Wind power industry in moment of reckoning as stocks fall

Renewable energy firms are mostly suffering a dire earnings season as struggling supply chains, manufacturing faults and rising production costs eat into profits.

With the world trying to transition at pace toward cleaner energy, equipment manufacturers are struggling to keep up with soaring global demand, leading to rising production costs and questions over the economic sustainability of large-scale projects from the industry’s major players.

Manufacturing faults, most notably at Siemens Energy‘s wind turbine subsidiary Siemens Gamesa, have emerged as companies race to build turbines at a greater pace and scale.

The problems at Gamesa led Siemens Energy to scrap its profit forecast earlier this year, and last month the company sought guarantees of up to 15 billion euros ($16 billion) from the German government.

Specialist wind energy firms are also often finding themselves outbid for seabed licenses by traditional oil and gas players. Should they win a contract, electricity prices are often too low to justify the manufacturing costs, leaving companies looking to their governments in Europe and the U.S. to deliver greater subsidies and restore balance to the market.

As a result, most wind energy stocks are down sharply since the turn of the year.

In a report published last week, Allianz Research noted that the eight largest renewable energy firms in the world reported a combined total $3 billion decrease in assets in the first half of the year, with wind projects in particular facing turbulent conditions. The firm’s economists said the past earnings season was a “learning moment” for the industry.

“The whole sector is grappling with rising construction and financing costs, quality-control problems and supply-chain issues. Inflation and global…