Lighter winds impacted the performance of the two largest offshore wind players of the world in the first quarter – Orsted and RWE, which highlighted the extent to which profit in this booming industry is dependent on weather conditions.
Wind speeds in the April-June period were “significantly lower than normal”, said Denmark’s Orsted, and noted that the latest completed quarter was among the three worst quarters in the past more than 20 years.
This performance during the quarter would potentially result in the company being to achieve only the lower end of its guided core profit range for the entire of 2021.
Confidence was however expressed by Orsted about the wind speeds returning to more normal levels.
“Over time the wind speeds have been incredibly stable. We build wind farms that have an average life time of 30+ years and we have no reason to believe that this is something which will structurally challenge that,” CEO Mads Nipper told journalists.
Wind speeds during the quarter amounted to an average of 7.8 meters per second (m/s) all across the offshore portfolio of the company, Orsted said, and noted that the speed was lower than the 8.4 m/s that was witnessed by the company in the same quarter a year ago. It stated that the normal expected wind speed at this time of the year was 8.6 m/s.
An identical factor of much lower wind volumes in Northern and Central Europe compared to the very high level of speed that were seen in the same period last year was enumerated by Germany’s RWE as the company reported a drop of 22 per cent in its core profits at its offshore unit to 459 million euros ($539 million) during the first half of the current year.
These results of the top companies in the renewables segment highlight that despite strong fundamentals, renewable energy technology continues to be intermittent in nature where earnings are directly and significantly impacted by changes in the level of winds and sunshine.
Currently Orsted has mainly focused its business on the North Sea but the company now plans to expand its operations into new parts of the world such as the United States and Taiwan in order to mitigate some of the risks related to climate in the region it is focused on now. For this purpose, the company has already invested in technologies including solar PV and onshore wind.
Similar comments were also made by RWE.
“We also need diversification … because sometimes the business is volatile. And ideally it’s diversification across different technologies but also across different regions,” CEO Markus Krebber told journalists.
Orsted currently had no evidence that suggests that more extreme weather, potentially a result of global warming, would have an impact, Nipper said. RWE was however more cautious in this regards as its business was impacted by cold spells and floods this year, as was evident form the comments of Krebber.
“Aside from the fight against climate change we also have to deal with these weather effects becoming more regular,” Krebber said.
(Adapted from USNews.com)