Change is in the Air

Back to Energy

In a weekly series, primarily focused on the various types of energy the nation relies upon, BetterTrades will take a daily look at the wide range of energy sources that have an impact on our daily lives and on our nation as a whole.

Leading the way this week, BetterTrades will delve into the up-and-coming energy resource, Wind power. In a recent statement by the American Wind Energy Association (AWEA), the agency stated that wind power in the U.S. increased nearly 50% during 2008, producing enough energy to power nearly seven million homes.

With America’s obsession for crude oil, it has become commonplace for people to downplay the dependency of fossil fuels that the country relies upon. However, 2008 saw investors infuse some $71B into renewable energy developments throughout the country, which included wind, solar, hydropower, biofuels and clean burning coal technologies.

There are many investors and critics alike, not willing to bet the farm on wind energy as the answer to upstaging crude as the nation’s primary energy resource. There are, however, plenty of people and governments out there that are willing to invest in an industry that may help shed some of their country’s dependency on crude oil.

A report released by Credit Lyonnais Securities Asia (CLSA) Research, Asia’s leading independent brokerage and investment group, showed that in the coming year, the U.S., China and various European countries are willing to put some $150B into the research and development of alternative energy sources, including wind energy.

Throughout the world, several countries are already a few steps ahead of the U.S. in the production and usage of wind-powered energy. Leading the way is Denmark, which currently generates nearly 20% of the country’s energy from wind power. Not to be overlooked, other countries such as Germany, Spain and Portugal all have substantial amounts of their overall energy production coming from wind. Germany currently produces 7% of their energy from wind, while Spain has 12% and Portugal has 10% of their country’s energy produced from this alternative resource.

So what makes wind energy a valuable resource? Well, between 2000 and 2007, the industry itself has increased fivefold. Economists believe that over the next ten years, the industry will expand four times its current size. By the end of 2008, there was more than $36B worth of investments in the industry alone, with the U.S. contributing some $9B.

Wind power is a cheap and never-ending resource. Costing approximately $0.06 to $0.085 per kilowatt-hour to produce, wind is far more cost effective than the other alternative resources. In comparison, nuclear power runs at about $0.15 per kilowatt-hour, whole coal is running at just over $0.10 and gas-fired power is costing nearly $0.12 per kilowatt-hour.

In a report released by CRA International (CRAI), the company confirmed data that showed that a recent project presented by ITC Holdings Corp. (ITC), which is looking to bring wind power from farms in the Dakotas to Chicago, would reduce the carbon dioxide emissions from the regions coal-burning plants down by more than 34 million metric tons.

The new plan calls for some 3,000 lines to transport the nearly 12,000 megawatts of energy from the wind farms to help power areas throughout the Midwest. Construction on the project would take place in alternating phases. If the plan goes through, ITC is looking to break ground within the next two years and have energy flowing to that region three years after that.

Like many other industries, renewable energy producers are looking towards Capital Hill in search of the government’s help. As the stimulus bill continues to work its way through Congress, these energy companies are looking to benefit from proposed tax credits that are within the bill itself.

The tax credit would give the energy companies the advantage of enticing investors into the industry, which would give those investments a tax break and would possibly give investors a return on their investments.

At what cost are we willing to explore alternative energy resources? In a recent news article, the Fish and Game Department and the Appalachian Mountain Club are in a current battle within the state of New Hampshire against Granite Reliable Power LLC over the possible construction of a wind farm in the state’s northern region.

The energy company has proposed plans to construct 33 wind turbines that would produce enough energy to sustain 33,000 homes. However, the two fighting the proposal have taken a stand that the building of the farm would destroy the habitat of four of the region’s wildlife species. Although the two organizations are in favor of wind power, they are strongly opposed to the site of the wind turbines.

So who are some of the players within the wind energy sector? In addition to such big players as General Electric (GE) and the Blackstone Group (BX), the majority of the industry’s participants come from lesser-known companies.

As an applied technology and advanced materials company, Zolt Companies Inc. (ZOLT) currently supplies carbon fibers used in the manufacturing of wind turbine blades. With a market cap just under $300M, the company is an up-and-coming player in the energy market with the majority of their business coming from the production of blades for the aircraft industry.

Another company involved in the industry is Trinity Industries Inc. (TRN), which manufactures wind towers used for the turbines. As a part of wind, rail and various construction engagements, the company has been profitable for the past several years and currently has a market cap just under $1B.

One of the more diverse companies engaged in the wind power industry is American Superconductor Corp. (AMSC), which has a dominant force in alternative energy, offering grid interconnection solutions as well as licensed wind energy designs and electrical systems. In addition, the company provides utility and industrial customers worldwide with voltage regulation systems that dramatically enhance power grid capacity, reliability and security, as well as industrial productivity within the wind farm industry.

In a world that has seen the price of oil reach record highs just six months ago, the resurgence of alternative energy sources could not have come at a better time. As the overall price of production for wind energy continues to decline, wind has become a more viable and cost effective measure to reduce our ration’s addiction to oil.