A boom in green energy investment to combat climate change has helped lower the cost of wind power to a level where it can compete with fossil fuels like coal and natural gas.

“What we have clearly realized is that wind power is now cheaper than everything else. But I think we shouldn’t be making it too cheap,” Managing Director Andreas Nauen told Reuters.

In Europe, wind and solar are currently significantly cheaper than coal, natural gas and nuclear power, according to a study by Bernstein.

Demand for wind turbines is at an all-time high, driven by the green transition, but lower prices and increased competition have squeezed margins.

“We have probably gone too far,†Nauen said. The industry’s ability to continue investing in new technologies and factories will be reduced if the drive to reduce wind energy costs continues at the same pace, he added.

Wind turbine manufacturers’ operating margins are also being squeezed by rising costs due to the shortage of supply and high prices of raw materials such as steel.

Siemens Gamesa and its main rival Vestas have said they have been able to pass some of the higher costs on to customers, which is expected to be reflected in higher auction prices and power purchase agreements over time. time.

Earlier this month, Vestas reduced its outlook for 2021 for the second time this year and now expects an operating profit margin of 4% from 5-7% previously, well below its long-term target. by a margin of 10%.

Siemens Gamesa has also pushed back the timeframe it plans to hit its long-term 8-10% margin target through 2024 or 2025, down from 2023 previously.

Governments around the world are phasing out generous wind subsidies, opting for more competitive tenders, and favoring project developers who submit the lowest bids.

“We have to change the auction systems in the future,†Nauen said. He suggested that criteria such as local job creation should be taken into account instead of just focusing on price.