General Electric Co. aims to create a market-leading power company as the conglomerate breaks into three. But it faces stiff competition from rivals also repositioning their businesses to cash in on a global renewable-energy boom.

GE said this week that it plans to create a new stand-alone business it would spin off around 2024 that would combine its existing units that make wind turbines, turbines for traditional power plants and its digital businesses. Such a company would instantly become a major player in the power manufacturing...

General Electric Co. aims to create a market-leading power company as the conglomerate breaks into three. But it faces stiff competition from rivals also repositioning their businesses to cash in on a global renewable-energy boom.

GE said this week that it plans to create a new stand-alone business it would spin off around 2024 that would combine its existing units that make wind turbines, turbines for traditional power plants and its digital businesses. Such a company would instantly become a major player in the power manufacturing space, positioned to prosper from an accelerating transition to cleaner energy sources in the midst of concern about climate change, while continuing to sell natural-gas turbines in much of the world.

GE’s power company would enter a crowded field that includes similar renewable businesses spun off by its German industrial rival, Siemens AG , and powerful Chinese players such as Xinjiang Goldwind Science & Technology Co. Only a few big winners will emerge from this ongoing contest for supremacy, analysts said.

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“Globally, competition is definitely increasing, it’s a fight,” said Shashi Barla, principal analyst for global wind supply chain and technology at Wood Mackenzie, a research and consulting firm. He estimates that the top five players in wind turbines are going to dominate 75% of the global market by the end of the decade, with some smaller companies possibly going defunct or being absorbed by the bigger ones.

Turning around the power business has been a priority for GE Chief Executive Larry Culp, who is trying to overcome GE’s history of management missteps and costly acquisitions of turbine-making rivals that didn’t yield results. A 2015 takeover of the power assets of France’s Alstom SA resulted in a $22 billion charge three years later.

“We’ve been intently focused on improving operational performance in these businesses,” Mr. Culp said Tuesday. He said the power business will carry the least amount of debt of the three as it exits.

Though GE has made some progress revamping its power unit, analysts said it remains the weakest of the three companies set to emerge from the once-mighty conglomerate, which also plans separate aviation and healthcare businesses.

GE reported an operating loss of $484 million for the first nine months of the year in renewables and an operating gain of $416 million in power, according to financial filings. Those units together had about $33 billion in revenue in 2020. Its digital division had about $1 billion in revenue last year.

“Of GE’s three businesses, this is a tougher one,” said Joshua Aguilar, equity analyst at Morningstar. “Having said that, it’s a tough business for everyone essentially.”

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Wind turbine manufacturers including GE are contending with many short-term headwinds that have dented returns, from pandemic-related port delays to questions about the fate of tax credits pending in Congress. Port snarls and soaring costs for materials including steel and resins have affected their ability to deliver wind turbines on time and on budget. Logistics costs have skyrocketed for moving turbine blades, which stretch more than 200 feet for onshore wind turbines and as long as a football field for offshore ones.

A 2024 spinoff would give GE about two years to show that the power business can profit on its own. Rivals have already moved in similar directions.

Siemens is ahead of GE in spinning off power and wind energy. In 2017, Siemens, which struggled to make its wind-turbine business profitable, merged operations with Spain’s Gamesa in a deal that created one of the world’s largest players in the field. The deal capped a string of mergers in the wind industry at the time after years of manufacturing overcapacity and technology improvements narrowed margins for manufacturers.

Wind-turbine manufacturers including GE are contending with numerous short-term challenges that have reduced returns.

Photo: Matthew Staver/Bloomberg News

Last year Siemens spun off Siemens Energy, which now owns 67% of Siemens Gamesa,

as part of its drive to focus on digital industries and smart infrastructure, which typically offer higher margins.

Much of GE’s potential for growth in renewables lies in building turbines for offshore wind and providing maintenance services. The Biden administration is preparing to open up swaths of the U.S. coastline to wind projects as part of a plan to boost production of clean energy.

Analysts said GE could capture a large share of the market for U.S. offshore projects. Its Haliade-X offshore turbine is the most powerful on the market and will be installed at Vineyard Wind, an 800-megawatt wind farm near Martha’s Vineyard, Mass., as well as Dogger Bank, an offshore project being built in the U.K.

GE has “the front row pole position to capture the majority of that,” said Nick Heymann, an analyst at William Blair & Co.

Much of GE’s potential for growth in renewables lies in building turbines for offshore wind and providing maintenance services.

Photo: Sebastien Salom-Gomis/Agence France-Presse/Getty Images

Its grid business could see a boost from the roughly $1 trillion infrastructure package passed by Congress last week, which included funding for improvements to the country’s aging electrical-distribution system. The spider web of power lines that deliver electricity across the country has proven vulnerable to extreme storms and fires, and moving new renewables from remote areas to urban centers has led to congestion.

“That’s going to allow GE to be very involved in upgrading all of our long- distance transmission lines,” Mr. Heymann said.

GE has pointed to hydrogen as a potential area for growth for its gas-turbine business. Hydrogen can be blended with natural gas to lower a power plant’s carbon footprint, and GE plans a demonstration project in New York state with the technology.

Scott Strazik, chief executive of GE Power, posted on LinkedIn recently about the company’s hydrogen-ready gas turbines and efforts to modernize the grid.

“Our ability to reach across all three of these areas—wind, gas and grid, plus carbon-free sources like nuclear and hydro—is unique and presents an incredible opportunity for the future,” Mr. Strazik wrote.

—Thomas Gryta contributed to this article.

Write to Jennifer Hiller at jennifer.hiller@wsj.com and Georgi Kantchev at georgi.kantchev@wsj.com