Kill With A Borrowed Knife

Beijing sharpens the blade, as Western wind firms bleed cash

“The last capitalist we hang shall be the one who sold us the rope” – Karl Marx

The offshore wind (OSW) market is perhaps the poster child for renewable energy failure. It is where engineers and accountants intersect on what is possible versus what is affordable. It is also where government ideology crosses paths with reality. Twenty years ago, global OSW capacity was around 1 gigawatt (GW). Today it stands at an optically impressive 83GW. China commands about half of the market.

However, what looks impressive above the waterline hides an industry sinking to the bottom of the ocean, weighed down by the anchor of political miscalculation and tactical stupidity.

The evidence is all too clear.

Financially Unsustainable

If a completely novice investor — who knew nothing about OSW — was presented with a company that had sustained 40 (yes, forty) straight quarters of losses from its basic operations, even before accounting for tax or loan costs — totalling US$12.8 billion — would they think it was a prudent investment with a bright future ahead?

That is the reality of one of the world’s largest wind power manufacturers, General Electric (GE), which now sits under the GE Vernova brand. Ten years of straight losses, despite all of the subsidies and support mechanisms thrown at it around the world. While the onshore wind part of the group managed to see a brief period of profitability during 2023–24, it was offshore wind (OSW) that dragged the division back into loss.

Annual and quarterly earnings reports, as well as investor conference calls, tend to reveal the devil in the details of why divisions perform the way they do.

Take the GE Vernova conference call back in December 2024. CEO Scott Strazik said the company would not be taking on new orders for offshore wind, suggesting there was little to no growth over the next three years.

Embarrassingly for GE Vernova, it turns out that an internal probe discovered shortcuts on quality control – related to bonding materials at its Quebec turbine blade factory – which had been behind several high-profile accidents such as those at Dogger Bank in the UK and Vineyard Wind in the US. Several of the flagship large-scale 100-metre long Haliade-X blades delaminated and consequently disintegrated within several months – despite the 25-year projected lifespan. Unsurprisingly, this required expensive environmental clean-up operations and delays that strained the company’s cash flow.

Luckily for Mr Strazik, he was extremely optimistic. Not about OSW, but about the prospect of growing customer interest in nuclear, gas turbines and grid software across its other divisions because of the explosion in data centre demand. For any C-suite executive, being able to sound upbeat for shareholders and financial analysts is a must. He said, “I can’t think of a time that the gas business has had more fun than they’re having right now.” One can only imagine the contrast of funereal depression within the OSW division.

Product defects were not just a GE problem. After all, the larger the size of the turbines, the more technical the challenges become in terms of installation, blade strength, the load on bearings, high-voltage cable durability, sea floor depths and weather-proofing to mitigate the effects of corrosion at sea, especially those further away from coastlines.

In the mad rush by OSW manufacturers to capture share in an ultra-competitive marketplace, all boasted about the merits of more powerful (i.e. larger diameter) turbines under the guise of enhanced efficiency, lower cost and superior energy output. Unfortunately, testing and evaluation clearly took lower-order priorities in the rush for market share, as warranty claims over the last decade have trebled as a percentage of revenue to six percent.

Not surprisingly, as the capital costs of larger turbines are higher, operators have been more sensitive to ensuring they maximise the use of in-warranty periods, which tend to last around five years. Manufacturers have also been taking on separate insurance policies to mitigate risks outside the warranty windows.

Siemens Gamesa Renewable Energy (SGRE) – formed through the merger of Siemens Wind Power and Gamesa of Spain in 2017 – captures these unfortunate dynamics.

Due to widespread defects in SGRE’s top-of-the-line 4.X and 5.X turbine series models – affecting up to 30 percent of that installed base – warranty costs to repair poor-quality blades, gearboxes and bearings blew out to €472 million in the first quarter of 2023. Six months later, major shareholder Siemens Energy quantified further warranty provision charges of €1.6 billion in the third quarter of 2023.

By November 2023, the German government agreed to provide a €7.5 billion guarantee to parent Siemens Energy, as part of a larger €15 billion support package to underwrite loans to ensure contracted projects could be completed. SGRE was absorbed into Siemens Energy in May 2022, with the latter buying out the remainder of the shares it didn’t own. For context, SGRE had fallen into negative equity (goodwill trading at €2.3 billion versus shareholder equity of only €1.8 billion).

Over the past two years, Danish giant Vestas needed to set aside €1.5 billion to cover blade and gearbox warranty repairs of models such as the V150-4.2MW turbines.

Vestas joined the ‘build it bigger’ frenzy of its competitors and stated its group operating profit margins in 2025 would be diluted due to ramp-up costs related to the new V236-15.0 MW platform and the delivery of initial orders of the type.

If the costs of replacing parts under warranty provision were not bad enough, the supply chain pressures are compounding losses for manufacturers. Contractual penalties – which cover liquidated damages – are also applied on a daily basis while turbines sit idle if replacements or repairs extend beyond a reasonable time. Force majeure is also harder to claim if these problems arise from known manufacturing defects.

Cancelled Projects

Project cancellations have not helped sector confidence.

In the US, 13 gigawatts (GW) of OSW projects across New York, New Jersey, Massachusetts and Connecticut met this fate. Trump’s election will only exacerbate this phenomenon.

Remember that this is an industry that demands high capacity utilisation rates to cover the expensive upfront capex and the high fixed-cost nature of the production cycle, driven by low-lot long lead-time production in order to stay – no pun intended – afloat. Danish company Ørsted has been one of the biggest victims of the US fallout.

Ørsted’s total revenues have declined from a peak of DKK108 billion (US$16.8 billion) in fiscal year (FY) 2022 to DKK58.8 billion (US$9.15 billion) in FY2024. Its share price has fallen over 80 percent during that time.

In August 2025, Ørsted – not only suffering from all of the other ailments as the other OSW players – announced it would raise US$9.4 billion (equivalent to 50 percent of its market capitalisation) via a rights issue, of which 50.1 percent will be underwritten by its largest shareholder, the Danish state.

A bulk of the funds are to be directed towards the Sunrise Wind project in the US. This was triggered because Ørsted’s original US partner, utility Eversource Energy – probably sensing a Trump victory – announced it was exiting OSW in 2024 and the Danes agreed to full ownership. Ørsted stated in its capital-raising filing:

“Following the recent material adverse development in the US offshore wind market, it is not possible for Ørsted to complete the planned partial divestment and associated non-recourse project financing of its Sunrise Wind offshore wind project on terms which would provide the required strengthening of Ørsted’s capital structure in order to support the company’s investment programme and business plan.”

While President Trump is freezing new offshore wind permits, Sunrise Wind is expected to be delayed by at least one year. Still, that doesn’t bode well for efficient capital deployment.

Beyond supply chain challenges, raw material inflation has only added to the sector’s pain. Aggressive pricing competition has also crushed margins, not to mention higher project financing interest rates, increasing the levelled cost of energy (LCOE) by as much as 60 percent.

Installation Fleet Shortages

Turbine installation costs present another challenge, especially associated with the limited supply of specialised wind turbine installation vessels (WTIVs), which assemble the towers and turbines from port side to sea. At present there are 50 of these vessels in operation and 33 belong to China.

As turbines increase in size for OSW, two factors impact construction. One is WTIV charter availability, and second is the US$200,000 per day rental charge to secure a WTIV capable of handling the latest behemoths.

Despite the proposed delivery of 25 new WTIVs this year, many of the existing fleet are not compatible with larger turbine installations, creating backlogs beyond 2027. For context, on top of three years to receive a new-build WTIV, prices are an eye-watering US$400 million – more than three times that of building a new 320,000 deadweight tonne very large crude carrier (VLCC).

China Syndrome

So where does China sit in the midst of such hard times faced by Western manufacturers?

For starters, China is half the OSW market in terms of share. Much like its dominance in solar, Chinese manufacturers are afforded generous government support. This has not been lost on other players.

Beijing provides generous tax concessions, below-market interest loans and export financing, which allows pricing to be half that of Western manufacturers. Under OECD rules, the European original equipment manufacturers (OEMs) are not allowed to offer deferred payment terms.

The Chinese manufacturers can provide deferrals up to three years after the operator is generating revenues from a farm, which lifts the burden on working capital. The extent of this can be seen in the financials of China’s major wind companies. Their accounts receivables to revenues run at around 55 percent versus 10 percent for the European majors.

In April 2024, the European Commission launched an enquiry into these alleged “unfair” subsidies, given the 300,000 people that work in the wind sector in the EU. Naturally, the Chinese protested at what they viewed as “discrimination” and the Global Wind Energy Council (GWEC) leapt to China’s defence to ensure harmony.

GWEC’s actions are hardly surprising when one considers it leads renewable energy delegations at United Nations (UN) COP summits, provides the UN Framework Convention on Climate Change (UNFCCC) with policy inputs and ensures the most vital ingredient to saving the planet – gender diversity and inclusion in renewables.

How convenient it is that China currently co-chairs the UNFCCC’s Mitigation Work Programme, central to driving the global climate agenda.

At one level, one has to hand it to the Chinese Communist Party (CCP). It shows utter contempt for the World Trade Organization (WTO) Protocols of Accession, and our media never calls them out.

Being able to provide such unbeatable terms, we are already seeing so many of the largest competitors and their supply chains on the ropes. Below is a small sample, but growing list, of Western OSW bankruptcies, which all work in Beijing’s favour.

US-based TPI Composites, one of the world’s largest wind turbine blade makers, filed for Chapter 11 bankruptcy in August 2025, citing falling prices, warranty claims and supply chain disruptions. After years of failed restructurings, Dutch medium-sized turbine manufacturer Emergya Wind Technologies collapsed in May 2025.

The End Game?

Is the West conducting self-sabotage?

Europe’s largest wind farm, Markbygden Ett, powered by GE turbines, might be the canary in the coal mine. The Swedish company is currently under administration for signing dud long-term power purchase agreements (PPAs) with Norsk Hydro reportedly at €25/MWh out to 2040. Due to the Ukrainian conflict, the Swedes were squeezed by the massive spike in spot energy prices to cover PPA shortfalls, leading to a material loss of €157 million in 2023.

Interestingly, Markbygden Ett is 75 percent owned by China General Nuclear Power Group (CGN), a group blacklisted by the US on the back of accusations of nuclear espionage. CGN controls stakes in another six major wind farms comprising around 3.4 percent of total Swedish generation.

In recent years, US and EU officials have found rogue communication devices not listed in product documents in some Chinese solar power inverters, storage batteries, and cellular devices.

Three years ago, a Dutch ethical hacker was able to gain access to Solarman, a Chinese company that manages solar panels for 42,000 customers in the Netherlands. By uploading firmware patches to the inverters (which convert DC current to AC) the hacker could control the parameters in a way that could disrupt the power grid on command. It was also alleged that Solarman was sending sensitive consumer data back to China in breach of the EU General Data Protection Regulation, which ensures data privacy.

In August 2024, another Dutch hacker discovered he could control four million solar panels across 150 countries in the same way.

With 90 percent of solar panels and two-thirds of storage batteries made in China, how large is the potential vulnerability to our grid? It is not a matter of whether they have intentions to do it, rather that they potentially can.

Once again, we have to hand it to the CCP in its ability to manipulate our gullible governments and institutions. One of the ancient 36 Chinese stratagems for psychological warfare is to “deceive the heavens and cross the ocean” – which roughly translates as masking your real goals with a fake goal until your aims are achieved.

In 2024, the Europeans introduced legislation banning Chinese equipment makers Huawei and ZTE from 5G cellular networks on the grounds of guaranteeing the protection of critical infrastructure. National security crisis averted? Not exactly.

Under the veil of net zero, China has achieved similar results by publicly guilt-tripping self-absorbed, virtue-signalling politicians and bureaucrats to accelerate the installation of more renewables under the pretence of saving our planet.

In Australia’s case, why should China waste money conducting live-fire drills off our coast when all it might take is a few keystrokes from Beijing to cripple our infrastructure so dependent on their equipment?

To add insult to injury, our government – drowning in the climate Kool-Aid – is heavily incentivising mostly Chinese-made renewables deployment, along with states introducing new legislation which allows ministers to ride roughshod over citizens’ private property rights so arbitrary targets that will achieve nothing can be met. The ancient Chinese had a strategy for that too – “kill with a borrowed knife,” i.e. utilise useful idiots to achieve one’s goals.

In conclusion, it should come as no surprise that renewables are expensive and unreliable energy generators. Much of the world is waking up to the folly of net zero. Except Australia.

As global competitors get squeezed out of the industry, the renewables supply chain becomes firmly in the grip of a country that has shown such contempt for us on so many occasions. Does our political class naively expect it to be a benevolent actor when it is time to replace our obsolete solar, wind and storage fleet?

Michael Newman has four decades of business experience in North Asia and served as NSW’s Senior Trade and Investment Commissioner to the region.

https://jp.linkedin.com/in/mike-newman-3896b810