The global wind sector is hitting turbulence

Danish company Ørsted, the world’s largest offshore wind developer, released its latest financial report yesterday (Wednesday).

What’d it say? This year, the company has:

  • ❌ Cancelled two large US offshore wind projects, and
  • 📉 Suffered $4B in impairment losses (ie, abrupt asset value drops).

Hours after this report dropped, the company’s shares had tanked 26%.

Where’s the intrigue? Most wind developers are now facing headwinds:

  • 🇯🇵 Various trading houses have cancelled wind projects in Japan, and
  • 🇸🇪 Swedish group Vattenfall halted one of the UK’s largest offshore wind projects in July due to “market conditions”.

What’s the problem?

  1. 📈 High interest rates have made project finance costly
  2. 💸 Stubborn inflation has caused production costs to spike
  3. 🚢 Supply chain bottlenecks have caused delays, and
  4. 💼 Governments are struggling to adjust their rules and incentives to keep projects viable over long time horizons.

Intrigue’s take: There’s a whirlwind of different objectives at play here: maximise shareholder value; keep energy costs low; hit net-zero targets; and put government debt on a sustainable trajectory.

When you mix them all together, the result is some clear market signals right now: renewable energy stocks have dropped around 30% since July, while fossil fuel stocks keep rising (and the sector looks as bullish as ever).

The path to net-zero is looking a little bumpy.

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