Market Insights

Siemens Gamesa Pushes US Government Action on Wind Market Barriers

January 26, 2023 by Shannon Cuthrell

Siemens Gamesa recently released a whitepaper pushing the U.S. government to address critical barriers in the wind energy market, such as lengthy permitting processes, workforce gaps, and a lack of certainty around incentives.

Siemens Gamesa Renewable Energy recently released a whitepaper outlining various gaps in the United State’s climate policies and how the government can address them. The company’s arguments mainly center around the lack of certainty regarding incentive programs, the demand for talent in the domestic renewable energy workforce, and lengthy permitting processes that are often unpredictable and come with insufficient transmission infrastructure.

 

A photo of a land-based wind farm by Joshua Winchell of the U.S. Fish and Wildlife Service. Image used courtesy of the U.S. Geological Survey

 

Addressing such challenges would be critical to Siemens Gamesa’s business as one of the world’s largest wind turbine manufacturers, installers, and service providers across both onshore and offshore markets. Operating as a subsidiary of German industrial giant Siemens, the Spain-headquartered company claims a 9.6% share of total industry revenue in the U.S., according to IBISWorld. It has 127.5 gigawatts of installed capacity globally in its portfolio, and its order book tops $38 billion. 

However, Siemens Gamesa has struggled to maintain profits as it faces economic headwinds, supply chain disruptions, high material costs, and inflation—all cited in its 2022 annual results, reporting a net loss of about $1 billion. Additionally, the company’s onshore division has faced several challenges related to the launch of its 5.X line of turbines. 

Much of Siemens Gamesa’s future growth in the U.S. depends on the passage of new tax credits and other financing programs for wind energy companies. Awaiting such action last year, it scaled back its U.S. operations by temporarily closing two factories in Iowa and Kansas, laying off more than 200 employees. In May 2022, the company said the decision was partly driven by a delay in new orders as the market waits on U.S. climate legislation and associated incentives for renewable energy installations. By December, however, the company began taking steps to resume production in Iowa thanks to new orders spurred by the Inflation Reduction Act being signed into law last August. 

 

Inflation Reduction Act Isn’t Enough to Expand US Wind Market

Siemens Gamesa is a crucial beneficiary of massive spending packages such as the Inflation Reduction Act, which earmarks about $370 billion for renewable energy and electric transportation programs via tax credits, incentives, and loans/grants. The Bipartisan Infrastructure Law, signed in November 2021, adds another several billion dollars to the government’s domestic spending on climate programs. 

In its whitepaper, Siemens Gamesa argued that federal incentives alone are insufficient to meet U.S. renewable energy deployment objectives. The company pushed lawmakers to address several points, starting with providing “expedient” clarification on tax incentive programs for manufacturers and developers in the wind energy sector. To alleviate gaps in certainty, it says wind companies need more clarity on the eligibility requirements for the Production and Investment Tax Credits involving renewable electricity projects and the Advanced Manufacturing Production Credit for domestically produced wind components. 

Siemens Gamesa cited another significant regulatory barrier in the wind industry: the lack of streamlined permitting procedures and new infrastructure capacity to lower interconnection queues. About 1,400 GW of generation and storage capacity is awaiting grid connection in the U.S., according to 2021 data from Berkeley Lab’s Electricity Markets and Policy Group. Renewables account for about 90% of the queue, including 247 GW of wind capacity (31% of which is offshore projects). 

The whitepaper also advocated offsetting rising inflation-related costs with additional compensation in offshore project procurements and expanding the wind workforce through training and other programs. 

 

The Race to Add US Wind Capacity

Siemens Gamesa CEO Jochen Eickholt said that more public-private collaboration would be needed to achieve the U.S.’s renewable energy goals. The company’s policy agenda comes as the Biden administration targets 30 gigawatts (GW) of offshore wind deployment by 2030 and another 15 GW of floating offshore wind by 2035. 

The U.S.’s land-based wind capacity totals 136 GW and provides more than 9% of electricity nationwide, according to 2021 data from the U.S. Department of Energy. Meanwhile, the offshore wind pipeline includes 40 GW in various stages of development; only two projects are currently operational, offering only 42 megawatts. 

 

This chart from the Department of Energy tracks wind energy capacity additions in the U.S. over time. Image used courtesy of the DOE

 

Several wind energy expansions have been announced over the last year, partially driven by the Production Tax Credit and various enhancements in the cost and performance of wind turbines. The Bureau of Ocean Energy Management (BOEM) recently held an offshore wind auction for five leases off the coast of California, its first lease sale covering the Pacific. The agency has run about a dozen competitive lease sales and issued 27 commercial wind leases along the Atlantic coast. 

Siemens Gamesa’s whitepaper echoes the sentiments of other stakeholders advocating for more effective climate legislation and loosened regulatory barriers. 

Private industry’s concerns are being heard, though. For example, the BOEM recently proposed a set of modifications to its offshore wind lease auction process and development timelines. 

According to a summary by K&L Gates, the agency suggested establishing a public renewable energy leasing schedule, eliminating approval for meteorological buoy deployment, increasing flexibility in design parameters and turbine locations, improving the verification process involving project design and installation, adjusting financial assurance requirements and reforming lease auction regulations, among other changes.