6 Reasons Tight Credit Markets Won't Stop the Wind Industry

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 (VWSYF.PK) 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 (FAN) has dropped two-thirds from its launch in June) I think it's worth reviewing the many reasons to be bullish.

1. Both presidential candidates are calling for a Carbon Cap'n Trade system.
2. The Production Tax Credit [PTC] was extended.
3. Commodity prices are falling.  While that makes power from natural gas less expensive, it should also drop the cost of wind farms.
4. State Renewable Portfolio Standards set a minimum for new wind production.
5. In a slow economy, wind farms bring more jobs than fossil fuel generation, especially during construction.
6. 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.

Comments

[Barry Robbins:]

I think the market has really overreacted. You can know buy Vestas and Gamesa, 2 of the top turbine producers in the world, for bargain prices. These companies is have huge earnings momentum. If you are thinking long-term, and believe in peak-oil theories, you have to own wind energy.

2008 Nov 03 08:13 AM

[NOWHEREMAN:]

Yeah, right, tell that to the VeraSun investors. This industry had Goverment subsidies.

If you believe in Peak Oil theories is the key phrase, what if I don't. Most Democrats believe in Green energy not Peak Oil. Peak Oil is just a conspiracy.

If I don't believe, then will wind financing will go the way of the DoDo or VeraSun? If TBoone's CLNE goes bankrupt will that force reassesment of the whole Industry? I don't believe that TB will be able to get the financing for the Billions of Dollars worth turbines he has ordered from GE. His personal collateral has dropped to such an extent that credit for that much will not be forthcoming. Meanwhile, the GE financing arm is in dire straits by its lonesome.

Good luck.

2008 Nov 03 09:03 AM

[Road Runner:]

Another reason to be bullish on wind. The number 1 and number 3 biggest wind farm operators in the world are well financed, and will have no problem getting capital for expansion: Spain's Iberdrola Renovables and Portugal's EDP Renovaveis. Thanks to the strong pro alternative energy policy in Europe, these companies have become powerhouses. Here’s the article

www.businessweek.com/g...

P.S. I wish the US would adopt a strong alternate energy policy like Europe. This would create strong US companies that will eventually export our services and technology to the rest of the world making us money. That’s been the very successful US model to prosperity for many decades – invent it here, then sell it to the rest of the world. We’ve got to start do that for alternative energy, instead of selling bad mortgages to the rest of the world.

2008 Nov 03 11:22 AM

[Gojijoan:]

The problem with wind turbines is (and I heard this from an ironworker friend who builds them) they only have a life expectancy of 20 years because the transformers can't be reliable after that amount of time. So their only recourse is to take the blades off and leave the base intact (because they're too hard to take down). What were they thinking when they first decided to use wind turbines. 20 years goes by pretty darn fast but those 93 metre bases will last forever ! ! !

2008 Nov 03 04:39 PM

[billp37:]

Konrad

What is the HEAT RATE for Wind Power industry?

www.energyvortex.com/e...

Less than 3412 BTU/KWh?

2008 Nov 03 09:33 PM