Renewable energy, such as that derived from sun and wind, is the wave of the future. Although solar power receives more attention, the United States has 3.5 times more wind than solar capacity. There are various ways to harness the power of wind for investing purposes, and they range from buying the stock of major companies focused on clean energy to yieldcos, which are business structures providing dividends from clean-energy sources to investors.
Some wind-energy stocks are little known outside of the industry. Others are household names, such as General Electric. The company acquired Thomas Edison’s company in the late 19th century, so it began in the dawn of the electric era. Today, General Electric includes a large clean-energy branch and is a major producer of turbines used on wind farms, as well as a developer of wind technologies.
Another U.S. company with a huge wind presence is Houston-based NRG Energy. Currently, NRG owns 32 wind farms in 12 states and also provides services and equipment to wind-power farms large and small. Outside the U.S., Vestas Wind Farm designs, manufactures and maintains wind farms worldwide. These are just a few examples of companies engaged in the wind-energy business.
Yieldcos were initially created in 2013, when NRG Energy started NRGYield. A yieldco’s business structure is formed to own renewable-energy assets yielding a steady cash flow for investors, and they are designed as high yield and high growth. A yieldco package is similar to a real-estate investment trust, as the assets produce returns, and most of these returns are paid to investors. Dividends are based on electric-utility sales based on long-term contracts.
Mutual Funds and Exchange-Traded Funds
Perhaps the easiest way to invest in wind energy is via a mutual fund or exchange-traded fund specializing in renewable energy. Most of the major mutual fund companies, including Vanguard, Fidelity and Franklin, have natural resource or energy funds with significant wind-farm components.
Aging Wind Turbines
Opportunities in wind energy and wind farms are also coming down the pike because of aging infrastructure. By 2030, according to the Institute for Energy Economics and Financial Analysis, the average age of wind turbines in North America will be 14 years, and that means a significant investment in operations and maintenance expenses.
Some turbine owners will replace these older turbines with newer models, while others will replace worn-out components. This may prove a $25 billion annual expenditure, so investing in major companies that provide these services could offer a good return. The biggest players in the industry include Siemens Gamesa, Suzlon and Vestas.
- Institute for Energy Economics and Financial Analysis: $40 Billion Investment Opportunity Seen in U.S. Wind-Farm Upgrades
- Energy & Capital: Wind Energy Investing: What You Need to Know
- Bloomberg: Wall Street Sours on $9 Billion Mechanism for Green Projects
- The Motley Fool: How to Invest in Wind Energy
A graduate of New York University, Jane Meggitt's work has appeared in dozens of publications, including PocketSense, Zack's, Financial Advisor, nj.com, LegalZoom and The Nest.