We discussed the woes of the wind power industry at length in a dedicated ESG and Climate piece last week, and the Vestas results below play into the same theme. The company is cutting guidance again for 2022, which is already much lower than estimates would have suggested 6 months ago. While Siemens Gamesa has the added headache of a mismanaged platform change, all of the issues raised by Vestas are shared industry wide, delayed installations because of supply chain issues and material shortages, as well as significant cost inflation. In tomorrow’s ESG and Climate report we discuss some of the increases in European PPAs in 1Q 2022, reversing a multi-year trend of lower installed costs of power. This reversal will likely impact plans for 2022 and 2023, especially for those banking on lower power costs to justify many of the announced hydrogen ventures – particularly in Europe. Those who press ahead despite higher power costs and higher construction costs in general, may stretch both balance sheets and borrowing capacity.
Source: Vestas – 1Q22 Results, May 2022
Both the Williams and Westlake sustainability summaries below talk in generalities (with some specific initiatives) but also have a common theme around finding their own solutions. Williams talks about renewable power projects as well as CCS initiatives, while Westlake talks about investing in existing and emerging technologies. We have much more faith in companies that are looking to solve their own problems versus those that are expecting other to do it for them. This is most relevant for those that need renewable or low carbon power to replace existing sources. For many manufacturers, the scope 2 emissions associated with their power consumption (scope 1 for co-generated on -site power), are the most significant. We have noted that we believe that for next 20 years, renewable/low-carbon power may be THE scarce resource, and direct investment will be needed to secure both the economics of the power and supply.
Source: Williams – 1Q22 Earnings Results Presentation, May 2022
Source: Westlake Chemical – 1Q22 Earnings Release Presentation, May 2022
