Home Science Mitigation As wind power sector grows, turbine makers feel the squeeze.

As wind power sector grows, turbine makers feel the squeeze.

Vestas Wind Systems and Siemens Gamesa are giants of the wind-power industry, building mammoth turbines that rise high into the air and power more and more homes. But disappointing earnings reports from the two companies this week indicated that even they are struggling to adapt to a fast-changing sector.

Wind power is an increasingly important source of electricity around the world, and prices for the technology are dropping fast. But belt-tightening governments across Europe and North America are phasing out subsidies and tax incentives that had helped the industry grow, squeezing companies like Vestas and Siemens Gamesa in the process.

On Thursday, Vestas, the world’s largest maker of wind turbines, said its revenue in the third quarter fell 6 percent compared with the same period a year ago, to 2.7 billion euros, or $3.1 billion. Profit dropped 18 percent, to about €250 million, Vestas said. The figures sent the Danish company’s shares plummeting by as much as 20 percent.

The Vestas results came just days after Siemens Gamesa Renewable Energy — the recently formed company combining the wind-power units of Siemens, the German conglomerate, and Gamesa of Spain — reported a €147 million loss for the third quarter. The Madrid-listed company also said it would have to shed 6,000 jobs.

Executives and analysts blamed several factors for the two companies’ poor results.

In addition to the phasing out of tax credits and guaranteed prices by some governments, prices for solar power have fallen rapidly, making it a competitor to wind in some parts of the world. Perhaps more significant, countries like Britain, Chile and Germany are using competitive auctions more often to award enormous wind and solar power projects, helping push down costs.

Such auctions have helped lower by 15 percent the costs per unit of electricity generated by onshore wind projects set to come online over the next five years, and by a third for offshore wind projects in the same period, according to the International Energy Agency, an organization based in Paris.

“The overall theme that affects all companies is that you are seeing a transition to power auctions that are quite competitive,” said Brian Gaylord, a senior analyst at MAKE, a market research firm.

As an example of the tougher conditions, Vestas said on Thursday that the price it gets for its turbines has fallen sharply. The company received around €800,000 per megawatt, a unit of power capacity, for the orders it booked in the third quarter of the year. By comparison, it received €950,000 per megawatt in late 2016.

Those cost differences are significant given the size of the wind turbines that Vestas produces. Its largest onshore turbine can pump out 4.2 megawatts of power, enough to provide electricity to roughly 5,000 homes.

In a conference call with analysts on Thursday, Anders Runevad, the company’s chief executive, described a landscape of competitive electricity auctions that started in Latin America and have spread across much of the globe. Vestas said in a statement that it was “seeing accelerated competition and decreasing profitability.”

Things could get worse. Proposals being considered by lawmakers in the United States, one of the world’s biggest markets for wind power, could sharply reduce the value of tax credits for new wind power projects. That would potentially reduce the sector’s growth, and create uncertainty for manufacturers.

“We believe challenges” for wind turbine makers “are mounting,” Sean McLoughlin, an analyst at the bank HSBC, wrote in a note to clients on Monday.

Still, there are positive signs. A close look at the data appears to show that the industry is not in a fatal swoon but needs to adapt to current trends. Vestas, for example, reported a 48 percent rise in orders for the third quarter, a key metric for the company, compared with the same period a year ago.

And while there is little evidence that a respite is coming for manufacturers, the industry trends have been positive for consumers. Wind energy accounted for 20 percent of new global power capacity in 2016, according to the International Energy Agency. And the falling costs are a boon for households.

The shift, Mr. Gaylord said, “is ultimately good for consumers, and the power industry.”