Energy transition will fail unless wind power fixes problems: CEO

The CEO of Siemens Energy on Wednesday argued that the energy transition would fail unless his industry addressed a number of issues currently facing the wind power sector.

In an interview with CNBC’s “Squawk Box Europe,” Christian Bruch said his firm was “in the heart of the energy transition” but noted that there were “challenges in wind” especially when it came to supply chains.

“Never forget, renewables like wind roughly, roughly, need 10 times the material [compared to] … what conventional technologies need,” he said.

“So if you have problems on the supply chain, it hits … wind extremely hard, and this is what we see.”

“And this, unfortunately, obviously, leads to the situation [where] … it impacts the overall group results substantially.”

On Wednesday, Siemens Energy said its “overall performance” had been “held back by the negative development at Siemens Gamesa Renewable Energy,” a wind turbine manufacturer in which it has a majority stake.

In a statement, Siemens Energy said its adjusted earnings before interest, taxes, and amortization — and special items — had fallen to 379 million euros (around $393.8 million) compared to 661 million euros for the 2021 fiscal year.

“While Gas and Power benefited from its turnaround plan and saw adjusted EBITA rise sharply, the increase was more than offset by a wider loss at SGRE,” it added. This was “due to difficulties in the ramp-up of the 5.X onshore platform as well as supply chain delays.”

Siemens Energy posted a net loss of 647 million euros against a 560 million euro loss in the previous year but also reported a record order backlog of 97.4 billion euros.

“Due to the widening loss, and the challenges facing the company now and in the coming year, the executive board of Siemens Energy will suggest to the Supervisory Board not to propose a dividend for 2022 at its annual shareholder meeting in February 2023,” it added.

New management has been installed at SGRE — which has faced a period of turbulence — and Siemens Energy on Wednesday also referenced its announcement in May of a “voluntary cash tender offer to acquire all outstanding shares in SGRE.”

Overall, Bruch appeared optimistic about Siemens Gamesa’s prospects. “I think we have seen now that we have initiated all the relevant measures, and with Jochen Eickholt [SGRE’s new CEO], have a person on board who is step after step, tackling the different elements going forward.”

“And I’m confident that we can tap into this mid-term and long-term fantastic potential of wind, which is there,” he said. “And to be crystal clear, [the] energy transition without wind energy does not work.”

Despite this positive outlook, Bruch noted that several issues facing the sector would need to be ironed out. There was, he argued, “still a way to go” when it came to the wind industry maturing.

“How do you manage that business, how do you manage long-term risk,” he said.

“And also — between our customers, the operators and ourselves — how do you distribute risk along the supply chain in a world which is much more volatile, much more difficult, much more multilateral than before.”

There were, he explained, certain areas that the industry needed to fix itself, including sourcing and supply chains.

“And there are certain elements where the market needs to fix certain things,” he added.

This included shortening approval times for projects and distributing risk between operators, who were making “good profits”, and equipment suppliers.  

These were the “discussions which we will need to have over the course of the next 12 months to drive this business forward.”

“But there’s no question — if we don’t resolve it as an industry, we are missing a substantial part of the energy transition, and we’ll fail with the energy transition. So there’s no option but to fix it.”