Spending cuts by cash-strapped European governments and cheap gas are denting the profits and prospects of renewable energy companies, quarterly reports from two major sector players showed on Wednesday.
Vestas (VWS.CO), the world's biggest wind turbine maker, and Norwegian solar industry group REC (REC.OL) said they saw earnings hit by lower power scheme subsidies and heightened competition.
Countries including Germany and Italy are reining in spending to pay for bailing out their banks and are cutting the guaranteed prices for solar power, reducing the incentives to install solar panels.
Some utilities, such as RWE (RWEG.DE), are also reducing renewable investments due to lower earnings, while gas, the fossil fuel with the lowest carbon dioxide emissions, becomes more attractive due to low prices, dragging investment away from wind.
The world's fourth-largest wind energy generator, Portugal's EDP Renewables (EDPR.LS), which cut its targets for new U.S. windpower installations last year, said cheap shale gas is still making it hard for wind power to compete in the United States.
"I don't see a recovery in U.S. energy markets; shale gas provides the U.S. with oversupply," EDPR's Chief Financial Officer Rui Teixeira said on a conference call on Wednesday.
"What we are seeing is that some of our cherry-picking projects, which combine high-efficiency turbines with low-cost ones are able to compete even with current gas prices there," Teixeira added.
Norway's Renewable Energy Corp (REC) warned of oversupply, price pressure and falling demand due to political uncertainty on the key European solar markets.
The caution came after U.S.-based First Solar (FSLR.O), the world's biggest solar company by market capitalisation, late on Tuesday warned the solar market would face a tough second half of the year.
The chief financial officer of German conglomerate Siemens (SIEGn.DE), Joe Kaeser, said the solar industry was hit most by government austerity programmes and that this would continue for a while.
Profit in Siemens's renewable energy division, which makes wind turbines and solar power plants, dropped by half in the three months through March, the company's second quarter.
Vestas, which from 2015 plans to offer a 7 megawatt wind turbine with a diameter of 164 meters, reported deeper-than-forecast operating losses for the first quarter and orders below expectations.
Its shares had dropped 8.22 percent to 163.10 Danish crowns by 1453 GMT.
"At first glance it is very difficult to see positive aspects in Vestas' first-quarter report," Jyske Markets analyst Christian Nagstrup said.
EDP Renewables shares had shed 4.05 percent to 4.97 euros, tracking the weak performance in global renewable stocks despite posting forecast-beating first-quarter net profit before the market opened.
