Siemens Gamesa has decided to shut down its Aoiz factory at Navarre in Spain citing that it is not competitive in the current market environment to produce blades for large turbine models.

“To succeed in that environment and increase the competitiveness of its onshore business, the company will focus on the next generation of large turbines, with rotors of up to 170 metres,” the company said in a press release. Siemens Gamesa added that these models already represent almost half of the current demand and are crucial to increase its profitability and bring further down the cost of clean energy. It said that the plant in Spain makes the SG 3.4-132 primarily for local projects, but higher costs and geographical position (the manufacturing facility is more than 200 km away from the closest port) make it uncompetitive for global markets.

Siemens Gamesa has stated that the closure decision is not directly linked to the Covid-19 crisis, but the effects of the pandemic on the company’s operations and commercial activity have “accentuated the need for action”. The firm has announced that it will start a collective dismissal procedure for a maximum of 239 employees. Negotiations with local workers council are intended to start in the coming days, in accordance with applicable rules and regulations. Information on the final agreements will be communicated once negotiations are completed.

However, the company has stated that it still has strong roots in Navarre where Siemens Gamesa has a global engineering hub for the development and validation of onshore wind technologies. It will also install and test the prototype of its Siemens Gamesa 5.X latest generation turbine in Alaiz at Navarre, where it has run validation campaigns for all its onshore turbines. The nacelle will be assembled in Siemens Gamesa plant at Agreda in Soria, Spain, with other components, such as the gearbox and the generator, sourced from some of its other plants in Spain.

Going forward, Spain will still continue to be the country with the largest manufacturing footprint for Siemens Gamesa. The company has decided to reinforce its R&D related activities, less exposed to market temporary conditions, and in the last two years, it has hired over 450 employees in Navarre and the Basque Country. “The proximity of the Spanish suppliers to our onshore R&D hub represents a big opportunity for them. In 2019 we bought more than Euro1.2 billion to Spanish suppliers.”

REGlobal’s Views: Strong competition and price pressures are leading to a deterioration of margins for wind power equipment manufacturers globally. All major turbine makers have reported a decline in revenues while also downwardly revising the order guidance for upcoming quarters. The major concerns of the sector revolve around global supply chain issues with wind projects witnessing logistical delays. As a practice, going forward, countries should avoid dependency on one or two countries and progress towards attaining self-reliance on domestic production and diversifying their supply networks to overcome future disruptions.