Why Wind Power is The #1 Alternative Energy
It's become cliché to say that the United States is addicted to oil. I'll make no effort to refute the claim because it's true. It's an expensive habit, too.
The upshot, however, has been the explosion of interest in renewable energy. In 2009, investors have poured a record $155 billion into the alternative energy space. And billions more funnel in every week.
But with so many possibilities - hydropower, wind, solar, geothermal, biofuel, clean coal technology - investors are forced to pick which energy source will distinguish itself as the most viable replacement for oil.
It's a crapshoot. That is, until you realize the shooter (in this case Wall Street) is rolling a pair of "loaded" dice.
Heavy hitters like The Blackstone Group and General Electric have stealthily invested billions into wind energy resources. JP Morgan Chase revealed that it's holding a $1 billion stake in the wind power sector.
Even better, in the next five years, the governments in the United States, China and Europe will plow at least $150 billion into the same power source, according to CLSA Research.
And, unlike oil, there's no possibility of it ever running out.
So let's take a closer look at this odds-on favorite to win the alternative energy derby. And more importantly, reveal three solid ways to ensure that you're holding the winning ticket.
And the Winner Is...
Wind. It's clean (wind power generates absolutely no greenhouse gases). It's renewable. And it involves no production decline curve. Hence, 30 years from now we won't be worrying about "Peak Wind" theories coming to fruition.
It also can't be horded by power hungry cartels. In fact, enough of it exists to satisfy global demand seven times over, according to a Stanford University study. North Dakota alone has enough of it to meet 25% of U.S. demand.
But perhaps most importantly, it's finally coming of age. Just consider:
1. From 2000 to 2008, the size of the wind power industry increased fivefold.
2. In 2008, records were shattered with $52.9 billion in total global wind investments.
3. In the next 10 years, the wind industry is expected to quadruple in size.
Hands down, wind is the fastest growing source of power. But can such parabolic growth continue?
Sure, the Department of Energy and countless other studies and industry experts say it will. But are they being realistic? Absolutely. And here's why...
Wind Power Simply Works
First and foremost, wind power makes economic sense... even without government subsidies.
You see, wind can be used to generate electricity for 6 to 8.5 cents per kilowatt-hour.
For comparison's sake, the cost of nuclear power runs about 15 cents per kilowatt-hour. Coal runs north of 10 cents (without factoring in carbon capture). And gas-fired power costs approximately 12 cents.
Keep in mind, too, that just a few years ago, wind costs rested north of 15 to 20 cents. But today, costs are low enough in some markets to compete with conventional power generation methods. And future advancements will make wind power even cheaper.
Want proof that it works? Look no further than Denmark. It already generates 20% of its electricity from wind. And Spain, Portugal and Germany boast similarly impressive penetration rates of roughly 12%, 10% and 7%, respectively.
Harnessing Every Bit of the Wind's Power
The Department of Energy has set a goal for wind energy to produce 20% of the total U.S. demand for electricity by 2030. Sure, it's an ambitious goal. Especially considering that wind power currently contributes less than 2% to overall electricity demand.
That said, wind makes a lot more sense than other renewable energy alternatives. Here are a few reasons why:
1. Provides Energy Security. Wind provides the opportunity to dramatically reduce U.S. dependence on foreign fossil fuels. The Great Plains States are home to the greatest wind energy potential in the world.
2. Provides Price Security. With wind, the future cost of electricity will drop to near zero. After constructing the turbines, costs such as maintenance and transmission will still exist. But they'll be nominal when compared to the exorbitant cost of oil and gas.
3. Dramatically Reduces Impacts on the Environment. By 2030, the cumulative reduction of greenhouse emissions in the United States alone would total 7.6 billion. Or in more comprehensible terms, it would be like taking two-thirds of all U.S. passenger vehicles off the road.
4. Stimulates Far-Reaching Economic Growth. As the Executive Director of the American Wind Energy Association, Randall Swisher, sums up, "Every megawatt of installed wind power creates employment in manufacturing, construction and operations..." All told, the economic ripple effect of wind power in the United States would create up to $80 billion in new economic growth each year.
5. Preserves Another Scarce and Vital Resource - Water. As the DOE points out, "Few realize that electricity generation accounts for nearly half of all water withdrawals in the nation." Using wind for 20% of our power needs would free up more than 450 billion gallons of water per year.
As I see it, there's really three ways to play the imminent boom in wind power; each suitable to different types of investors, with varying degrees of risk.
By Louis Basenese,