From Mitsubishi Heavy Industries to E.ON, the world’s largest companies are investing in wind power, the best-performing energy in the past year.
Led by Vestas Wind Systems and Iberdrola of Spain, utilities and governments in the United States, China and Europe will spend as much as $150 billion on wind projects in the next five years, according to CLSA Research. Lawmakers are providing financial incentives because windmills are non-polluting and cost less than solar projects.
“Wind has the biggest potential to meet renewable energy targets over the next decade, compared with solar and biofuels,” said Philippe de Weck, who started the Pictet Clean Energy fund last month for Pictet in Geneva.
The greatest returns so far are generated by equipment makers for farms with as many as 400 windmills. Each has a tower as high as 135 meters, or 443 feet, and rotor blades with diameters that reach 112 meters. Wind spins the blades, turning a shaft attached to gears and a generator that converts the motion into electricity.
The market value of Vestas, the world’s biggest windmill maker, has more than doubled in the past year, and Gamesa Corporación Tecnológica, the Spanish turbine manufacturer, is up by more than two thirds. That compares with a 55 percent loss by Pacific Ethanol, whose largest shareholder is Bill Gates, the chairman of Microsoft.
“Wind energy is cheaper than solar – it’s a less risky form of investment,” said Michael McNamara, an analyst in London at Jefferies International, which tracks solar and wind companies. “The demand for quality wind turbines is so high, we won’t see supply meet demand for several years.”
Electricity from wind is a little more than 1 percent of global power supplies. The leading country is Denmark, with 20 percent. Wind provides 9 percent of energy in Spain, and 7 percent in Germany.
The National Development and Reform Commission in China will almost double wind generation by 2008, partly to produce cleaner power for the Beijing Olympic Games, said Shi Lishan, head of renewable development at the commission, the top Chinese economic policy planner.
China and the United States, the top producers of carbon emissions, which contribute to global warming, are under pressure from Europe to reduce pollution. President George W. Bush last week proposed a round of talks among industrialized nations to set targets for reducing the so-called greenhouse gases.
In the United States, the world’s fastest growth market for wind, Arizona, Texas, Wyoming and at least 18 other states require increases in the amount of renewable power.
Congress will consider a law this year that would force utilities to buy more electricity from nonpolluting sources. West Virginia, once the dominant producer of coal in the United States, has a wind farm at Silver Lake. Dominion Resources and Royal Dutch Shell plan to triple the amount of wind power in West Virginia this year to 230 megawatts.
FPL Group, owner of the main utility in Florida, has the world’s largest wind farm at the Horse Hollow Wind Energy Center in Taylor County, Texas. The 421 turbines at the site can generate 735 megawatts.
“The U.S. is the Saudi Arabia of wind,” McNamara said. “The American Midwest is windy, very flat, and with no natural beauty sites to speak of. The U.S. is a very strong wind market and it’s booming.”
Utilities like Iberdrola, the world’s top producer of electricity from wind, and FPL, the leader in the United States, helped raise capacity last year by 25 percent to 74 gigawatts, said the Global Wind Energy Council in Brussels.
E.ON, the German utility, said last week that it would spend â‚¬3 billion, or $4 billion, on wind stations and other renewable energy projects. In February, GE bought a 15 percent stake in Theolia, a French wind power company.
Duke Energy, a major operator of coal-fired power plants in the United States, said last week that it would buy wind units in states including Arizona, Texas and Wyoming. The next day, AES agreed to buy wind projects in Minnesota and Iowa.
“The demand for renewable energy, energy that has less carbon associated with it, has really skyrocketed,” Paul Hanrahan, the AES chief executive, said last week by telephone while traveling to a hydroelectric dam that the company was building in Panama. “The capital costs of building a wind farm have come way down and when you put those together, it has really put wind in the lead for renewable needs.”
JPMorgan Chase, a U.S. bank, has a $1 billion portfolio of wind energy investments, including 26 wind farms in the United States, with enough capacity to power 600,000 average U.S. homes.
“There are far greater opportunities to make good investments in wind at the moment compared with other renewable energies,” John Eber, a managing director responsible for the principal JPMorgan investments in energy in Chicago, said. “The market is much better developed.”
The rise in shares of wind equipment makers will continue at least through next year, said Bruce Jenkyn-Jones, a fund manager at Impax Group in London.
Shares of Vestas are up 159 percent in the past year, while Gamesa, based in Zamudio, Spain, is 70 percent higher. Clipper Windpower, based in London and a maker of turbines for BP, and FPL have more than doubled.
The Morgan Stanley Capital International world industrials index, which counts Vestas and Gamesa among its members, gained 24 percent in the past year, while the MSCI world utilities index climbed 35 percent.
Shares of wind-related companies have risen since crude oil prices in New York touched a record $78.40 a barrel last July. Oil has lost 7.6 percent in the past year and closed last week at $65.08 a barrel in New York.
A price of “$45 a barrel is the threshold at which we’re competitive with crude oil,” Peter Kruse, a spokesman for Vestas, said on the phone from company headquarters in Randers, Denmark. “With wind, you know what the price of your fuel will be in the future. It will be zero.”
By Marianne Stigset and Stephen Voss
4 June 2007
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