One Super Bad Day For Fossil Fuels: Siemens Cuts Workforce, Keystone Oil Pipeline Leaks

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Fossil fuel stakeholders got a double dose of bad news yesterday. In the morning Siemens announced it would drop thousands from its power and gas operations, partly due to a drop in demand for oil and gas turbines. Around the same time, TransCanada sent out word that its that Keystone tar sands oil pipeline sprang an underground leak in South Dakota.

The timing was just a coincidence, but it demonstrates how quickly the world is turning away from fossil fuels — and why.

Siemens: Canary In The Coal Mine For Natural Gas

In yesterday’s announcement, Siemens made it clear that renewable energy has become a force to be reckoned with. Here’s Lisa Davis of Siemens Managing Board with the explainer:

“The power generation industry is experiencing disruption of unprecedented scope and speed. With their innovative strength and rapidly expanding generation capacity, renewables are putting other forms of power generation under increasing pressure…”

Got all that?

The downsizing — 6,900 jobs in all — is intended to remedy “overcapacities” in core sectors — power plants, generators, and large scale electrical motors.

Siemens notes that the global demand for gas turbines with a capacity of more than 100 megawatts has taken a nosedive.

That’s bad, though it doesn’t necessarily foretell the end of the world for gas. Industry analysts are coalescing around the view that smaller scale, distributed electricity generation is the wave of the future, and gas stakeholders have been lobbying for a share of that pie.

In fact, Siemens notes that development of a new “mobile gas turbine” represents the kind of steps it has taken to respond to the “growing market for quick power generation.”

However, renewables could eventually push gas out of that part of the market, partly with the help of portable and transportable microgrids.

Reuters was among the first news organizations to spot the Siemens announcement. It notes the falling demand for large gas turbines:

Demand for powerplant sized gas turbines has tumbled and is expected to bottom out at 110 turbines a year, compared with total global manufacturing capacity of around 400 turbines, Siemens said.

Reuters also underscores that both oil and gas are feeling the pinch:

Siemens’ Process Industries and Drives division, which makes large mechanical drives for oil and gas extraction and turbines, will also be hit, Siemens said, not ruling out forced layoffs as part of the plan.

Wind Power: It’s Complicated

The Siemens development doesn’t particularly bode well for wind power. In fact, just last week Siemens announced thousands of layoffs in its Gamesa wind power division.

The layoffs — reportedly as many as 6,000 are in the works — have been attributed to stiff competition within the wind power ranks. That’s partly a consequence of falloff in demand as important subsidies are phased out, and partly due to pressure from the rapid drop in solar costs.

However, the market could turn around over the long run. Wind costs are dropping, and two key offshore wind markets have yet to be tapped. One is the USA’s sprawling Atlantic coast, and the other consists of deep ocean areas that require new floating turbine technology.

Helping matters along is the emergence of the electric vehicle market, which will continue to drive the demand for electricity.

Siemens may be winding down its wind and solar operations to focus on core business (it dropped solar back in 2012), but other companies are picking up the slack.

More Bad News For Oil

As for where all that electricity will come from, analysts agree that coal has no future as a mainstream fuel. So far, cheap natural gas has been the main force driving coal out of the market, but low cost renewables beginning to put the squeeze on natural gas.

That leaves oil, and the pressure is coming from all directions. Renewables are replacing diesel-fueled power plants, cities are beginning to look at bans on gasmobiles, the EV market has been expanding into buses and heavy duty vehicles, the “energy poverty” case for small diesel generators is crumbling, and green alternatives are beginning to supplant petrochemicals.

Oil’s role in global climate change and local pollution hazards is also part of the mix.

In the latest oil related crisis, yesterday TransCanada shut down its Keystone tar sands oil pipeline from Alberta all the way down to Cushing, Oklahoma after discovering a 5,000-barrel leak. about three miles southeast of Amherst, South Dakota.

An assessment of the damage is still under way, including possible groundwater contamination.

That’s far from the first time that Keystone has leaked oil in South Dakota and elsewhere.

Meanwhile, Nebraska is on the verge of a critical decision on whether or not to permit TransCanada to build a leg of its notorious new Keystone XL pipeline within the state’s borders.

Keystone XL appeared all but dead at the close of the Obama Administration, but President* Trump gave it the green light last spring.

It’s a good guess that the latest Keystone leak will not prevent the Nebraska Public Service Commission from approving Keystone XL, regardless of the pressure from environmental groups and local stakeholders.

However, the pipeline faces an unclear future. As of last summer, TransCanada was reportedly having a hard time convincing oil companies to commit to the project.

TransCanada has pushed back against the reports, but just last week Bloomberg noted that the company seems not to have convinced enough buyers to fill its oil transportation capacity, and is now turning to the Alberta government for help.

On top of that, the Omaha World-Herald notes that the project is encumbered by potential lawsuits, which may delay it indefinitely even if it is approved.

Even if TransCanada succeeds in shaking off the legal weeks, World-Herald reports that a cloud of “uncertainty over the economic viability of the $8 billion project” is casting a dark bottom line shadow over the project.

The shadow is so dark, according to World-Herald, that TransCanada is still trying to figure out if it wants to move forward with the project after all.

A decision by TransCanada is expected next month, so stay tuned for that.

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Image (screenshot): Keystone oil leak via Facebook.

*As of this writing.

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Tina Casey

Tina specializes in advanced energy technology, military sustainability, emerging materials, biofuels, ESG and related policy and political matters. Views expressed are her own. Follow her on LinkedIn, Threads, or Bluesky.

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