Vestas, the world’s largest wind turbine maker, is to cut 3000 jobs and shut five plants as shrinking power demand and U.S. policy uncertainty buffet the young green energy industry. The Danish company posted a smaller-than-expected drop in third-quarter profit but said markets in Europe would not live up to its expectations next year, knocking its shares down more than 10%. According to the company’s executive director Ditlev Engel, indebted European governments are not investing in new energy projects, which has delayed recovery. “A lot of countries are facing a challenging 2011 in terms of budget deficits and other financial issues. It is a hard time to see a lot of activity in this area compared to what we had initially expected,” Engel said in a Reuters Insider interview.

The wind energy equipment market has been dogged by persistent weakness since late 2008, against hopes for a rebound this year and after a drought in orders in 2009, the Reuters report says. The financial crisis has damaged the entire power sector, hurting demand both from both residential and industrial users. But in renewables, there are further dark clouds, with uncertainty over regulation especially hurting the U.S. industry. There are no federal U.S. targets for deployment of renewable energy. Those mandates were expected as part of a climate or energy bill which is stalled in the Senate.

In the EU there are binding renewable energy targets but the recession has made these easier to achieve, so there is less pressure on companies to invest in new capacity, the news agency reports. In addition to this, some banks including Barcap and HSBC this summer downgraded their growth estimates for the wind turbine market.