Best Wind Energy Stocks & ETFs To Buy

If you are an investor interested in the energy transition in the United States, it is likely that you have exposure to onshore …

If you are an investor interested in the energy transition in the United States, it is likely that you have exposure to onshore wind companies.

After all, America has been a leader in land-based capacity for some time. But that’s only just the beginning with offshore wind – giant wind farms in the ocean or in the Great Lakes.

If the United States follows Europe and Asia’s path with offshore wind, there is a substantial investment case for the nascent domestic industry.

Although the United States currently only has 42 megawatts of offshore wind power from two pilot projects, an August report from the U.S. Department of Energy says there are more than 35,000 megawatts at various stages of development.

The US offshore wind industry is also expected to benefit from decades of development in other countries, as ever larger turbines have made offshore wind farms more efficient, a development that is good for businesses and consumers.

“The turbines that will be available in the next few years promise a new level of efficiency and production capacity and could help reduce the costs of offshore wind while helping it to further supply our energy needs,” said the Frontier Group think tank in a March report. .

Consider these points when considering adding US offshore wind exposure to your portfolio:

– Offshore wind is supported by the federal government.

– Invest in turbine manufacturers.

– Invest in wind farm developers.

– Invest in other parts of the supply chain.

– Invest in exchange traded funds.

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Offshore wind has federal support

One of the reasons the time may have come to invest in the domestic offshore wind industry is that the federal government and some coastal states are making this type of renewable energy a priority.

“Our outlook for the US offshore wind industry is strong, driven by the favorable policy winds of the Biden administration, as well as by an acceleration in the development of new wind projects,” said Andrew Little, research analyst at Global X, which manages exchange-traded funds. .

The Biden administration has set a target to install 30,000 megawatts of offshore power by 2030. While there is debate within the industry as to whether it will meet this target, the attempt could prove to be lucrative for the companies involved. Capital spending in America’s offshore wind supply chain alone could total $ 200 billion through 2035, according to a recent report by research provider Lium.

The US Department of the Interior is in the process of approving a host of potential offshore wind farms off the east coast and off California, and this year approved the first commercial scale wind farm. The Department of Energy has provided $ 3 billion in loans to support the industry. Congress recently approved a 30% investment tax credit for offshore wind projects that will begin construction by December 31, 2025.

The country’s first commercial-scale offshore wind farm, under development off the coast of Massachusetts, recently secured a $ 2.3 billion investment from nine banks. Last year, global investment manager Apollo Global Management Inc. (APO) bought offshore wind power developer US Wind, which works on a federal rental area off the coast of Maryland.

But you don’t have to be JPMorgan or Bank of America to participate in the US offshore wind investment stock because there are many publicly traded companies with exposure to the industry.

[SEE: 9 Best High Dividend Stocks to Buy.]

Invest in Siemens Gamesa and other turbine manufacturers

With up to 30% of the capital expenditure for a wind farm going to giant turbines, the suppliers of these turbines are among the most obvious beneficiaries of the development.

“Turbine suppliers are often recognized by investors as the ‘face’ of the offshore wind supply chain,” says the Lium report. “That’s because they’re big and publicly traded with success on onshore wind and international offshore wind under their belt, and the turbine prices are visible.”

Of the 9 gigawatts – or 9,000 megawatts – of known turbine prices off the east coast, 48% went to Siemens Gamesa Renewable Energy SA (ticker: GCTAY), 35% to General Electric Co. (GE) and 17 % to Vestas Wind Systems (VWDRY), says Lium.

They are expected to “collect a large chunk” of the $ 40 billion to $ 50 billion spent on offshore wind turbines through 2035, according to the report.

Siemens Gamesa is a global manufacturer of offshore and onshore turbines that has installed more than 107,000 megawatts in more than 70 countries. In its final quarter, the company reported a 12% increase in revenue, although its net profit declined.

“Renewable energy projects, including wind power, continue to show considerable resilience in the persistent context of the pandemic,” the company said in its quarterly report. “The constant increase in decarbonization commitments and the role of renewable energies in economic stimulus programs have had a very positive impact on the short, medium and long term demand prospects.

Invest in Orsted and other wind farm developers

Of course, these sales wouldn’t have happened without the companies that develop offshore wind farms in the first place.

The world’s largest offshore wind developer is Danish power company Orsted (DNNGY). The company participated in the development of two pilot offshore wind projects in the United States, off Rhode Island and Virginia. It also has a strong portfolio of commercial scale projects at various stages of development.

Other key developers to watch are Avangrid Inc. (AGR), Eversource Energy (ES), Equinor ASA (EQNR), Dominion Energy Inc. (D), Royal Dutch Shell Plc (RDS.A) and Aker Offshore Wind (AKOWF) .

Keep in mind that some developers, such as Avangrid, as well as turbine manufacturers, are also exposed to the domestic onshore wind industry. Other stocks exposed to onshore wind in the United States include NextEra Energy Inc. (NEE) and Berkshire Hathaway Inc. (BRK.A, BRK.B).

[SEE: 7 of the Best Tech Dividend Stocks to Buy]

Invest in other parts of the supply chain

For the US offshore wind industry to be successful, the country will need to develop a supply chain to support it, including specialized ocean-going vessels to transport and install wind farm components and companies that can make foundations. Additionally, these wind farms will require miles of high voltage cables, as well as offshore substations to help manage electricity.

“The US offshore wind industry is strong,” says Mike Bammel, national leader of JLL’s renewable energy assessment team. “The infrastructure involved includes port improvements, specialized vessels, and land and power transmission improvements where power lines come ashore.”

As America’s offshore wind supply chain kicks off and the country’s energy transition continues, industry watchers expect offshore wind to use the expertise of the offshore oil and gas industry.

Lium partner Joseph Triepke mentions companies such as oil and gas equipment company Nov Inc. (NOV), offshore platform and vessel manufacturer Gulf Island Fabrication Inc. (GIFI) and ship companies. offshore Seacor Marine (SMHI) and Tidewater Inc. (TDW).

Invest in exchange traded funds

Investors who want more immediate diversification than building a portfolio from individual stocks can look to exchange-traded funds, including the First Trust Global Wind Energy ETF (FAN) and the Global X Wind Energy ETF ( WNDY).

Keep in mind that these funds invest in the global wind industry and contain companies with both onshore and offshore exposure.

Whether you’re investing in turbine manufacturers, farm developers, or other companies involved in the US offshore wind supply chain, it looks like the winds of fortune could be behind this industry for some time to come.

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