5 challenges to ensure wind energy development through the energy transition

Challenge n°1: Managing supply chain issues

Global supply chains have been heavily impacted by Covid-19 and the war in Ukraine. In the wind energy sector, these disruptions have not only caused difficulties in the supply of parts and components necessary for the production and maintenance of wind turbines, they have also caused significant fluctuations in the prices of materials and components. This volatility has made inventory management and long-term planning more complex. As a global wind market develops, production capacities are likely to be lower than demand and bottlenecks are to be expected.

Challenge n°2: Navigating industrial policies

The global upheavals of recent years and resulting geopolitical considerations have put energy and industrial sovereignty on the agenda of many governments. In the United States, the Inflation Reduction Act aims to develop domestic industries needed for the energy transition through government subsidies. In Europe, the Green Deal Industrial Plan and the Zero-Emission Industry Regulation, proposed in early 2023 by the European Commission, propose that 40% of wind turbine manufacturing should be on European soil by 2030¹La relocalisation : une vraie bonne idée ? par Jean-Marc Figuet | vie-publique.fr. Although these policies support the development of domestic wind manufacturing, the promotion of reshoring is likely to further disrupt the global supply chain of wind turbines in the short and medium term.

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Challenge n°3: Managing price inflation

Due to supply problems and an increasing demand for wind energy, prices for raw materials and components have greatly increased. For example, the price of steel, copper and aluminum, of which 50% of wind turbines are made, has tripled in the last 3 years. Many original equipment manufacturers (OEMs) are feeling the full brunt of this increase, especially when they cannot pass it on to their customers because they are bound by fixed-price contracts.

Challenge n°4: Addressing the lack of skilled labour

The training of specialized technicians, particularly in maintenance, has not kept pace with the rapid growth of the wind industry. The lack of skilled manpower can delay maintenance operations, which extend wind turbine non-operation periods or in the worst-case result in large-scale equipment malfunctions and damage. This is particularly the case for offshore wind, a less mature industry where sending technicians to sea is expensive and restrictive. The lack of specialized technicians will be an even greater obstacle in developing countries, where investment resources for wind-specific training are lower.

Challenge n°5: Improving the reliability of wind turbines

The average lifespan of a wind turbine is estimated at 20 years, during which technical problems and maintenance needs are not constant: wind turbines require more maintenance with age. In addition, older models are less technologically advanced. As a result, ageing wind farms are likely to be exposed to more technical problems.

Newer wind turbines, however, are not immune to reliability problems. In order to remain competitive and win contracts with wind farm developers, OEMs regularly develop new wind turbine models seeking to achieve an ever-higher capacity/price ratio, in particular by increasing the size and therefore the capacity of wind turbines. The multiplicity of new models and simultaneous increase in turbine size reinforce reliability problems in practice. For example, Siemens Gamesa recently announced series defects on several already installed new models, causing its stock market value to drop by 30% in just one evening²Siemens Energy shares plunge after wind turbine problems deepen | Financial Times. Moreover, maintenance, especially corrective maintenance in the event of unplanned repairs, is costly: it accounts for an average of 90% of operating expenses³master-thesis-xavier-turc-castell-.pdf (upc.edu).

These five factors directly or indirectly affect the costs, and therefore the economic viability of wind projects. Several wind projects have already been halted for financial reasons, such as  the “Norfolk Boreas” project in the UK, which Swedish supplier Vatenfall halted this month.

The resilience of production chains and market stability are therefore key issues for the wind industry, which developers, equipment manufacturers, governments and players in the entire wind energy value chain will have to address to enable and accelerate the energy and climate transition.

Despite these challenges and issues, one reason for optimism is that for the foreseeable future, the wind industry will receive increasing investments. Indeed, 2022 marked a record level of investment, with $185 billion invested, an increase of 20% compared to the previous year⁴Wind – IEA. The impetus for this increase in investment into wind and all renewables is the development of sustainable finance, which is leading to divestment from fossil fuels and a reallocation of capital towards renewable energy. In addition, the development of the wind market is supported by public policies implemented by a growing number of governments, including in developing countries. Alcimed closely follows developments in the field and is ready to support you in your projects related to the energy transition. Don’t hesitate to contact our team!

About the author,

Juliette, Consultant in Alcimed’s Energy-Environment-Mobility team in France.