GE Vernova chief Strazik says no more offshore wind orders without better terms

GE Vernova is “very appreciative” of its partnership with New York, its round 3 auction, and other states to help build the US offshore wind industry but won’t book new turbine orders unless economic terms are “materially different” than those in its backlog today, CEO Scott Strazik said Thursday.

“That’s a combination of many things – price, other terms, and really leaning in on projects that are set to thrive,” Strazik told analysts on a first quarter earnings call, adding: “There is a lot of complexity in offshore wind we are learning from.”

"In offshore, we are working towards the existing backlog. We believe offshore is an important part of the energy transition here," he said. "We will remain highly selective on new orders."

GE Vernova’s offshore wind business lost $1.1bn in 2023 and this year won't be much better as it grapples with the “tough economics” of a $4bn backlog of orders for the 6MW Haliade and 14MW Haliade-X turbines in Europe and the US for delivery over the next two years.

In today’s difficult economic environment, the OEM is executing on contracts priced and signed before the Covid-19 pandemic, an era of cheap borrowing costs and low inflation, fully functioning global supply chains, and geopolitical calm.

Those low prices also resulted from turbine suppliers bidding assertively against each other to secure orders, looking to get their foot in the door in emerging markets such as New England in the US.

In the past 18 months, GE Vernova, recently spun-off as an independent company, has streamlined its wind turbine offerings to several “workhorse products.” For offshore, this is a 15.5MW turbine with the ability to have a power boost up to 16.5MW. Plans call for a prototype running by the end of 2025, according to Strazik.

GE Vernova’s move to focus on the 15.5MW turbine and move away from a promised 18MW offering for three projects off the coast of New York led the state to scrap its blockbuster 4GW round 3, dealing another setback to the US industry already struggling to gain scale and become cost competitive.

The New York State Energy Research and Development Authority (Nyserda), which is overseeing the state’s energy transition, said GE Vernova’s decision not to deliver an 18MW turbine “caused material changes” to three proposed projects.

A smaller turbine would force the developers to redesign their projects and raise capex due to the need for eight to 12 more units per array, along with associated cabling and other ancillary construction costs and higher operations and maintenance (O&M).

The OEM’s18MW platform and its proposal to build supporting nacelle and blade manufacturing plants through its subsidiary LM Wind formed the basis of each developers’ bid.

These include supply chain such as a paucity of installation vessels with crane capacity for heavier 18MW turbines, electric grid access, and port infrastructure challenges.

Strazik appeared to allude to those hurdles by noting, “it’s been hard to get projects to a point where they are ready to thrive.”

He said GE Vernova believes offshore wind is a key to the US and global energy transition. “But we are only going to add to the backlog when it is meaningfully different than what we are executing on today.”

Strazik made no mention of any potential GE Vernova decision on offshore manufacturing in New York State during the call.