Both companies agreed to cross licences under the asserted patent families for the life of those patent families.
An amicable settlement was an obvious choice for both parties. Most patent cases in the wind industry ended in amicable settlements by the parties involved - as I mentioned in a previous opinion piece for WPM, “An amicable settlement will benefit both the parties and the broader global offshore wind industry”.
Pressure from customers
The companies were shelling out millions of dollars on legal fees and, most importantly, losing the customer confidence in the technology and the companies’ ability to sell and install turbines in the burgeoning US offshore wind market.
Pressure also came from customers of both companies to settle their dispute, as it will only procrastinate the energy transition in the US as well as globally.
High stakes battle
I anticipate $100 billion of investments flowing into the US offshore wind market by the end of this decade, and these patent wars jeopardised and put that $100 billion at stake.
That is a much bigger concern than the legal fees, as this will have a ripple effect on the offshore wind fortunes for both parties.
Besides these macro wind market dynamics, all the wind turbine OEMs financial margins have deteriorated in the past few years, and these players are leaving no chance to turn around their profits within the next two years.
If these patent battles were prolonged, they would not only dwindle the margins further but also threaten future sales opportunities. The top four wind turbine OEMs collectively reported €5.7 billion in losses in 2022, compared with €1.3 billion in 2018, an erosion by €7 billion.
If GE and Siemens Gamesa were to improve their financial numbers, they had to reconcile their issues and agree to an amicable settlement.
Don’t scare the investors
It has been 32 years since the world’s first commercial offshore wind farm was commissioned. Since then, many turbine OEMs have ventured into this space with minimal success.
Today the top three turbine OEMs command more than 98% of the global market share, excluding China for the following decade. If the leading players indulge in such patent wars, the investment fraternity will shy away from investing in the sector and these OEMs will suffer from a demand slow-down.
The profitable turnaround for these players hinges a lot on offshore volume growth. The offshore segment will become a substantial profit margin driver for these OEMs in the next few years, besides the current biggest driver – the operations and maintenance business segment.
The context of the patent battle
Siemens Gamesa suffered major setbacks in the US onshore wind market in the past three years, partly due to patent challenges with GE: It has been a historical tactic by GE to shut down the competition via the patents. Mitsubishi, Nordex and Vestas were earlier involved in these types of disputes and since mid-2020, they also involved Siemens Gamesa’s onshore technology.
Due to GE’s claim that SGRE infringed it’s low-voltage-ride-through and zero-voltage-ride-through technologies, Siemens Gamesa suffered a significant market share erosion during this period, exacerbated by the slowdown in the US onshore wind market after the earlier production tax credit regime phase-out.
The US onshore order intake of Siemens Gamesa plummeted from 2.4GW in 2019 to less than 400MW in 2021 and 0MW in 2022. Siemens Gamesa was the only player among the top four OEMs not to book any orders in the US in 2022.
In conclusion, GE will have a breathing space to develop the next-generation variant of the Haliade-X platform.
Due to this settlement, GE can compete in the US market with the current generation of Haliade-X, 12MW to 14.7MW with a 220-metre rotor.
However, the current configuration of the Haliade-X is not competitive compared to peers’ offerings.
GE stands a wafer-thin chance of winning any volume in the UK CfD AR4 7GW auction, primarily due to the exemplary turbine configuration from Siemens Gamesa and Vestas.
GE was pressured to announce the next-generation turbine commercially, but the settlement gave it more time to develop the 16-18MW platform.
Shashi Barla is head of renewables research at the Brinckmann Group