Global pandemic of COVID-19 has made an impact on supply chains in the wind sector like many other manufacturing or service enterprises and will continue to do so in the months ahead.
Some project milestones will be deferred, with impacts being felt throughout the whole value chain, whilst at the operational level; turbines, blades, component and material orders will be cancelled or unfulfilled, the latest report from the Global Wind Energy Council (GWEC) stated.
There will be staff lay-offs and facility closures and back office functions will be reduced to skeleton levels with home working becoming prominent.
The supply chains have less multi-level integration and are not as reliant on just-in-time disciplines. This means that short or medium termed adjustments can be more readily accommodated.
By far the biggest challenge for entities of any size however, concerns the dramatic reductions in revenue creation which will ensue. In a business crises in particular, one of the first jump-to solutions is to delay payments to creditors.
This has knock-on effect throughout the value chain, where the least solvent down the line are particularly vulnerable. For some, the crippling effects of a collapse in cash-flow will be impossible to avoid.
On the positive side for wind however; turbine makers and suppliers are, to a large extent, now used to operating in an increasingly price focused environment, in which wind project and equipment costings have fallen dramatically in recent years, GWEC noted.
Businesses also went through the extreme hardships of the last financial crash, and whilst some were merged or disappeared in that particular global rupture, many survived, becoming both leaner and stronger.
Also, given the sector’s often ‘fluidity’ regarding project approval and implementation timing, businesses have become adept at juggling frequently changing schedules and responding to last minute cost down demands. However, in the case of COVID-19, there are additional factors at play which are uniquely challenging.
Firstly, it has affected supply chains across most sectors. This means that opportunities to offset wind business losses with bouyancy elsewhere do not exist.
Secondly, even though some governments have announced various financial support packages, how that transpires, case by case, depends on prioritization, value, support duration and the willingness of financial institutions to fully engage.
In terms of short-term mitigation, the bigger sector players must now work collaboratively with supply partners to overcome immediate difficulties. Where effective, this could include help to broker potential support packages or provide relief on contracted services. This starts with supply chain professionals carrying out urgent partner reviews and then agreeing, where appropriate, what bespoke support plans are needed.
The truth in any scenario is that some business will fail and others merged or broken up. What is different this time however, is that job retention and industrial stimulus, in the context of the Green New Deal, will all be in the governmental mix.
Lastly, according to GWEC, its easy to scapegoat in a crisis, and one disturbing outcome of the current turmoil is a knee-jerk rush to condemn ‘globalization’ and what some see as on over reliance on China.
Even before COVID-19, the collective ability to deliver on commitments made during project auctions, was extremely stressed. Maintaining competitiveness in a global industry like wind depends upon objective, business-led, decision making.