With the recent bankruptcy filings of solar firms Evergreen Solar (OTCBB:ESLRQ) and Solyndra, many investors have seriously begun to question the validity of alternative energy. Stocks within the sector have fallen hard the last few weeks as investors have dumped risk in the face of safety. However, with the world's expanding populations, rising middle classes and dwindling fossil fuel sources, renewables will be needed to meet the world's future energy needs.

Despite the recent stock pessimism, one bright spot has been the wind industry. Both utility-scale and community wind installations are growing, and turbine costs are falling. For investors, now could be a good time to consider the sector in the face of lower stock prices.

Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.

More Than Just a Breeze
A recent paper published in the science journal Proceedings of the National Academy of Sciences (PNAS) estimates the total global wind energy potential at 2,470 exajoules (EJ) or about 40 times current worldwide consumption of electricity. The U.S. Energy Information Administration predicts that worldwide demand for non-fossil fuel sources, such as solar and wind, will increase 22% over the next five years and 85% over the next 25. The global wind industry is bent on making those targets and saw a major revival in new capacity during 2011. More than 18.4 gigawatts (GW) worth of new capacity has been installed globally in the first half of 2011, and 25.5 GW is expected to be added in the second half of the year. So far, global wind capacity grew by 9.3% in 2011.

Domestically, the United States has constructed more than 2,150 megawatts (MW) worth of new wind power in 2011. Over the last four years, the U.S. has been responsible for 35% of the world's new capacity. This growth in wind generation is second only to the growth in new natural gas generation, but it is more than nuclear and coal growth combined. Overall, scientists at NREL estimate that the U.S. has a total generation potential of 145,500,000 MW worth of both on- and offshore wind energy.

Globally, the picture continues to be rosy for wind energy. Faster-growing emerging markets have adopted the power form in spades as a way to satiate their growing energy needs. In Brazil, wind energy now costs less than natural gas, despite the nation being a huge producer of fossil fuels. Both India and China continue to add new capacity at record clips, with China adding over 8 GW in only six months. Kenya, moving past its reliance on hydroelectric power, has plans to significantly increase its use of wind by 2013.

Catching the Gust
With the long-term potential for wind energy great and stocks within the sector down big, now could be a great time to add wind to a portfolio. Both the First Trust Global Wind Energy (NYSE:FAN) and PowerShares Global Wind Energy (Nasdaq:PWND) offer investors a chance to bet on a wide swath of wind companies. Both ETFs are currently trading near their 52-week lows and can be used as a proxy.

Perhaps one of the easiest ways to play the growth in wind is through the turbine manufacturers. Both GE (NYSE:GE) and Vestas (OTCBB:VWDRY) are the two largest and most-efficient turbine producers, and Ming Yang Wind Power Group (NYSE:MY) offers an interesting play on China's "low-cost" leadership in alternative energy.

Parts for Complex Machines
In addition, many of the companies that provide parts for these complex machines are trading for bargain levels. Carbon fiber is used in turbine blades to reduce weight and allow the blades to spin faster. Fiber producer Zoltek (Nasdaq:ZOLT) recently won a $3.7 million grant from the U.S. Department of Energy (DOE) for advanced carbon fiber research, while Hexcel (NYSE:HXL) continues to expand its presence in emerging markets.

Finally, ball-bearing manufacturers such as Kaydon (NYSE:KDN) and Federal-Mogul (Nasdaq:FDML) are seeing their stars shine as more wind products are being built across the globe.

The Bottom Line
Renewable energy is facing a vacuum of confidence from most investors. However, the long-term promise is great. One shining example in the space is the wind energy sector. Capacity continues to grow and offers a value among the renewable energy sectors. The previous stocks, along with Woodward, (Nasdaq:WWD) make ideal choices. (For additional reading, see Going Green With Exchange-Traded Funds.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Bonds & Fixed Income

    The Top 5 High Yield Bond Funds for 2016

    Learn about mutual funds and ETFs that invest in high-yield bonds. Read about the risks and rewards associated with investing in high-yield bonds.
  2. Chart Advisor

    Rare Earth Metals Continue To Struggle

    Rare earth metals are used in many of today's products and many investors are wondering if consumer demand is enough to offset the global economic slowdown. We'll take a look at how they are ...
  3. Mutual Funds & ETFs

    3 ETFs to Consider Before an Interest Rate Hike

    Learn about potential impacts of the Federal Reserve boosting interest rates and three ETFs that can help you capitalize on the perceived December increase.
  4. Mutual Funds & ETFs

    A Complete Guide to Tax Loss Harvesting With ETFs

    Using exchange-traded funds (ETFs) to harvest tax losses can be a smart way to maximize your portfolio's tax efficiency.
  5. Mutual Funds & ETFs

    Why ETFs Are a Smart Investment Choice for Millennials

    Exchange-traded funds offer an investment alternative to cost-conscious millennials who want to diversify their portfolios with less risk.
  6. Stock Analysis

    Will J.C. Penney Come Back in 2016? (JCP)

    J.C. Penney is without a doubt turning itself around, but that doesn't guarantee the stock will respond immediately.
  7. Mutual Funds & ETFs

    Should Investors Take a BITE Out of This New ETF?

    ETF BITE offers a full menu of restaurants. Is now the right time to invest?
  8. Financial Advisors

    5 Things All Financial Advisors Should Know About ETFs

    Discover five things all financial advisors should know about ETFs, including when ETFs may be a better choice for your clients than mutual funds.
  9. Stock Analysis

    The Top 5 ETFs to Track the Nasdaq in 2016

    Check out five ETFs tracking the NASDAQ that investors should consider heading into 2016, including the famous PowerShares QQQ Trust.
  10. Investing

    Time to Bring Active Back into a Portfolio?

    While stocks have rallied since the economic recovery in 2009, many active portfolio managers have struggled to deliver investor returns in excess.
  1. Should mutual funds be subject to more regulation?

    Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>
  2. Do ETFs pay capital gains?

    Exchange-traded funds (ETFs) can generate capital gains that are transferred to shareholders, typically once a year, triggering ... Read Full Answer >>
  3. How do real estate hedge funds work?

    A hedge fund is a type of investment vehicle and business structure that aggregates capital from multiple investors and invests ... Read Full Answer >>
  4. Are Vanguard ETFs commission-free?

    While some Vanguard exchange-traded funds (ETFs) are available commission-free from third-party brokers, a large portion ... Read Full Answer >>
  5. Do Vanguard ETFs require a minimum investment?

    Vanguard completely waives any U.S. dollar minimum amounts to buy its exchange-traded funds (ETFs), and the minimum ETF investment ... Read Full Answer >>
  6. Can mutual fund expense ratios be negative?

    Mutual fund expense ratios cannot be negative. An expense ratio is the sum total of all fees charged by an asset management ... Read Full Answer >>

You May Also Like

Trading Center