The World's Most Attractive Wind Energy Stocks
The Outlook for Wind Turbine Manufacturers Looks Strong
Feb 23, 2009
As the race for viable wind energy continues, the growing scope of the need makes for a compelling investment opportunity. One clear reality has surfaced though - it's a technology-reliant field. The companies with the best wind turbine technology are not only well positioned to capture the bulk of the market share, but are also most apt to reward their investors.
Industry Outlook
Despite 2008 being a disastrous year in terms of broad economic health as well as capital investment, the growth of the wind energy industry remained impressive. Over the last 10 years, the average annual growth rate of wind energy capacity has been about 26%; 2008 was roughly in line with that trend.
Recent projections - even adjusted for a less enthusiastic investor base - foresee growth of more than 150% (total) by 2012 for the wind energy industry. That would translate into 240 GW worth of electricity production capacity, up from the current capacity level of approximately 95 GW. By 2020, wind energy is anticipated to meet 7% to 8% of the global energy need, well up from less than 1% now.
Leading Companies
The ultimate success of any wind energy stock is correlated with the usefulness of the underlying company's technology, as said above. Specifically, the organizations that are to have a long future in the wind turbine business need the means to (1) deliver enough quantity to meet the growing demand, and (2) deliver a product that makes wind energy fiscally sound.
Though not necessarily an exhaustive list, the following companies appear to be some of the best-suited to satisfy both criteria in the foreseeable future:
- Vestas Wind (CPH: VWS) (Pink: VWDRY) - This Danish company is already the capacity leader, controlling about 23% of the wind turbine market.
- Gamesa Corp. Tecn. SA (MCE: GAM) (Pink: GCTAF) - Spain-based Gamesa has captured about 16% of the global market so far. Booked contracts have kept them at their maximum production capacity since 2007.
- Suzlon Energy Limited (Bombay: 532667) - This Indian company boasts 14% of the world's wind turbine market share... third best overall.
- Siemens AG (NYSE:SI) - This German company is actually the biggest of the four companies mentioned here, but their wind power operation is still a very minor part of their product mix.
The Litmus Test
Though all four companies mentioned above have proved their value by taking a large piece of the wind energy production pie, there is still one overarching goal all wind turbine manufacturers must still eventually meet - the ultimate cost to consumers needs to be competitive.
According to General Electric's (NYSE:GE) recent assessment, the per-kilowatt hour cost of wind energy is approaching $0.08. Many in the industry, as well as investors, believe kWh costs near $0.05 to $0.06 - where coal and natural gas kWh costs tend to hover - will be the point where wind energy becomes more attractive than the alternatives. Companies that can make wind energy that affordable first are apt to reward investors first, and perhaps best.
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