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. Mutual Funds & ETFs

    Top 3 Japanese Bond ETFs

    Learn about the top three exchange-traded funds (ETFs) that invest in sovereign and corporate bonds issued by developed countries, including Japan.
  2. Mutual Funds & ETFs

    What Exactly Are Arbitrage Mutual Funds?

    Learn about arbitrage funds and how this type of investment generates profits by taking advantage of price differentials between the cash and futures markets.
  3. Savings

    Become Your Own Financial Advisor

    If you have some financial know-how, you don’t have to hire someone to advise you on investments. This tutorial will help you set goals – and get started.
  4. Investing News

    Ferrari’s IPO: Ready to Roll or Poor Timing?

    Will Ferrari's shares move fast off the line only to sputter later?
  5. Investing Basics

    6 Reasons Hedge Funds Underperform

    Understand the hedge fund industry and why it has grown exponentially since 1995. Learn about the top six reasons why the industry underperforms.
  6. Mutual Funds & ETFs

    Top Three Transportation ETFs

    These three transportation funds attract the majority of sector volume.
  7. Stock Analysis

    5 Cheap Dividend Stocks for a Bear Market

    Here are five stocks that pay safe dividends and should be at least somewhat resilient to a bear market.
  8. Investing Basics

    Tops Tips for Trading ETFs

    A look at two different trading strategies for ETFs - one for investors and the other for active traders.
  9. Investing

    How to Win More by Losing Less in Today’s Markets

    The further you fall, the harder it is to climb back up. It’s a universal truth that is painfully apparent in the investing world.
  10. Fundamental Analysis

    Use Options Data To Predict Stock Market Direction

    Options market trading data can provide important insights about the direction of stocks and the overall market. Here’s how to track it.
  1. Can mutual funds invest in IPOs?

    Mutual funds can invest in initial public offerings (IPOS). However, most mutual funds have bylaws that prevent them from ... Read Full Answer >>
  2. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  3. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  4. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  5. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  6. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!