General Electric is looking to offshore wind power as one way to rebuild its earnings, as its traditional business making equipment for gas-fired power plants faces weaker demand because of the shift towards renewable energy sources.
Jérôme Pécresse, chief executive of GE Renewable Power, said the company could “get many positives out of the energy transition”, and was investing heavily in new products to enable it to compete against rivals including Vestas and Siemens Gameas.
It is planning a giant new wind turbine, almost as tall as the Eiffel Tower, for use offshore, a market where GE has until now been weak. The planned expansion in wind power comes as GE cuts 12,000 jobs from operations making equipment for gas-fired and coal-fired power plants.
GE not only has the core competency to build and manage offshore wind power, but it also has the capital needed for such a capital-intensive undertaking.
Once considered a fantasy wind power is currently disrupting the power industry. It represented just under 10 per cent of all the generation capacity installed by major manufacturers in 2017. Meanwhile, 122 large gas turbines for power generation were sold in 2017, down from 181 in the year earlier period; that represents a 33% decline. As countries continue to shift away from coal to clean energy the slide will likely continue.
The deemphasis on coal has hurt railroads like Norfolk Southern (NSC) and CSX (CSX) with a high concentration of coal traffic, so why wouldn’t it impact the power generation industry? As sales of large gas turbines were peaking GE was doubling down in space the with its $10 billion acquisition of Alstom’s (ALSMY) (AOMFF) power division two years ago. The turbine services backlog and expected cost synergies from the deal never materialized. GE recently announced it would layoff 12,000 employees in an effort to wring $3.5 billion in cost savings from Power Systems.