SCHADENFREUDE: At the same time, plans for Germany’s bailout of green energy using pandemic money goes bust.
As we prepare for the upcoming climate virtue-signalling drama of the UN Conference of Parties (COP28), it appears another green energy domino is about to fall.
Today’s focus is on Siemens Gamesa, a Spanish-German wind engineering company. The firm has just suspended a plan to build a $200 million turbine blade factory at Virginia’s Portsmouth Marine Terminal.
It appears #Bidenomics is to blame.
Siemens Gamesa confirmed Friday that it would not be moving ahead with its plans for the 80-acre manufacturing site, citing problems meeting “development milestones.”
The cancellation is the latest in a series of setbacks for U.S. offshore wind, as well as for political ambitions to localize the industry’s suppliers in the United States.
When it was first announced in 2021, the Portsmouth site was the first investment by a major turbine manufacturer in the U.S. supply chain, and it was heralded as a landmark development. “Make no mistake: Virginia is building a new industry in renewable energy, with more new jobs to follow, and that’s good news for our country,” said then-governor Ralph Northam at the time.
But times have changed: Like other suppliers, Siemens Gamesa faces a challenging business environment in the U.S. market. Orsted has just canceled its Ocean Wind project off New Jersey (a GE-equipped project), and a slew of others are working to renegotiate their power-purchase agreements with utility customers. Costs have soared alongside interest rates and supply chain challenges, and offshore wind developers warn that the sales contracts they signed three years ago no longer make business sense.
This isn’t the only sign of green energy collapsing, either. The parent company, Siemens Energy, is now trying to reduce its losses and structure its business with additional support from the German government.
The loss of $5 billion will refocus objectives quickly.
Siemens Energy (ENR1n.DE) may exit some markets and products of its struggling wind turbine business, it said on Wednesday, in a bid to return Siemens Gamesa to profit after it triggered the group’s 4.6-billion euro ($5.0-billion) annual net loss.
Siemens Energy on Tuesday secured a 12-billion euro credit line from private banks that was partly backstopped by the German government, removing a major concern for investors that feared the group could lose out on business without the funds.
A producer of key equipment such as gas turbines, converter stations and wind turbines, Siemens Energy is viewed by the German government as vital to its energy transition from fossil fuels to renewables.
But Siemens Gamesa, once considered the future growth driver for Siemens Energy, has become a millstone around the group’s neck after deeper-than-expected wind turbine quality issues were disclosed in June. The business is expected to post a 2 billion operating loss in 2024.
However, the government money may now be off the table. Some Germans had a tough time reconciling the use of pandemic-designated monies for green schemes.
The German government froze major spending pledges focused on green initiatives and industry support on Wednesday after a constitutional court ruling on unused pandemic emergency funds blew a 60 billion euro ($65 billion) hole in its finances.
The decision threw into disarray budget negotiations taking place this week within Chancellor Olaf Scholz’s three-way ruling coalition, whose popularity has slumped as Europe’s biggest economy teeters close to another recession.
Wednesday’s decision by the constitutional court could also set a precedent for fiscal responses to future crises.
Finance Minister Christian Lindner will meanwhile face increased scrutiny over how he plans to keep spending in check, just days before he is due to meet his French counterpart for talks on enforcing fiscal discipline across the European Union.
The ruling may impact Siemens Gamesa and the current German ruling coalition itself (hat-tip, Hot Air’s Beege Welborn).
When Germany’s Social Democrats formed a three-way coalition with the Greens and the conservative Free Democrats in 2021, they sold the unconventional alliance as a progressive ménage à trois that would transform German politics.
Two years later, it looks more like a clusterfuck.
The government’s disarray was on full display after Germany’s highest court ruled Wednesday that the centerpiece of the alliance’s environmental strategy — a plan to repurpose €60 billion left over from an emergency COVID-19 fund to finance the coalition’s climate agenda — was unconstitutional.
The decision blew a massive hole through the middle of the coalition’s signature legislative agenda, in particular a plan to remake the German economy root and branch by weaning it off of fossil fuels. If the parties fail to find a new way to finance those plans, the coalition itself could quickly collapse, some analysts warn.
There is a reason schadenfreude is a German word.
— Leslie Eastman ☥ (@Mutnodjmet) November 20, 2023
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