Wind Power: A Huge Profit Opportunity for Investors

David Fessler
by David Fessler, Energy & Infrastructure Strategist, The Oxford Club
wind turbines in Oiz eolic park

Editorial Note: This article originally ran in Energy & Resources Digest, a free e-letter from The Oxford Club that covers the ever-changing resource sector. Click here to check out recent articles and subscribe.


When it comes to wind power, few Americans are opposed to the idea. And, considering the prospects for industry growth, few investors should be too.

But more on that in a bit.

Most of the newer land-based turbine towers are between 100 and 200 feet high. The turbine blades (there are usually three blades on each turbine) alone are 100 feet or more in length.

Longer blades mean more power to turn the generator in the turbine housing. The housing - referred to as the nacelle - contains the generator, control electronics, a giant bearing and a ladder to the ground.

More power per turbine means fewer turbines in any given installation. However, there’s one problem: The turbines make a lot of noise.

The more turbines, the greater the whine. For most sites, this isn’t a problem, since the tops of mountain ranges and other sparsely populated areas are the best wind sites. However, land-based turbines sometimes kill bats and migrating birds.

While some people say they are generally in favor of renewable energy, including wind, they don’t want to see the turbines.

This mindset is more commonly referred to as “NIMBY,” or “not in my backyard.” But many mid-Atlantic states have a few locations that would suit NIMBY naysayers and provide enough wind.

Fixing the NIMBY Problem

Fortunately, there is a simple solution to the NIMBY problem and just about every other objection to wind-generated electricity.

Simply install the turbines offshore.

Despite its simplicity, offshore wind power is nonexistent in the United States.

Head overseas to Europe and you’ll find many offshore wind farms.

Europeans quickly realized the value of wind turbines in producing electricity. However, Europeans didn’t want to look at gigantic wind towers any more than Americans do. So, they started putting them offshore.

As of December 2014, the European Union had 128.7 gigawatts (GW) of wind power installed, 8 GW of which was offshore. The latter figure is growing quickly. The continent boasted a compound annual growth rate of offshore wind capacity of 31.2% from 2009 to 2014.

Traditionally, offshore wind turbines are larger than onshore turbines. This means that utilities can generate more power with larger turbines while avoiding the issues associated with land-based turbines. The current generation of offshore wind turbines is five to 10 times greater in power output, too.

The world leaders in offshore wind turbines are Vestas Wind (OTC: VWDRY) and Siemens AG (OTC: SIEGY). Vestas’ headquarters is in Denmark and Siemens’ is in Germany.

Here in the U.S., offshore wind promises to solve both the NIMBY problem and transmission issues (getting permits for an onshore transmission line can take five to 10 years).

And we have the perfect offshore location... the Atlantic continental shelf.

On the shelf, the water is generally less than 100 feet deep. The shelf extends to nearly 100 miles off the Atlantic coast.

That means large offshore wind turbines can be out of sight of onshore viewers.

In addition, transmission lines can be in federal waters that start 20 miles offshore.

That makes permitting relatively simple. Transmission line placement is also simple.

Newly developed underwater high-voltage lines and substations can take the place of onshore units. Fewer than a dozen shore connection points can bring vast amounts of power onshore.

Offshore wind farms can provide additional baseload capacity to East Coast utilities. That’s because the wind blows nearly all the time offshore.

An Embarrassment of Offshore Wind Riches

So how much wind are we talking about? According to a report released by the Department of Energy’s National Renewable Energy Laboratory, the U.S. has the potential to generate 4,150 GW using offshore wind.

About 31%, or 1,300 GW, of that capacity would stem from the East Coast states. Let me put that in perspective.

In 2008, U.S. electricity generating capacity from all sources barely topped 1,000 GW. So the potential wind power produced by just the East Coast could power the entire country, leaving 300 GW to spare.

So why aren’t we moving ahead with offshore wind here in the U.S.? Good question.

The answer lies with Congress. It would have to approve legislation enabling these offshore wind farms to be built.

It’s not difficult to see what great benefits offshore wind would bring to the U.S. power industry, especially since having enough baseload power is always a concern.

Offshore wind is an inexpensive, pollution-free, no-brainer way of getting there.

And it’s a no-brainer for investors, too.

Last year, the U.S. wind industry dumped $12 billion into private investments. Plus, four times more wind energy came online in 2014 compared to 2013.

And the trend is catching on globally. More than $99 billion has been invested in wind power. That makes wind energy one of the fastest-growing industrial segments in the world.

In Vestas’ homeland, Denmark, 39% of the country’s electricity consumption was covered by wind energy last year. The country hopes to reach 50% by 2020.

Currently, wind energy accounts for 3% of global electricity. Estimates show it could account for 17% to 19% by 2020 - that means growth potential of more than 465% in 48 months.

That huge growth translates to huge opportunities for energy investors.

Until we become organized here in the U.S., Vestas and Siemens are great wind power investments.

Good investing,

Dave

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This Alternative Energy Play Is Beating Estimates Left and Right

It’s no secret that Dave is a fan of alternative energy. He was one of the first to own Nissan’s all-electric vehicle, the Leaf. He also has a massive solar farm running his house in Pennsylvania. But Dave doesn’t just enjoy this technology from a practical or ecological viewpoint... he also believes it will mean big money for early investors.

That’s why he recommended First Solar (Nasdaq: FSLR) to his Advanced Energy Strategist subscribers.

Here's an excerpt from his write-up of the stock: “What do I like about First Solar? First Solar is a solar energy company on a tear. After making a mere $5 million of net income in Q1 2015, it turned in impressive results the following quarter.

“Back on August 4, 2015, First Solar released its Q2 2015 results. Total sales were $896 million, and it made $94.5 million of net income. The company blew estimates out of the park. Revenue expectations were $790 million. Expected earnings per share were $0.49 compared to actual earnings of $0.93 per share.

“What a difference a year makes. In Q2 2014, the company had net income of $5 million, or $0.04 earnings per share. Why the big difference? It's simply solar's torrid growth...

“Since 2008, worldwide installation of solar PV systems has increased by a factor of 10. Ten years ago, no one predicted that level of growth for solar. But as I predicted, technology continued to evolve, and manufacturing costs dropped continually over the period. As a result, solar is now close to grid parity cost and even exceeds it in some areas.

“There's no reason to think that solar installations are going to slow. Right now, solar still provides only about 1% of the world's electricity. That leaves plenty of opportunity for growth. That's exactly what First Solar is doing. The company is nearly sold-out for the next year and a half. I expect it will continue to beat estimates at least through the end of this year, and likely beyond.”

- Alexander Moschina with David Fessler

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