By Jeremy Hodges, Bloomberg
Competition in the wind energy industry is getting tougher than ever, forcing even the biggest manufacturers to slash more than a thousand jobs in the past few days.
Vestas Wind Systems A/S, the world’s largest maker of wind turbines, said Friday it was cutting about 590 jobs, adding to the 90 already announced in August. Siemens Gamesa Renewable Energy SA detailed plans to eliminate 600 jobs in Denmark, the home of the industry where wind regularly meets more than half the power demand.
The most mature renewable technology is one of the cornerstones in the switch to a greener economy. But as the sector has matured, product advances and auctions replacing subsidies have eaten into margins for the largest manufacturers. Chinese producers are taking market share.
“Our continued competitiveness in this environment means we must adjust our global manufacturing footprint to ensure we proactively manage our cost base,” said Jean-Marc Lechene, Vestas’s chief operating officer.
Vestas’s cuts in Denmark and Germany were made to adjust to evolving customer demand as the Aarhus-based company streamlines manufacturing and scale back production of a certain blade. The firm in August detailed 90 jobs losses at a Danish factory.
Siemens Gamesa will reduce headcount by 600 at its Danish operations citing “challenging market conditions.” Prices for turbine contracts have plummeted in recent years, sliding by 57% in the past decade, according to BloombergNEF data.
“We have seen a massive drop off in demand in Germany, a core market for several major turbine manufacturers,” Oliver Metcalfe, a BNEF analyst in London, said. Most are now looking to push into higher-growth markets further afield, such as Latin America.”
Although prices have stabilized this year, they could slide further into early next decade, BNEF said.
Shares in Vestas fell 1.6% in Copenhagen on Friday. They have gained 10% this year.
Vestas’s margin before interest and taxes dropped 6% in the second quarter from 11.5% a year earlier and the cuts should ease the cost pressure, according to Bloomberg Intelligence’s clean energy analyst James Evans.
“The reason for the job cuts has to do with the fall in onshore turbines sale volume in the EMEA region, as a consequence of the sustained pressure on prices and the company’s bid on prioritizing profitability rather than volume,” said Javier Diaz an analyst at Ahorro Corp. Financiera in Madrid.