Is Wind the New Solar?
It's no secret that renewable energy has been a growing field for many years. Over the past decade, solar energy generation has been getting all sorts of press.
But at the same time, wind power has been quietly stealing market share from both traditional fuels like coal and natural gas and from solar as well. And it's poised to grow even faster in the coming decades.
It makes you wonder if wind energy is the new solar power...
Winds of Change
Over the last decade, wind power has grown exponentially. In 2015, 20 U.S. states added nearly 8,600 megawatts of capacity with new wind projects. That was 77% more than the prior year. And it represented 41% of all new electricity generation capacity to come online that year. That's more than solar and more than natural gas.
Last year, Iowa produced more than 30% of its energy from wind. South Dakota and Kansas were close behind with more than 20% of their power coming from wind farms.
Currently, wind energy makes up 5% of the energy produced in America. That's enough to power 17.5 million homes. And experts predict that wind power will account for 20% of the nation's power supply by 2030.
Falling Costs = Rising Demand
Thanks to cheaper, more efficient turbines, the cost of onshore wind generation has dropped 30% over the past eight years. And according to Bloomberg New Energy Finance, those costs are set to drop even more in the next two decades. Analysts predict onshore generation costs will slide by as much as 47% by 2040.
But that's not the most impressive figure. Those same analysts are predicting that the cost of offshore wind farms will drop a whopping 71% over the same period. Thanks to bigger projects, bigger turbines, and economies of scale, wind is on track to outperform all other forms of electricity generation in the very near future.
And those falling costs are leading more and more countries to put more and more cash into new wind projects. By 2040, an additional $3.3 trillion is expected to go towards new wind projects worldwide. That's in comparison to $2.8 trillion for solar and $2.8 trillion for all forms of fossil fuels.
Even countries that have historically burned tons of coal to power their economies are getting on board. China and India combined will account for 39% of the investments in power generation by 2040. And both are putting a third of their cash into wind projects.
By 2050, the International Energy Agency projects wind power will account for 18% of global power generation.
A Windfall of Profits
Unlike solar, however, there aren't many pure play investments in wind energy. Most companies that are heavily involved in the field run wind operations through subsidiaries.
But there are still a few options for investors who want to get some skin in the wind game...
The Big Kid on the Block
Perhaps the biggest and best-known company involved in wind energy, General Electric (NYSE: GE) is the first investment that comes to mind for wind power.
When it comes to wind power generation, GE has become a major player through its subsidiary, GE Renewable Energy.
Not only does it manufacture and sell the massive turbines that make up many of the existing and future wind farms around the world, but it's also scooping up smaller companies to establish its spot in the wind business.
Earlier this year, GE announced it was buying leading rotor supplier LM Wind Energy for $1.7 billion. That and its previous forays into the market make GE a stock every wind investor should consider.
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Another option for investors are yieldcos. These are companies formed to buy stable, cash-producing assets like wind farms from the companies who build them. This allows the builders to focus more money on developing new projects instead of supporting existing ones.
And it allows investors to profit from the steady cash flows produced by the assets.
Typically, these companies are investing in other renewable assets like solar farms as well. But they still provide good exposure to the wind power market.
And there are quite a few yieldcos out there that invest in wind power generation. My personal favorite in this space is NextEra Energy Partners (NYSE: NEP).
This company invests in and operates multiple clean energy projects spanning North America. It pays a 4.11% dividend and is up over 40% this year alone.
The Pure Play
There are a few pure wind investments out there. And the very best of them is Pattern Energy Group (NASDAQ: PEGI).
PEGI is the proud owner of 18 wind power projects that generate 2,644 megawatts of energy annually. It sells the energy it generates mostly to local utility companies and makes a tidy profit doing so.
Over the past 12 months, Pattern has brought in over $380 million in revenues. And its share price reflects its success. It rose over 34% this year before dropping back down some last month.
That drop, however, gives investors the opportunity to get in on a great company at a supreme discount.
PEGI also pays a solid dividend. And at current prices, the yield is sky-high at 7.42%.
My subscribers at The Wealth Advisory have been collecting quarterly payments from PEGI since 2015. We've already banked over $3.56 per share. That's over 13% of our initial entry price.
Plus, every dividend we've received has been bigger than the last. And we're going to be raking in those growing payments for years more to come.
Bottom Line
No matter how you choose to play the growing wind power market, you're going to see substantial profits in the years to come.
The demand for energy is going nowhere but up. As wind power becomes more and more economical, it's going to make up more and more global power generation. And it's going to reward investors who get in on the ground floor.
You don't want to miss out on this trend.
To your wealth,
Jason WilliamsEnergy and Capital
Follow me on Twitter @AllBeingsEqual