Siemens Gamesa Egypt sees Russia-Ukraine war threatening wind energy growth

By David Whitehouse

Posted on Wednesday, 16 November 2022 11:28
Photo supplied.

Supply chain challenges arising from the Russia-Ukraine war present risks to the short-term development of Egypt’s wind power industry, Ayman Saad, CEO of Siemens Gamesa Egypt, tells The Africa Report.

The company, Egypt’s largest supplier of wind turbines, sources equipment from Germany and Spain as well as components from China. Costs of raw materials, including steel and transportation, have risen due to the war in Ukraine.

The uncertainty over how long the war will last makes it hard to accurately cost projects, Saad says. “We need to work on our supply chain”, which is a “major issue.”

“It’s very difficult to plan. We don’t know what will happen tomorrow,” Saad says. “No-one can give you a long-term commitment on cost.”

The Russia-Ukraine war and the European energy crisis is creating new opportunities for Egypt as a wind power exporter, while at the same time making it harder to deliver projects. 

Inevitable risks

Partial solutions for Siemens Gamesa Egypt have so far included increasing the amount of local content and improving design efficiency. The company is “exploring all options” and looking for new suppliers with competitive prices, Saad says.

Developers and suppliers alike will “have to take some risks” in the short term, Saad says, adding that “everyone has to be innovative” to ensure that projects are feasible.

The fact that project sizes are becoming bigger, in the range of gigawatts rather than 100 to 200 megawatts, may convince some investors to back projects, he adds.

An agreement for a 10-gigawatt project, which will be one of the largest in the world, was signed at COP27 by Masdar of the United Arab Emirates with Infinity and Hassan Allam Utilities of Egypt.

Siemens Gamesa delivered the first wind farms in Egypt in 2005. It now has 1.5 GW of installed wind capacity and a 90% market share in the country. Existing projects include the 250 MW West Bakr wind farm in the Gulf of Suez area with African renewable power generation company Lekela.

The parent company, Siemens Gamesa, posted a net loss of €940m (around $977m) for the 2022 fiscal year to the end of September, citing supply chain disruptions and higher costs for inputs and shipping. Siemens Energy, which owns 67% in Siemens Gamesa, is offering €4bn to purchase the remaining one-third stake in the Madrid-listed company.

More aggressive trajectory

The plan for Saad is to target both the Egyptian domestic market and European exports. Wind and solar generated a record 24% of EU electricity from March to September, up from 21% a year earlier. This has saved the EU about €11bn in fossil fuel costs during this period, according to research from E3G and Ember.

Mild weather and high storage levels have so far eased some of the energy pressure on Europe, according to the International Energy Agency (IEA). 

Next year’s winter may be harder in Europe, highlighting the need for an accelerated reduction on gas reliance, the IEA says. The EU and the UK could face a gap of 30bn cubic metres of natural gas during next year’s summer refilling period, the IEA estimates.

Saad sees Egyptian wind prospects in the long term as “very strong”. The government has a target of 42% of energy to come from renewables by 2035, but developments at COP27 indicate that a “more aggressive” trajectory will be pursued in light of the energy crisis caused by the war.

Siemens Gamesa will have a “considerable” business in Egypt “if we do our work properly. It’s moving much faster than we ever thought”, Saad says.

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