s latest problem is creaky wind turbines 

The ill wind blowing for clean-energy windmills just got stronger.

Siemens Energy shares fell 36% on Friday morning after the company withdrew its fiscal 2023 profit guidance late Thursday. Components in wind turbines made by its subsidiary Siemens Gamesa are wearing out faster than expected. The news isn’t just a blow for the company’s shareholders, but for all investors and policy makers betting on the rapid rollout of renewable power.

The problem appears to involve critical parts like bearings and blades. The average lifespan of a wind turbine can be up to 20 years, but the wear and tear has been spotted in both newly installed and older turbines.

The creaky components, which affect 15% to 30% of the installed onshore fleet, will be expensive to fix. Management thinks the cost could run upward of €1 billion, equivalent to $1.09 billion, effectively wiping out more than a third of the profit the company is expected to make doing maintenance on wind turbines it has already installed, according to Bernstein analyst Nicholas Green.

This component quality issue is hurting Siemens Gamesa’s onshore wind-turbine business. But there are also problems with its offshore turbines, which aren’t meeting their productivity targets due to rising material costs and manufacturing delays.

Siemens Gamesa has been a problem child for years due to cost overruns and supply-chain challenges. Siemens Energy recently took full control in a roughly €4 billion buyout of minority shareholders to turn it around away from the full glare of the public market—or so it hoped.

As recently as last month, Siemens Energy’s executives indicated that the wind-turbine unit could break even in the second half of the current financial year. They appear to be blindsided by how deep its problems run.

One risk for investors is that the same faults crop up at other wind-turbine manufacturers as a result of shared supply chains. Shares in rival Vestas Wind Systems were down 7% on Friday morning.

A fundamental design flaw is an even more worrying possibility. Turbine makers have been under pressure to make bigger, more powerful wind turbines and may have overstretched the technology. When things go wrong with such massive pieces of equipment, they are costly to fix. The nacelle that holds all of the turbine’s generating components can be as large as a house.

Wind-turbine makers rely on the servicing side of their business to generate steady earnings. But contracts guaranteeing a certain amount of uptime are turning out to be costly. Earlier this year, Vestas said heavy losses in 2022 were partly linked to higher warranty provisions for repairs of installed turbines. Inflation in key raw materials such as steel and in transportation costs also hit the company last year.

The risk for the world’s leading wind-turbine makers, which were already struggling to turn a profit, is that the promising servicing part of their businesses turns into a headwind. For everyone else, it is further delays in the arrival of cleaner power.