Investing in Wind Energy Growth Trends

Wind Power Stocks Make for Better Opportunities than Realized

Mar 14, 2009

Some investors may feel wind energy is a mere fad that will never really produce investment gains. These investors need to look at the facts, and the projected growth.

Less than a couple of decades ago, the world didn't have enough wind energy infrastructure in place to power more than a few dozen houses. A lack of interest and a lack of efficiency simply didn't foster investment in the technology. Now, however, some investors are surprised to hear that enough wind energy is now created to power as many as 30 million homes. That should get investors' attention, especially knowing the number could quadruple by 2020.

Wind Energy Basics

For investors to understand the scope of the growth opportunity in wind energy, a few basics need to be understood first.

The basic unit of utility-level energy measurement (enough to power multiple houses) is the megawatt, commonly abbreviated as 'MW'. It's just a measure of capacity - a 100 MW power plant can send up to one-hundred million watts of power to its customers.

In general, one megawatt of capacity is enough to power about 250 average homes. Likewise, 100 MW is enough electricity to power 25,000 homes.

How many megawatts can a single wind turbine (or windmill) produce? Though modern windmills' turbines produce anywhere from 1.0 megawatts to as much as 3.0 megawatts of energy, the most common wind turbine in production today can yield 2.5 megawatts. That's enough to power more than 600 average homes.

This is why windfarms are necessary. To make the best use of limited land resources and to prevent building more transmission stations than feasibly required, windmills are gathered together in close proximity so they can work together.

Wind Energy Growth Trends

As of the end of 2008, about 120,800 MW of wind energy capacity is available worldwide, 27,000 of which was only installed in 2008. That's a 29% capacity increase for the year, and 36% more capacity than what was added in 2007.

And how much growth is in store looking forward? The World Wind Energy Association (WWEA) forecasts that the word's wind energy capacity will reach 160,000 MW by the end of 2010. This means 40,000 MW will need to be added both in 2009 and 2010.

After that, the capacity growth pace will quicken to 50,000 MW per year. That growth rate should put the industry on track to meet the WWEA's capacity forecast of one million megawatts by 2020.

Investment Opportunities

Building windmills isn't free. To add 2008's 27,000 megawatts of new wind energy capacity, $47 billion was spent. With that being enough to build approximately 10,000 new windmills, the price tag per windmill is roughly $4.7 million.

The question investors should be asking is, which companies are going to receive those dollars in the future? Those organizations that can profitably supply wind turbine components like gearboxes, fan blades, and towers are likely to be outstanding investments, particularly given the industry's projected growth.

The number of publicly traded wind energy companies is still relatively low, but as the growth continues, so will the number of choices.

Though not an exhaustive list, or a list of 'recommendations', here are a few companies that could be considered leaders in the industry.

Note that the United States may not necessarily offer the most options in terms of wind energy investments. Foreign (non-U.S.) exchanges may have more listed wind energy companies.

The copyright of the article Investing in Wind Energy Growth Trends in Shares/Stocks is owned by James Brumley. Permission to republish Investing in Wind Energy Growth Trends in print or online must be granted by the author in writing.