Thursday, January 10, 2008

Investing in wind

Climate change fears have heightened focus on clean renewable energy sources. Wind power is growing in its importance as a clean source of energy for electricity generation, but at present only accounts for 0.34% of the world's electricity. (Cifuentis, 2007) The wind power generation industry is forecast to grow at 20 - 30% p.a. over the next 3 years. (Economic Times, 2007)
There are two primary ways to gain investment exposure to the wind power sector.
  • Investing in wind farms
  • Investing in wind turbine manufacturers.

Investing in wind turbine manufacturers

Manufacturing wind turbines is a growth industry. Manufacturers are struggling to keep up with the demand for turbines and there are large order backlogs. This growth is shown by the increasing global capacity of wind power installations. There was 15,200 MW of new wind power installations in 2006 (2005: 11,400 MW) and about 18,800 MW installed during 2007. This represented growth of 33% in 2006 and 24% in 2007. Over the last ten years wind has been growing at an average annual rate of 28%. (GWEC)
The largest markets for wind power are the United States, Germany, India, Spain, China and France. There is over 74,000 MW of capacity installed globally across 70 countries and this is expected to double by 2010. (GWEC) Whilst Europe is starting to mature, China is growing rapidly with growth for 2007 of approximately 70%.
The main impediment to growth for turbine manufacturers is supply bottlenecks and capacity constraints. There is a shortage of supply of some key components and some projects are experiencing delivery delays.

Wind turbine manufacturers

Some of the large wind turbine manufacturing firms include:
  • Vestas
  • Gamesa
  • Suzlon
  • Nordex
  • GE power
Vestas is a Danish company with its primary listing on the Copenhagen Stock Exchange. It has a market capitalisation of approximately €13 billion. Vestas accounts for 28% of the international wind turbine market and management have stated a goal for 2008 of 30 to 32%.
Gamesa is a Spanish company whose primary focus is on the manufacture of wind turbines. They also develop wind farms and promote them for sale. In addition they have a small solar power business. It has a market capitalisation of approximately €6 billion.
Suzlon is an Indian company with ambitious expansion plans. They are currently one of the largest turbine manufacturers in the world.
Nordex is a German company. It is a lot smaller than the above three companies with a market capitalisation of approximately €2 billion but has been growing very strongly. Management aims to achieve revenue growth of 50% per annum over the next few years. The current order book is sufficient to keep them operating at full capacity until well into 2009. This is a common characteristic across the main wind turbine manufacturers.
GE power is a subsidiary of the huge US conglomerate GE.

Investment options for Australian investors

Australian investors can gain access to some of these companies relatively easily through CFDs. The European companies, Vestas, Gamesa and Nordex all have CFDs available over them. The Indian company Suzlon does not. GE power can be indirectly accessed through the listed company GE but investment in GE includes exposure to a diverse range of other businesses.


Cifuentis, C., 2007, "A Ray of hope: The case for solar energy" Platinum investment management.
Economic Times, Suzlon to triple capacity by 2009, 12 Sep 2009.
GWEC, Global Wind Energy Council