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Wind Generation Exceeds Hydroelectric in 2019: Stocks in Focus

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Per a latest report by the U.S. Energy Information Administration (EIA), annual electricity generation from wind energy in the nation exceeded hydroelectric generation for the first time in 2019. Impressively, this announcement was in line with EIA’s prediction around middle of last year.

Notably, the ISE Global Wind Energy Index has returned a solid 31.9% in 2019 compared with S&P 500 Index’s 30.3% return. This should encourage investors interested in renewable energy to turn their focus toward wind stocks, in particular.

Factors Boosting Wind Energy

The extension in Production Tax Credit (PTC), which drove wind capacity additions, has been one of the key growth catalysts for wind generation, over the past decade. Moreover, in July 2019, the U.S. Senate introduced two bills to extend the federal Investment Tax Credit (ITC) for offshore wind energy.

While such government support is crucial for expansion of an industry, a steady decline in input cost also tends to bolster growth. To this end, it is imperative to mention the fact that the price index for wind turbines has gradually decreased over the last decade, reaching $0.7 million per megawatt in the second half of 2019 from $1.58 million in 2008. Such price drop for U.S. wind turbines has been largely due to competition between manufacturers. Other factors such as growth in turbine heights and improved capacity factors have also lowered levelized costs of wind energy.

Significant investment in wind power generation has also bolstered capacity additions in this industry. Per a report published by BloombergNEF, the United States hit a record $55.5 billion in renewable energy investments in 2019, reflecting annual growth of 28%, with wind and solar leading the way.

All these factors enabled annual wind generation in the United States to total 300 million megawatt-hours (MWh) in 2019, exceeding hydroelectric generation by 26 million MWh.

Looking Ahead

This pace of wind capacity additions is expected to continue, with the industry aiming to invest $62 billion in new projects over the next few years, per an estimate provided by the American Wind Energy Association. This would allow wind energy to achieve 20% of the nation’s electricity mix in 2030.

Consequently, wind is predicted to remain the largest renewable energy generator in the country in the foreseeable future.

Stocks in Focus

Keeping in mind the aforementioned discussion, we have zeroed in four stocks that investors might want to keep a tab on as they are significant players in the U.S. wind industry.

Siemens AG SIEGY provides highly reliable and cost-efficient wind turbines. Currently more than 35,000 megawatts of wind power is installed with its turbines. In offshore wind power, Siemens broke the record for the world’s largest offshore wind power plants, presently held by the 630 MW London Array project. The company also occupies a leading position within onshore wind power. It was awarded the world’s largest single onshore order to date, a 1,050 MW order from MidAmerican Energy, for a series of onshore wind power plants in Iowa.

General Electric Company’s GE renewable energy unit is one of the world's leading wind turbine suppliers, with over 42,000 units installed across the globe. The company’s onshore Wind turbine installed base was approximately 45,000 units as of Dec 31, 2019. In offshore wind, it introduced Haliade X-12MW prototype, the most powerful offshore wind turbine in the world.

NextEra Energy NEE is the world's largest generator of renewable energy from wind and sun based on 2019 MWh produced on a net generation basis. The company added approximately 1,125 MW of new generating capacity and repowered wind generating capacity totaling 1,091 MW in the United States in 2019.

Vestas Wind Systems VWDRY designs, manufactures, installs and services wind turbines across the globe. It has more than 113 GW of wind turbines in 81 countries. Vestas’ joint venture with Mitsubishi Heavy Industries Ltd. (MHYVF), MHI Vestas Offshore Wind A/S provides a leading product platform and global footprint and aims to become a market leader in offshore wind power.

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