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Will Wind Turbines Be More Expensive Post-Pandemic?

It’s possible that wind turbines could go up in price after lockdown restrictions in the UK are lifted because of a material supply bottleneck, as well as restrictions imposed on the movement of both workers and goods.

 

This is according to analyst firm GlobalData, which explained that potential investors in offshore wind could be deterred because of the ongoing disruption as a result of the pandemic. And currently, almost 15GW of UK wind projects - the majority of which are offshore - have been classified as awaiting construction.

 

These projects now have to wait to secure financing before construction can begin. And bidders could now have more time to consider how the impact of the outbreak in their proposals because round-four offshore wind power auctions have now been postponed for the foreseeable future.

 

Manufacturers like Nordex, Siemens-Gamesa and Vestas have all stalled their facilities in Italy and Spain, although the majority of wind manufacturing plants in Europe are still up and running.

 

Senior power analyst Somik Das explained that the UK does have a thriving offshore wind industry but it is also lacking in domestic turbine manufacturers.

 

“Despite the manufacturing sector being exempt from the lockdown, stringent quarantine measures are likely to create a material supply bottleneck. Production rates are not expected to be high, hence to meet the expected rates, the manufacturing costs would go up.

 

“During the first quarter of 2020, the UK’s average turbine price is estimated to rise to $854/kW, from $816/kW, and is expected to peak further in Q2 to reach $891.6/kW as suppliers across the value chain are likely to be impacted by capital crunch, a shortage of personnel and transit issues,” he went on to say.

 

On April 24th, GlobalData also noted that the pandemic has altered the market dynamics for renewables, which is having an impact on stakeholders along the value chain.

 

Demand and supply disruptions are being seen and there will be a drop in global investments in clean energy, which puts the initiatives that have already been undertaken to tackle the long-term effects of climate change at risk.

 

Mr Das explained that because of lockdown and social isolation, the demand and supply of renewable components has been disrupted. Although China, which is home to some major manufacturers of renewable equipment, has started to resume its operations the demand for said equipment is likely to be dented because of the global economic slowdown.

 

He went on to say that equipment prices are rising because of shortages of components and plant closures. Smaller developers will likely find it hard to remain solvent in the current climate, while bigger developers could protect their balance sheets and improve revenue streams by using large upfront capital, instead of opting to make new investments in renewable energy.

 

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