Renewable power companies face heavy losses despite expansion boom

Despite Germany’s increased focus on renewable energy following its decoupling from Russian energy sources in the wake of the war on Ukraine, high inflation and other economic developments have thrown the wind and solar sectors in a deep crisis, news broadcaster n-tv reported. An unprecedented boom in renewable projects in 2022 means order books are full. However, companies are struggling to make money: new projects are expensive, debts are overwhelming and company share prices are falling. “The development of shares in the solar and wind sectors is devastating,” says n-tv stock market expert Frank Meyer. Solar sector companies SolarEdge from Israel or US-based Enphase Energy, for example, have each lost around 70 percent of their share price since the beginning of the year. Danish wind farm giant Orsted lost over 50 percent and its compatriot Vestas Wind Systems almost 14 percent. A fatal combination of high interest rates, volatile costs, supply chain problems, overcapacity and “a ruinous price war” have resulted in a seemingly paradoxical situation in which companies are crashing in a major boom phase. As the industry suffers massive losses due to rising interest rates, exacerbated by long approval processes that lead to planning uncertainties, orders are being relocated to China for cost reasons, the article said. For the situation to ease, an interest rate turnaround is essential, Meyer stresses. “These business models can only survive with zero interest rates because of their low margins.”

Germany is aiming to have 80 percent of electricity consumption generated by renewable sources by 2030. The energy sector’s problems are exemplified by a 7-billion euro guarantee the state granted to Siemens Energy, which struggles with severe difficulties at its wind turbine subsidiary Siemens-Gamesa. SiemensEnergy recently unveiled a new electrolyser factory in Berlin that is supposed to become a cornerstone of the country’s green hydrogen production plans. The troubles also applied to the hydrogen industry, where initially high capital costs mean that companies face significant advance payments for extended periods of time before making a return on their investments, n-tv noted.