The Wind Power industry is gaining momentum in the U.S., with more wind power produced here than in any other country last year.
My own Colorado is quickly becoming a wind manufacturing and R&D hub, with three Vestas (OTCPK:VWSYF) plants, a wind tower manufacturing plant in Lamar, not to mention the National Wind Technology Center. When Vestas first announced the move to Colorado in January 2007, I assumed it was because of the central location in the wind belt and the great rail infrastructure, as well as the strong political support for wind. At the New Energy Economy Conference two weeks ago, I learned one other reason, Denver has the only non-stop international airport in the Midwestern wind belt, meaning that Vestas executives can get here much quicker than other windy cities.
Until the credit crunch, the advance of the wind industry seemed unstoppable. Now articles about how lack of financing could kill the industry are popping up faster than new turbines. With wind, financing is very important, because it's a lot like buying a natural gas turbine, and all the gas needed to run it the day it's built.
With wind stocks having dropped even more than the market as a whole (the First Trust Global Wind Energy ETF (NYSEARCA:FAN) has dropped two-thirds from its launch in June) I think it's worth reviewing the many reasons to be bullish.
- Both presidential candidates are calling for a Carbon Cap'n Trade system.
- The Production Tax Credit [PTC] was extended.
- Commodity prices are falling. While that makes power from natural gas less expensive, it should also drop the cost of wind farms.
- State Renewable Portfolio Standards set a minimum for new wind production.
- In a slow economy, wind farms bring more jobs than fossil fuel generation, especially during construction.
- Many states are working to remove the transmission bottleneck. (CA, TX, CO, and KS to name a few.)
None of these will be enough to keep wind projects that can't get financing going, but markets tend to overreact. The question we have to ask ourselves is, "Is the current fall an overreaction, or is there still more to come?"
DISCLOSURE: Tom Konrad owns FAN.