Siemens Gamesa cancels $200M Portsmouth wind blade factory

Amid failing turbine components and financial challenges, Siemens Gamesa Renewable Energy said Friday it has “discontinued” its plans to build the nation’s first offshore wind-turbine blade manufacturing facility at the Port of Virginia’s Portsmouth Marine Terminal.

“Siemens Gamesa will continue to meet our obligations for the Coastal Virginia Offshore Wind project. Siemens Gamesa discontinued plans to build and operate an offshore blade facility in Virginia, as development milestones to establish the facility could not be met,” a spokesperson for the Spanish-German wind turbine company said in a statement. 

The $200 million project, first announced in October 2021, was expected to create 310 jobs in Portsmouth — and also was viewed as a major step toward creating a U.S. offshore wind manufacturing hub in Hampton Roads. The factory was set to support Dominion Energy’s $9.8 billion Coastal Virginia Offshore Wind project 27 miles off the coast of Virginia Beach, and Siemens Gamesa had leased 80 acres at the port’s Portsmouth terminal next to 72 acres leased by Dominion for staging and preassembly of the foundations and turbines for the wind farm.

When completed, the 2.6-gigawatt, 176-turbine wind farm will power 660,000 homes, according to the Richmond-based Fortune 500 utility. Last week, Dominion passed critical hurdles to start construction as planned in the second half of 2024, with a 2026 delivery date. The first foundation posts, or monopiles, for the wind turbines began arriving at Portsmouth Marine Terminal in late October.

The Port of Virginia was notified several weeks ago that the Siemens Gamesa project was not going to proceed, and Siemens Gamesa honored the port’s termination fee, according to Aubrey Layne, board chair for the Virginia Port Authority, which oversees the Port of Virginia.

“Obviously from the economic development perspective for the state, that’s a disappointment,” Layne said Friday. “While we are disappointed, it doesn’t impact our ability to move forward in terms of how we would use the facility. [We’re] more saddened by the fact that it did not work out for offshore wind development with them, and we’ll see if somebody else steps in their place.”

“This announcement has no impacts on our project,” Dominion spokesperson Jeremy Slayton said Friday. “Due to the timing of our project, the proposed facility was not scheduled to manufacture our blades.”

Components for Dominion’s project are being manufactured at another Siemens Gamesa facility in Europe, where the company is making the turbines, consisting of blades, nacelles and hubs.

“We have confidence in Siemens Gamesa, a turbine vendor with decades of experience as the global leader in wind turbine technology,” Slayton said. Dominion locked in the costs and production contract early. Siemens Gamesa made the pieces for the two pilot turbines currently operating off the coast, which Slayton noted “are exceeding expectations” since becoming operational in 2020.

Asked how the cancelled project will impact regional plans for Hampton Roads to become an East Coast manufacturing hub for offshore wind operations, Layne said the port will continue to work with state and local economic development officials to develop the property. “We’ve got other uses for it, so we’re gonna be a good partner,” he said.

The Hampton Roads Alliance also weighed in on the potential impact to Hampton Roads.

“As the offshore wind industry shifts its focus from Europe to the United States, changes in the scope of emerging projects bring with it changes in supplier demand,” Doug Smith, president and CEO of the alliance, said in a statement. “Just last week, however, Dominion was granted approval to build the largest offshore wind farm in America off the coast of Hampton Roads. In addition, the City of Norfolk was awarded a $39 million grant to work with the Miller Group to turn Fairwinds Landing into an offshore wind logistics facility. These announcements put Hampton Roads in a better position than ever to serve as America’s East Coast offshore wind logistics and manufacturing hub and to create thousands of jobs over the next decade.”

Heavy headwinds 

However, Siemens Gamesa has had major economic difficulties in recent months stemming from malfunctioning turbine parts.

The company scrapped its profit guidance in late June, citing a “substantial increase in failure rates of wind turbine components” at its wind division, CNBC reported in July, and in a single day in June, Siemens Energy’s stock fell by 37%.  Specifically, the problems involve turbine platforms, rotor blades and main bearings, Reuters reported. And two weeks ago, Siemens Energy said it was in talks with the German government to secure financial assistance to finish future large projects.

Other wind energy companies have also seen difficulties in recent months, indicating a wider problem in the industry. On Tuesday, a Philadelphia news channel reported that Ørsted, the Danish firm that built Dominion’s first two offshore turbines in 2020, is trying to get out of a $300 million payment to New Jersey after canceling two offshore wind farm projects in southern New Jersey. In late October, Ørsted said it had booked an impairment charge of more than $4 billion against its U.S. offshore portfolio, while announcing its decision to scrap its two New Jersey projects.

Layne said he and port officials have been in regular contact with Siemens Gamesa about the reported turbine issues and concerns with the wind industry.

Slayton said Dominion still plans to help establish a domestic offshore wind supply chain in Hampton Roads, saying that the region is ideally situated to capitalize on the wind industry.

“The offshore wind supply chain in the U.S. is in the development stages,” he noted. “We have that tangible evidence that offshore wind is happening in Virginia, and we are moving forward full steam ahead to start that offshore construction in May of next year.”