Wind power becoming too cheap to support itself

The cost of wind power has recently dropped to levels that allow a challenge to such fossil fuels as coal and natural gas, thanks to an enormous investment boom in green energy.

“What we’ve clearly achieved is that wind power is now cheaper than anything else. But I believe we shouldn’t make it too cheap,” Siemens Gamesa’s Chief Executive Andreas Nauen said as quoted by Reuters.

In Europe, wind and solar are reportedly significantly cheaper than coal, natural gas and nuclear power. Driven by the green transition aimed at addressing climate change, demand for wind turbines is at a record high. However, lower prices and increased competition have seen producers’ margins squeezed.

“We have probably driven it too far,” Nauen said, stressing that the sector wouldn’t be able to invest in innovations if the drive to cut the cost wind power continues at the same rate.

Rising costs stemming from the global supply crunch and high prices for such raw material as steel are also eroding the operating margins of turbine makers.

Earlier, Siemens Gamesa, one of the world’s largest suppliers of wind energy technology, as well as its major rival Vestas, warned they have been able to pass on to customers a part of these higher costs, which is likely to be reflected in higher auction prices and power purchase agreements over time.

Governments around the world have been phasing out generous wind subsidies, opting for more competitive contract tenders, and favoring project developers that submit the lowest bids.

“We need to change auction systems in the future,” the top manager said, suggesting that criteria such as local job creation should be considered instead of focusing only on price.

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