Recovery in wind energy is picking up speed
Prospects for sector looking up on hard-nosed commercial and strategic grounds
Over the past five years the European wind industry has been squeezed by rapidly rising costs on the one side and penny-pinching clients on the other. Those ill winds, plus the arrival of Hurricane Trump, have sunk the market capitalisations of equipment suppliers such as Vestas and project developers like Ørsted, which are still trading well below their 2021 peaks. But results from the pair this week point to improving conditions.
For one thing, a huge post-pandemic increase in the cost of raw materials and components has largely been worked through. At Vestas, which makes wind turbines for onshore and offshore projects, operating margins in the second quarter came in at 9.4 per cent, up from 1.5 per cent this time last year. And Ørsted, which raised $9.4bn of capital less than a year ago, had no further bad news to report on its costly and delayed legacy projects.
It also looks like governments are coming around to the notion that electricity generated by wind farms is worth supporting, even if it is more expensive than originally envisaged. The UK led the way with its January auction for new offshore capacity, in which developers won the right to build projects despite requiring relatively high fixed electricity prices. Denmark, which set such tight terms at its 2024 auction that it failed to attract any bidders at all, ran a successful round earlier this month, while the Netherlands is reintroducing subsidies for its planned November auction.
European governments have obvious incentives to back wind projects again: tensions over the Strait of Hormuz in Iran have driven up the cost of generating electricity with natural gas and also heightened concerns about energy security. Even in the US, despite President Trump’s opposition to wind turbines, 2026 onshore installations are set to be the highest in five years, according to Wood Mackenzie, as data centres demand increasing amounts of power.
As the outlook for wind power brightens, European suppliers and developers are arguably in a better competitive position than they once were. While Chinese turbine suppliers have made great strides, geopolitical tensions may dissuade government and corporate clients in Europe and the US from buying their wares.
Meanwhile, oil companies — which in past bidding rounds won around 15 per cent of acreage off the US east coast, according to UBS analysis — have largely pivoted back to their legacy businesses. That suggests specialists like Ørsted will no longer face hordes of fossil fuel giants keen to burnish their sustainability credentials by waving their cheque books about.
Wind energy has been a spectacularly poor investment in recent years. But despite the pullback in many governments’ green ambitions, prospects for the sector are looking up on hard-nosed commercial and strategic grounds. There may be something to salvage from this wreckage after all.