With the 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 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 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.

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) 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

    ETF Analysis: iShares JPMorgan USD Emerg Markets Bond

    Learn about the iShares JPMorgan USD Emerging Markets Bond fund, which invests in bonds of sovereign and quasi-sovereign entities from emerging markets.
  2. Mutual Funds & ETFs

    ETF Analysis: SPDR Dow Jones International RelEst

    Learn how the SPDR Dow Jones International Real Estate exchange-traded fund (ETF) is managed and for whom the ETF is most appropriate.
  3. Active Trading Fundamentals

    How Hedge Funds Front-Run Index Funds to Profit

    Understand what front running is, and learn how hedge funds use this investing strategy to profit from the anticipated stock buys of index funds.
  4. Mutual Funds & ETFs

    ETF Analysis: Schwab US Large-Cap

    Discover how the Schwab U.S. Large-Cap exchange-traded fund is managed, the index it tracks and the investors for which it is most appropriate.
  5. Mutual Funds & ETFs

    ETN Analysis: Rogers Intl Commodity Energy Total Return

    Learn more about the Rogers International Commodity Total Return, which is an exchange-traded note that tracks a broad index of commodity futures.
  6. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  7. Mutual Funds & ETFs

    ETF Analysis: ProShares UltraPro Nasdaq Biotech

    Obtain information about an ETF offerings that provides leveraged exposure to the biotechnology industry, the ProShares UltraPro Nasdaq Biotech Fund.
  8. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI Europe Financials

    Learn about the iShares MSCI Europe Financials fund, which invests in numerous European financial industries, such as banks, insurance and real estate.
  9. Mutual Funds & ETFs

    ETF Analysis: SPDR S&P Insurance

    Learn about the SPDR S&P Insurance exchange-traded fund, which follows the S&P Insurance Select Industry Index by investing in equities of U.S. insurers.
  10. Mutual Funds & ETFs

    ETF Analysis: SPDR S&P Emerging Markets Small Cap

    Learn about the SPDR S&P Emerging Markets Small Cap exchange-traded fund, which invests in small-cap firms traded at the emerging equity markets.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  3. Exchange-Traded Mutual Funds (ETMF)

    Investopedia explains the definition of exchange-traded mutual ...
  4. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  5. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  6. Lion economies

    A nickname given to Africa's growing economies.
RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. 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 >>
  4. 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 >>
  5. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  6. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
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!