With the enormous need we have for renewable energies, how is it possible that the western wind blade and turbine industry is at a deep lossand forced to fire?
The terrifyingly familiar explanation: while our bureaucracy blocks everything that moves, China is starting to gobble up this sector too.
We witness the remake of a film already seen with photovoltaic panels and batteries for electric cars.
Europe is slipping fast from Russia’s dependence on fossil fuels, alla dependence on China for renewable ones. I’m not saying it, the alarm is written in a report by the German group Siemens Energy, which is one of the largest producers in the sector above all through the Spanish subsidiary Gamesa. There is a concrete possibility – we read in that report – that the energy transition of the European Union is managed in China.
What are Brussels and the national capitals waiting for to react to save the national product before it’s too lateas the Biden Administration is doing in the United States instead?
The state of health of companies that manufacture blades and wind turbines is really bad. There Siemens Gamesa Renewable Energy, based in Madrid, one of the European leaders in offshore wind, turbines and blades installed at sea. He has just released his latest annual report: 940 million euros of losses. In these conditions the company has announced that it will be forced to lay off 2,900 employeesthat is, more than a tenth of its workforce.
The American giant in the wind blade and turbine sector, la, is even more in the red General Electric: two billion dollars of annual losses for its specialized branch.
The world leader in wind turbines fares only a little less worse, Vestas Wind System, with 147 million euros of losses in one quarter.
Stanley Reed of the New York Times interviewed two chief executives of the companies in question, and their unanimous lament. Every time we sell a wind turbine we lose 8% on the cost of productionVestas chief Henrik Andersen told him. The chief executive of Siemens Gamesa, Jochen Eickholt, told the American newspaper that companies need to make profits to finance investments, to become capable of producing bigger and more powerful wind farms, but in this period we are working at a loss.
The explanations of the industrialists touch familiar keys. In Europe, as well as in the United States, there is talk of fighting climate change, but many new wind farm projects are delayed by a myriad of red tapeadministrative vetoes, local resistance and landscape protection.
Another handicap given by new surcharges on extra profits, which also affect those who generate electricity from renewables. Those taxes go to eat the profits – if any – that companies should use to finance new investments.
And then there is China. Following a script already known for solar energy and the electric car, China it began by gaining a dominant role in the components needed to make wind turbines and blades: already today 70% of the parts assembled by a European turbine manufacturer are made in China.
The next stage sees the Chinese giants manufacturing entire blades and wind turbines enter the European markets by offering supplies at ultra-competitive prices. Often there is unfair competition behind itbecause the state aid offered by Beijing to its national champions allows them to export below cost.
If the script follows what has already happened for solar energy, we will see some big Europeans fail and the surrender to China will be total. Which would mean losing control over our energy future, again.
How does the European Union react to this danger? For the moment arguing … with the United States. The Brussels Commission has targeted the Inflation Reduction Act, a new law wanted by Joe Biden and approved by Congress. Despite the title, that law serves to finance the green transition more than to fight inflation. With $370 billion in funding, generous aid for renewable energy. On one condition: that the producers are American or located in the USA with their factories. In short Biden uses Chinese methods against China, based on subsidies and protectionism.
For the moment, Brussels seems above all indignant because American incentives risk attracting European companies to US soil, to produce under that rain of public money. Perhaps it would be more urgent to deal with the Chinese advance and react to it before it’s too late.
If the Chinese product costs less because it is sold in dumping (below cost) thanks to state aid, then a countervailing duty levied from Europe is a perfectly legal countermeasure. Of course, we need to make sure that local producers are able to replace the Chinese also in components, and as soon as possible. Otherwise, in the absence of valid European substitutes, the barriers against the Chinese would only increase and slow down the production of wind blades and turbines.
But this is the very lesson of the Asian dragons that we should have studied decades ago: how national industry champions are bred and strengthened to become world champions. There are some objections to this rediscovery of industrial policy: politicians and bureaucrats are usually not the best suited to select the right companies, those that will be efficient and competitive.
America too has had its industrial policy scandals, such as the Solyndra solar company that went bankrupt in 2011 after gobbling up $535 million in taxpayer funding (the Obama administration had to acknowledge serious mistakes in handling that aid).
The counter-argument that all the Far Eastern economic miracles have had effective industrial policies among their ingredients, which we should study. On the other hand, if the alternative is spending on assistance, i.e. distributing fragile and precarious wealth to the population, then it is better to use public resources to support those who can generate wealth, i.e. businesses.
