The polysilicon shortage in the solar industry is, by now, a well-known fact, and most investors are aware of the scale and probable duration of that shortage, as well as of what companies are positioned to benefit from a tight polysilicon market.
A similar situation is currently unfolding in the wind industry. We have discussed the very bright prospects for the wind sector here before. In the US, the American Wind Energy Association forecasts that installed capacity could grow from 11,603 MW today to around 100,000 MW by 2020. In Canada, Emerging Energy Research predicts that installed wind capacity will expand from around 1,500 MW today to around 14,000 MW by 2015.
We have also noted how the seeming lack of attention wind receives from retail investors, despite the fact that wind is a proven technology nearly competitive with conventional grid power, likely stems from the fact that there just aren't a great deal of 'exciting', headlines-grabbing wind stories in North America. Wind just keeps on growing quietly (albeit very rapidly), and North American investors are paying that growth next to no attention. The same definitely cannot be said of solar, with its plethora of exotic Chinese plays and its engrossing contest for technological supremacy. At the end of the day, though, wind is a proven and well-understood business with a good track record...which cannot always be said of solar.
The New Kid On The Shortage Block?
One of the key factors limiting growth in wind right now is a shortage in the various components needed to make wind turbines, from gearboxes all the way down to bearings. Someone alerted me yesterday to an interesting article in last week's Economist discussing feedstock shortage problems in the solar and wind industries. While the solar polysilicon story is well-known, the shortfall in wind turbine components supply will probably come as news to many folks. The article notes:
Wind turbines are giant machines that require lots of parts. Several firms are building new factories: Vestas has just announced its first American plant, which will make blades in Colorado. But new factories will take several years to get up to speed. In the meantime, buyers are putting down deposits to reserve their turbines. GE Energy, the largest turbine installer in America, is already booked up until the end of next year.
A Stock That Could Benefit
The pick is Zoltek [ZOLT], a carbon fiber manufacturer said by RBC Capital Markets to be, because of the projected growth in wind, in a "commodity cycle position" similar to that MEMC Electronic Materials [WFR] was in two years ago.
Feedstock shortages related to alternative energy are currently responsible for some of the biggest gains generated in this bull market, both through direct commodity exposure and through exposure to companies involved in providing the feedstock. Just think of uranium, corn and sugar, to name a few.
This is merely an extension of that phenomenon - the growth in alternative energy has been so rapid over the past two years that players in various positions along supply chains just haven't had time to ramp up production enough to meet demand.
While this is bad news for downstream players, it is worth keeping an eye on up- and mid-stream companies who typically hold an appreciable degree of pricing power in tight markets.
The polysilicon, uranium and corn stories are well-known - might it be time to start paying more attention to wind?
Disclosure: I do not hold a position in any of the stocks discussed above but I do have exposure to wind