Wind power is already big in Europe and India, and should get a huge boost from China's aggressive plans to generate 10% of its electricity from renewable sources by 2020, including a thirtyfold increase in wind power to 30 gigawatts. "We expect wind energy to be the fastest-growing form of electricity generation over the coming 10 years," says Jens Peers, who heads the eco-investing team at KBC Asset Management International and who is the lead portfolio manager of the Calvert Global Alternative Energy fund. He says that global installed wind farm capacity is forecast to grow 15% on a compounded annual basis through 2015.
Wind-generated electricity costs about 5 cents per kilowatt-hour, which compares favorably with natural gas, but is still more than coal.
One of Peers' favorite stocks is Vestas Wind Systems, a Copenhagen-based wind company with more than 33,500 wind turbines in 63 countries that produce more than 50 million megawatt hours of electricity a year, or enough to supply millions of homes. He also likes Hansen Transmissions International, a London-traded company that makes gearboxes for wind turbines.
Closer to home, wind farms constitute only about 1% of the U.S. electricity supply. But the growth potential is enormous, given the country's three coasts and a wind belt that runs from Texas (by far the nation's leading wind-power source) to North Dakota.
There are only a few wind-power companies in the U.S. market, and none are pure plays. Among them is American Superconductor Corp., which among other things supplies electrical systems used in wind turbines and sells products that regulate wind farm voltage so it can be hooked up to the power grid. Zoltek makes lightweight carbon fiber material that enables wind-turbine blades to be longer and stronger than fiberglass blades. And the largest wind turbine maker in the U.S. is General Electric, whose wind business is thriving even if it represents only a speck on its mammoth balance sheet.
Hot Rocks And Other Things
One of the major drawbacks of solar and wind is that they're not always "on." Geothermal, on the other hand, is a never-ending energy source that captures the thermal heat trapped within rocks beneath the earth's surface. The ample supply of geysers and hot springs in the western U.S. help make it the world's largest geothermal energy source, and geothermal is the country's third-largest renewable energy source after hydro and biomass, according to the Geothermal Energy Association.
There aren't a lot of publicly traded geothermal companies, but Ed Guinness from the Guinness Atkinson Alternative Energy Fund likes Ormat Technologies, a Reno, Nev.-based company with 10% of the world's installed geothermal capacity, more than 75 patented power technologies and low operating costs. The company's shares recently traded down about 30% from their 52-week high; shares traded at 34 times 2008 earnings that are forecast to grow nearly 80% over last year.
Ethanol stocks shined in 2006, but have since fallen mightily on concerns of oversupply and rising corn prices fueled in large part by the ethanol frenzy. A clean energy research report from Morgan Stanley said that ethanol fundamentals will likely deteriorate this year because of a commodity squeeze, supply imbalance and a U.S. recession.
The renewable energy space is filled with enticing yet speculative companies that include makers of biodiesel; producers of enzymes that convert cellulosic feedstocks to biofuels; and manufacturers of fuel cells. These aren't for the faint of heart. "Fuel cells have been astoundingly successful at losing money the past seven years," says Rob Wilder of WilderShares, who nonetheless says they make up 10% of his Clean Energy index.