Here's a company whose stock is trading at 1994 levels. It never recovered from the "dot-com" crash of 2001. The dividend yield is nowhere close to a US treasury at any maturity. It's losing money left and right. A good chunk of that was the pivot, under Jack Welch's leadership, from actually making stuff into financial services, shedding hundreds of thousands of jobs along the way. GE was therefore well-placed for full-impact during the GFC.
What gets me is how Jack Welch was held up as an amazing businessman and model for corporate flexibility for years while his changes utterly destroyed GE's future for short-term gains. I'd argue the same thing about the Clinton administration and Greenspan specifically. There's got to be a better mechanism to force companies and countries to focus on long-term rather than short-term improvements.
Jack Welch was CEO of a different era. Remember when GE owned NBCUniversal? No? That was also under Welch. The WSJ lays some of the blame of GE's downfall at the feet of his successor, Jeff Immelt.
> GE’s precipitous fall, following years of treading water while the overall economy grew, was exacerbated, some insiders say, by what they call “success theater.” Mr. Immelt and his top deputies projected an optimism about GE’s business and its future that didn’t always match the reality of its operations or its markets, according to more than a dozen current and former executives, investors and people close to the company. [0]
Jack Welch didn't always make great decisions -- diversifying away from GE's core businesses into financial markets, media, etc. His last act of trying to acquire Honeywell failed. But it was Immelt who brought the company down. Immelt grew GE Capital from 40 to 55% of the company at the onset of the Great Recession, took government bailout money when it tanked, then divested it from the company when it was clearly a drag on profitability. He championed GE Digital which never materialized, and then made big bets on conventional energy just when renewables were taking off. I don't know if it could have been different in someone else's hands. But a little more truth-telling would probably have helped. Welch did think that appointing Immelt was his "biggest mistake" [1].
There was a recent book about Jack Welch : The Man Who Broke Capitalism: How Jack Welch Gutted the Heartland and Crushed the Soul of Corporate America—and How to Undo His Legacy
One thing to think about when reading news like this (which is something I learned through the first solar boom): While counterintuitive, it can at the same time be true that a technology is booming and companies building that technology are struggling.
It's not that surprising once you think about it: Booming technologies means more companies enter the market. Some will be able to produce cheaper or better products than what's already there. If the old ones can't adapt they'll struggle.
I would say in climate tech it's a bit different. Yes companies can be suffering but typically for any of these energy technology companies they have significant manufacturing costs and long periods in which they have to deploy that capital to physically manufacture goods. It isn't necessarily the competition that sinks the companies its the market structure and timing.
In the case of solar what happened was that the Chinese government underwrote Chinese manufacturers who produced significant volumes of solar panels which they dumped on the global market for incredibly cheap prices which put pressure on all the other global manufactures and consolidated the market. That said a lot of the Chinese manufacturers also went bankrupt as they undercut each other on prices to fill out the manufacturer queue.
Also in energy tech you don't have infinite upside like technology -- as you deploy hard capital you have a finite range that you can get returns on. In the electricity markets you typically have to build technology and sell it for cheaper than what is currently available (i.e. project finance your project on a PPA < market rates). Already a fundamentally difficult structure to do well in - add in regulatory slowdown, political mandates, utilities as your clients (slow lead times).
this does not translate well to an industry like wind energy where there are multiple moving parts, literally and metaphorically.
the solar industry is literally zero moving parts. Panels and inverters are off-the-shelf commodities that are in a race to the bottom for price. this is further helped by the fact that they are largely interchangeable.
Wind turbines do not function like this and they are complicated, dynamic systems requiring continuous monitoring and regular maintenance.
The reality here is that the wind energy industry is and will continue to see a boom and order books are often full years into the future. Despite the headlines, onshore wind isn't going anywhere because there are many regions around the world where offshore wind does not work well.
Offshore wind is being hyped up by Europe - coincidentally, a region with relatively shallow seas and limited land area. Despite the boom, there are not that many manufacturers of wind turbines precisely because it is a capital intensive industry. This is not good news.
Warren Buffet has some quote on capital intensive industries like you say.
"The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. Think airlines. Here a durable competitive advantage has proven elusive ever since the days of the Wright Brothers. Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down." [1]
The last sentence is a sarcastic quip, for those who aren't familiar with his personality.
Also growth is hard to manage. And GE power has multiple business lines ( nuclear, hydrogen, off-shore wind) that might be better investments and higher margins than onshore wind.
Offshore wind is turning out to be a lot easier to sell.
Unfortunately, the skills involved in deploying on land don't transfer very easily to sea work. Doing anything at sea is a specialty of its own. So, people with long sea experience will learn to put up wind turbines.
I worked in a company that got bought by GE... was incredible how much waste and odd decisions were made. Felt like layers and layers of bureaucracy, and that their main reason for buying us was because they had billions offshore and didn't want to pay taxes to bring it back to USA.
Yes that is exactly what happened Welch came in started pushing the MBA way of doing things, pushed it throughout the entire industry, talked a big game. Tons of MBA programs were focused around the "GE Way" etc. It was when the Peter Principle, people are promoted to their level of incompetence, to the Dilbert Principle, idiots are promoted directly to keep them out of the productive flow.
The MBA ruined many things, it was scientific management brought back with a catchy name. Not creative enough to be in the artists? Lacking the intellectual discipline to become a real process engineer? It's okay you can become an MBA, learn no real skills, no real information and feel superior because then you can lord yourself over the serfs that decided to go into the silly practice of actually providing goods and services, when you can "manage" the people that actually contribute.
Note this shouldn't be taken as a tirade against management, there are good leaders out there that do make things better for those they lead, but my point is that an MBA is totally independent variable to whether or not someone will be a good manager. The problem is that an MBA basically trains people to see their work/world as a video game where they play with spreadsheets, choose the right dialogue options in the tree, and assign your workers to specific tasks, and then when the reality doesn't conform everything hits the fan.
I interned at the GE Wind division in Greenville, South Carolina. It's under GE Energy, and it was a complete and utter disaster.
This was around 2005 and the entire GE Wind division was recently acquired from the Enron meltdown. Part of my job was to sort through a bunch of Enron manuals that had water damage sitting in the Tehachapi desert for 3 years in a warehouse. Surprisingly, the work done at Enron was quite good and bluebooks were really well done. They had already worked on a 5MW version of the turbine and had plans for 8MW. I'd say a third of it was water damaged and impossible to read. But, GE's management was a trainwreck happenning in slow motion beyond that. I worked a little bit with their Bangalore team that was working on wind turbine conceptual design framework. Essentially, GE's internal simulation tool for determining a whole bunch of design envelopes. There was little coordination between the US and Bangalore software team, often stepping on each other's toes. This program ended six months later after my internship. Basically, GE's wind turbine division at the time was Enron's zombie dressed up with nice clothes and trying to stand straight. Idk if things improved after that. I hated that internship so much, part of which was sifting through nasty boxes of molded design docs and then scanning them on a xerox machine.
I know several companies that flat-out refuse to sell components to them. Last I heard, their standard payment terms were net 90, and the word was that they would often overshoot this by another 90 days with smaller businesses. Not getting paid for half a year could easily bankrupt a small company.
Theyve also either sold off divisions or license their names to other companies. GE doesnt make appliances anymore, Haier makes the product and slaps a GE logo on it.
Wasn't GE long ago taken over by MBA sociopaths that cooked books with financial shenanigans, and deemphasized all the actual productivity and technology?
IIRC then the house of cards collapsed right after Jack Welch and his management cult of personality retired?
Likely this is a "last gasp" financial bloodsuck to sell off what remains of the legitimate parts of the company.
As posted elsewhere, the Danish government has almost no financial stake in Vestas.
If they did want to make Vestas their champion, they could make Ørsted, a global leader in offshore wind in which the government has a majority stake, buy Vestas turbines. As it is, Ørsted has historically only bought from Siemens and GE.
In reality, Vestas is based and rooted in Jutland “far” from the capitol.
> While demand for clean energy options is rising as energy shortages continue to wreak havoc, analysts say it’s been difficult to make wind energy a cost-effective option. The recently passed Inflation Reduction Act does restore a tax credit for onshore wind, but some experts worry it came too late.
How many hours per day does a wind tower have to be working and during which lifetime to be able to pay up for all that steel, copper, aluminum, and a couple of rare earth metals, with their prices currently rising, and to offset the environmental impact of collecting and producing such materials?
I don't know about the financial aspect, but there are many studies on the lifecycle emissions of a wind turbine that you can look up. How much CO2 a turbine offsets depends a lot on the grid it's connected to, so there's no single number for "time-to-carbon-negative".
However, remember that all power plants have materials, and wind has the second-lowest lifecycle emissions of all renewable technologies (https://www.nrel.gov/docs/fy21osti/80580.pdf), and of course is orders of magnitude better than non-renewables.
> to pay up for all that steel, copper, aluminum, and a couple of rare earth metals,
This sentence obfuscates that we're just talking about the dollar price here. Which is easily calculated
> offset the environmental impact of collecting and producing such materials?
Harder to decisively calculate but seems unlikely to be an actual issue; and trivial when compared to the opportunity cost of generating the same energy with fossil fuels.
The payback period has been dropping over time and is now under a year, in some cases well under a year. This depends on many things including where it is placed, size of the tower and time of year.
Wind can compete favorably with solar on price when you have the right conditions, which are both starting to beat traditional sources of power. It is hitting the point where you would select either wind or solar for price, when ignoring the desire for stable output.
One current issue for wind power is what to do with the waste. The blades erode over time and need to be replaced, but mostly consists of fiberglass. It's not a huge problem, but each advancement in technology brings a new set of problems to be dealt with. Still, I'd rather deal with fiberglass than nuclear waste.
The operative word here is onshore, for a variety of reasons, like the absence of road/tunnel/bridge permits, neighborhood Karen councils and local politicians, having to manage multiple lease arrangements, etc, etc.
I read an industry article mid-COVID that claimed the biggest barrier to offshore right now was the lack of ships to install them - alleviated somewhat by the introduction of floating offshore rigs, like these:
So yeah, it's gotta be way cheaper to drop a couple of those in the ocean than truck towers out to middle-of-nowheresville or digging a foundation at the bottom of the ocean or whatever.
[+] [-] SevenNation|3 years ago|reply
For some context, GE is kind of riches-to-rags story. Check out this chart of the share price:
https://www.tradingview.com/chart/?symbol=NYSE%3AGE
Here's a company whose stock is trading at 1994 levels. It never recovered from the "dot-com" crash of 2001. The dividend yield is nowhere close to a US treasury at any maturity. It's losing money left and right. A good chunk of that was the pivot, under Jack Welch's leadership, from actually making stuff into financial services, shedding hundreds of thousands of jobs along the way. GE was therefore well-placed for full-impact during the GFC.
[+] [-] mdorazio|3 years ago|reply
[+] [-] hcrisp|3 years ago|reply
> GE’s precipitous fall, following years of treading water while the overall economy grew, was exacerbated, some insiders say, by what they call “success theater.” Mr. Immelt and his top deputies projected an optimism about GE’s business and its future that didn’t always match the reality of its operations or its markets, according to more than a dozen current and former executives, investors and people close to the company. [0]
Jack Welch didn't always make great decisions -- diversifying away from GE's core businesses into financial markets, media, etc. His last act of trying to acquire Honeywell failed. But it was Immelt who brought the company down. Immelt grew GE Capital from 40 to 55% of the company at the onset of the Great Recession, took government bailout money when it tanked, then divested it from the company when it was clearly a drag on profitability. He championed GE Digital which never materialized, and then made big bets on conventional energy just when renewables were taking off. I don't know if it could have been different in someone else's hands. But a little more truth-telling would probably have helped. Welch did think that appointing Immelt was his "biggest mistake" [1].
[0] https://www.wsj.com/articles/how-jeffrey-immelts-success-the...
[1] https://finance.yahoo.com/news/jack-welch-one-regret-general...
[+] [-] geodel|3 years ago|reply
[+] [-] kqr2|3 years ago|reply
https://www.goodreads.com/book/show/59366216-the-man-who-bro...
[+] [-] tootie|3 years ago|reply
[+] [-] hannob|3 years ago|reply
It's not that surprising once you think about it: Booming technologies means more companies enter the market. Some will be able to produce cheaper or better products than what's already there. If the old ones can't adapt they'll struggle.
[+] [-] boringg|3 years ago|reply
In the case of solar what happened was that the Chinese government underwrote Chinese manufacturers who produced significant volumes of solar panels which they dumped on the global market for incredibly cheap prices which put pressure on all the other global manufactures and consolidated the market. That said a lot of the Chinese manufacturers also went bankrupt as they undercut each other on prices to fill out the manufacturer queue.
Also in energy tech you don't have infinite upside like technology -- as you deploy hard capital you have a finite range that you can get returns on. In the electricity markets you typically have to build technology and sell it for cheaper than what is currently available (i.e. project finance your project on a PPA < market rates). Already a fundamentally difficult structure to do well in - add in regulatory slowdown, political mandates, utilities as your clients (slow lead times).
[+] [-] eldaisfish|3 years ago|reply
the solar industry is literally zero moving parts. Panels and inverters are off-the-shelf commodities that are in a race to the bottom for price. this is further helped by the fact that they are largely interchangeable.
Wind turbines do not function like this and they are complicated, dynamic systems requiring continuous monitoring and regular maintenance.
The reality here is that the wind energy industry is and will continue to see a boom and order books are often full years into the future. Despite the headlines, onshore wind isn't going anywhere because there are many regions around the world where offshore wind does not work well.
Offshore wind is being hyped up by Europe - coincidentally, a region with relatively shallow seas and limited land area. Despite the boom, there are not that many manufacturers of wind turbines precisely because it is a capital intensive industry. This is not good news.
[+] [-] gen220|3 years ago|reply
"The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. Think airlines. Here a durable competitive advantage has proven elusive ever since the days of the Wright Brothers. Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down." [1]
The last sentence is a sarcastic quip, for those who aren't familiar with his personality.
[1]: warning, pdf link: https://www.berkshirehathaway.com/letters/2007ltr.pdf
[+] [-] ABeeSea|3 years ago|reply
[+] [-] adrianmonk|3 years ago|reply
[+] [-] ncmncm|3 years ago|reply
Unfortunately, the skills involved in deploying on land don't transfer very easily to sea work. Doing anything at sea is a specialty of its own. So, people with long sea experience will learn to put up wind turbines.
[+] [-] peppertree|3 years ago|reply
[+] [-] aprdm|3 years ago|reply
My faith in anything they do is very low.
[+] [-] unknown|3 years ago|reply
[deleted]
[+] [-] sveme|3 years ago|reply
[+] [-] buscoquadnary|3 years ago|reply
The MBA ruined many things, it was scientific management brought back with a catchy name. Not creative enough to be in the artists? Lacking the intellectual discipline to become a real process engineer? It's okay you can become an MBA, learn no real skills, no real information and feel superior because then you can lord yourself over the serfs that decided to go into the silly practice of actually providing goods and services, when you can "manage" the people that actually contribute.
Note this shouldn't be taken as a tirade against management, there are good leaders out there that do make things better for those they lead, but my point is that an MBA is totally independent variable to whether or not someone will be a good manager. The problem is that an MBA basically trains people to see their work/world as a video game where they play with spreadsheets, choose the right dialogue options in the tree, and assign your workers to specific tasks, and then when the reality doesn't conform everything hits the fan.
[+] [-] neilpanchal|3 years ago|reply
This was around 2005 and the entire GE Wind division was recently acquired from the Enron meltdown. Part of my job was to sort through a bunch of Enron manuals that had water damage sitting in the Tehachapi desert for 3 years in a warehouse. Surprisingly, the work done at Enron was quite good and bluebooks were really well done. They had already worked on a 5MW version of the turbine and had plans for 8MW. I'd say a third of it was water damaged and impossible to read. But, GE's management was a trainwreck happenning in slow motion beyond that. I worked a little bit with their Bangalore team that was working on wind turbine conceptual design framework. Essentially, GE's internal simulation tool for determining a whole bunch of design envelopes. There was little coordination between the US and Bangalore software team, often stepping on each other's toes. This program ended six months later after my internship. Basically, GE's wind turbine division at the time was Enron's zombie dressed up with nice clothes and trying to stand straight. Idk if things improved after that. I hated that internship so much, part of which was sifting through nasty boxes of molded design docs and then scanning them on a xerox machine.
[+] [-] ortusdux|3 years ago|reply
[+] [-] gvb|3 years ago|reply
Ref: "The fall of GE" https://theweek.com/articles/761357/fall-ge (2018)
[+] [-] N19PEDL2|3 years ago|reply
[0] https://www.defensenews.com/global/europe/2022/03/25/us-owne...
[+] [-] pipeline_peak|3 years ago|reply
[+] [-] juice_bus|3 years ago|reply
First I have heard of this!
[+] [-] 7speter|3 years ago|reply
[+] [-] AtlasBarfed|3 years ago|reply
IIRC then the house of cards collapsed right after Jack Welch and his management cult of personality retired?
Likely this is a "last gasp" financial bloodsuck to sell off what remains of the legitimate parts of the company.
[+] [-] boringg|3 years ago|reply
[+] [-] cinntaile|3 years ago|reply
https://m.marketscreener.com/quote/stock/VESTAS-WIND-SYSTEMS...
[+] [-] japanuspus|3 years ago|reply
If they did want to make Vestas their champion, they could make Ørsted, a global leader in offshore wind in which the government has a majority stake, buy Vestas turbines. As it is, Ørsted has historically only bought from Siemens and GE.
In reality, Vestas is based and rooted in Jutland “far” from the capitol.
[+] [-] vondur|3 years ago|reply
[+] [-] bilbo0s|3 years ago|reply
You can't compete against a nation state. Best you can do is have nation states agree to let you in on the action.
[+] [-] Apocryphon|3 years ago|reply
[+] [-] spywaregorilla|3 years ago|reply
[+] [-] unknown|3 years ago|reply
[deleted]
[+] [-] Ligma123|3 years ago|reply
Is their a study that answers these questions?
[+] [-] danans|3 years ago|reply
You are asking about the capacity factor, but that's governed more by when wind is available, and is about 40-50% for onshore wind.
> and during which lifetime to be able to pay up
This is the payback time and there are several to consider.
For the embodied greenhouse gases of the wind turbine, about 5.3 months on average: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6686152/
> for all that steel, copper, aluminum, and a couple of rare earth metals
About 6-7 years for the economic payback of capital costs (not counting the unaccounted avoided $ externalities of displaced fossil fuels).
https://www.semprius.com/how-long-does-it-take-a-wind-turbin...
Turbines last about 20 years.
[+] [-] hannob|3 years ago|reply
It's around 6 to 9 months.
[+] [-] burkaman|3 years ago|reply
However, remember that all power plants have materials, and wind has the second-lowest lifecycle emissions of all renewable technologies (https://www.nrel.gov/docs/fy21osti/80580.pdf), and of course is orders of magnitude better than non-renewables.
[+] [-] spywaregorilla|3 years ago|reply
> to pay up for all that steel, copper, aluminum, and a couple of rare earth metals,
This sentence obfuscates that we're just talking about the dollar price here. Which is easily calculated
> offset the environmental impact of collecting and producing such materials?
Harder to decisively calculate but seems unlikely to be an actual issue; and trivial when compared to the opportunity cost of generating the same energy with fossil fuels.
[+] [-] jseutter|3 years ago|reply
Links to articles that reference the studies: - https://www.windpowerengineering.com/wind-turbine-carbon-pay... - https://www.newscientist.com/lastword/mg24332461-400-what-is...
Wind can compete favorably with solar on price when you have the right conditions, which are both starting to beat traditional sources of power. It is hitting the point where you would select either wind or solar for price, when ignoring the desire for stable output.
One current issue for wind power is what to do with the waste. The blades erode over time and need to be replaced, but mostly consists of fiberglass. It's not a huge problem, but each advancement in technology brings a new set of problems to be dealt with. Still, I'd rather deal with fiberglass than nuclear waste.
[+] [-] s900mhz|3 years ago|reply
[+] [-] Gibbon1|3 years ago|reply
[+] [-] Proven|3 years ago|reply
[deleted]
[+] [-] s900mhz|3 years ago|reply
[+] [-] gsibble|3 years ago|reply
[+] [-] cm42|3 years ago|reply
I read an industry article mid-COVID that claimed the biggest barrier to offshore right now was the lack of ships to install them - alleviated somewhat by the introduction of floating offshore rigs, like these:
https://www.x1wind.com/
So yeah, it's gotta be way cheaper to drop a couple of those in the ocean than truck towers out to middle-of-nowheresville or digging a foundation at the bottom of the ocean or whatever.
[+] [-] throwayyy479087|3 years ago|reply
[+] [-] recursive|3 years ago|reply
These have been around longer than fossil fuel powered ones. They're called bikes.