By Thomas Kostigen
Wind is difficult to harness as an energy source because it’s inconsistent. Sometimes wind blows hard for long periods, which could create enough energy to power entire cities. But then it stops. And with that stoppage, the lights would go out. But storage technology has come a long way over the past few years, as have innovations in transmission. So much so that when wind is combined with other alternative energy sources such as solar and geothermal power, the mix can completely replace traditional fossil fuel energy sources.
That’s what’s happening in Europe. The European smart grid is being designed to allow different sources of energy to feed into it, taking the best natural resource and source of power from different locales on the content and beyond. That makes wind an attractive investment opportunity as no one utility is solely reliant of its ability to produce consistent power; it can take its place among a full menu of alternative energies. Indeed, The Wall Street Journal reports this week that investors are betting alternative energy producers, such as wind power utilities, will benefit from the European Union’s ambitious proposal to stop damaging the environment by 2050, which the bloc aims to bake into its economic recovery plan. The Journal notes that shares in renewable energy companies have already advanced significantly this year.
“The prospect of a burst in government-led investment has lifted shares in utilities that produce most of their electricity without fossil fuels,” the Journal reports. It highlights shares of the Danish company Ørsted A/S, whose shares have risen nearly 30 percent so far this year. Orsted develops and operates wind farms around the globe, including the Block Island Wind Farm off Rhode Island, as well as six more wind farms that are in the works in the U.S.
Pure play wind investments aren’t all that easy to find. Most wind energy operators are included in mutual fund and exchange-traded fund portfolios along with solar, biomass, geothermal, and other alternative energy companies. A financial advisor should certainly be able to find the best in class of these as investment prospects, and which funds are weighted more heavily in the wind sector.
According to the U.S. Energy Information Administration, which collects, analyzes, and disseminates independent and impartial energy information to promote policymaking, efficient markets, and public understanding of energy and its interaction with the economy and the environment, the electricity generation mix in the United States is experiencing a rapid rate of change, with renewables the fastest-growing source of electricity generation expected through 2050. The EIA says this is because of continuing declines in the capital costs for solar and wind production that are supported by federal tax credits and higher state-level renewables targets.
And the positive trend for renewables isn’t just occurring in the U.S. The Journal quotes Andrea Carzana, a portfolio manager at Columbia Threadneedle Investments, who says, “Companies that are exposed to renewable energy clearly will have a lot of investment going into them. We are looking at those stocks just because there is a lot of potential growth coming their way.”
With an increasing number of utilities worldwide turning to alternative energy to create power for their consumers, wind energy investing is certainly picking up speed.
Thomas Kostigen is a contributing writer to MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors. Thomas is a best-selling author and longtime journalist who writes about environmental, social, and governance issues.