While the United States continues to let its vast onshore and offshore wind resources go to waste, the rest of the world has begun to seriously explore the energy source. Nowhere is this more prevalent than in faster growing, emerging markets. As these nations struggle to find solutions to their future energy needs, renewable energy has taken a front seat in their search. China's prowess in wind and solar is well known, but the emerging world of Latin America has recently become a hot-bed of wind energy. For investors, this could be a great long term opportunity. (For more, see Going Green With Exchange-Traded Funds.)

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

Vast Untapped Resources
Latin America's population boom and growing middle class demands are creating an enormous need for energy. While traditional fossil fuel demand has been steadily rising, the region has recently undergone a renewable renaissance. Since 2003, Latin America has installed more wind generation capacity than any other of the world's major nations, save for China. The region currently has around 2,500 MW of installed wind energy, but more capacity is on the horizon.

According IHS Emerging Energy Research (EER), Latin America will reach 46 GW of total installed wind capacity by 2025; that's a 12.6% compound annual growth rate of yearly installations. While leaders in Brazil and Mexico will lead the charge, nations like Chile, Costa Rica and Uruguay have recently set aggressive renewable/wind energy goals. Chile alone plans on installing more than 280 MW worth of wind power by 2024. In addition, both Argentina and Patagonia have offshore potential that rivals Europe in terms of wind strength.

The real potential for wind energy in the region stems from the various governments' progressive policies. Many nations have set up feed-in tariffs and fiscal incentives, such as financing and loan options, as well as adopting aggressive renewable standards. The creation of both the MERCOSUR and Sistema de Interconexion Electricas de los Paises de America Central (SIEPAC) transmission partnerships, has also facilitated growth for the energy source. This openness and streamed-lined process in Latin America has promoted a variety of firms to build turbine and transmission factories within the continent. Most recently, the third largest power equipment manufacturer Alstom (OTCBB:ALSMY) opened a new turbine plant in Brazil, with the goals of exporting turbines across the rest of Latin America.

Playing LatAm's Wind Ambitions
Unlike the U.S., Latin America's openness towards wind energy could be the sector's savior. The long term potential is certainly there and incentives in the region will continue to spur development. For portfolios, this could be the catalyst for investment. Both the PowerShares Global Wind Energy (Nasdaq:PWND) and First Trust Global Wind Energy (ARCA:FAN) continue to be the only pure play ETFs for the sector. The First Trust fund has managed to outperform the PowerShares fund slightly over the last year, as it devotes less of its holdings to Chinese firms. However, both ETFs are down significantly since the start of the year.

For those wanting to go the individual route, the Spanish multinational renewable powerhouses of Iberdrola (OTCBB:IBDRY), Gamesa (OTCBB:GCTAF) and Acciona (OTCBB:ACXIF), could be the best inroad. Already big players in the region, historical and cultural ties will make them the preferred owner/operators for many Latin American governments.

Perhaps the biggest wind play on the continent will be building the vast transmission network needed to utilize all of that wind potential. Brazil alone will require around $2 billion a year in spending to transform its grid. Brazilian utility, CPFL Energia (NYSE:CPL) has already begun the process of transformation, while power management firms like ABB (NYSE:ABB) and Eaton's (NYSE:ETN) products will remain in demand. Both firms have expanded sales into the region.

The Bottom Line
As the United States continues to drag its heels with regards to wind energy, the emerging world is cooking right along. Latin America is poised to be one of the biggest generators of the energy source. For investors, this expansion could be exactly what they need to power their portfolios. (For related reading, see Clean Or Green Technology Investing.)

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

At the time of writing, Aaron Levitt did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Forex Strategies

    Two Great Currencies To Profit From Oil Volatility

    U.S. dollar crosses with Canadian and Australian dollars offer easy access to crude oil trends due to their tight correlation with energy futures.
  2. Mutual Funds & ETFs

    ETF Analysis: PowerShares FTSE RAFI Emerging Mkts

    Learn more about the PowerShares FTSE RAFI Emerging Markets ETF, a fundamentally weighted fund that tracks emerging market equities.
  3. Mutual Funds & ETFs

    ETF Analysis: iShares Cali AMT-Free Muni Bond

    Learn more about the iShares California AMT-Free Municipal Bond exchange-traded fund, a popular tax-advantaged ETF that dominates its category.
  4. Mutual Funds & ETFs

    ETF Analysis: SPDR S&P Emerging Markets Dividend

    Learn more about the SDPR S&P Emerging Markets Dividend Fund, a yield-focused exchange-traded fund tracking global emerging economies.
  5. Mutual Funds & ETFs

    ETF Analysis: First Trust Dow Jones Global Sel Div

    Find out about the First Trust Dow Jones Global Select Dividend Index Fund, and learn detailed information about characteristics and suitability of the fund.
  6. Mutual Funds & ETFs

    ETF Analysis: U.S 12 Month Natural Gas

    Learn about the United States 12 Month Natural Gas Fund, an exchange-traded fund that invests in 12-month futures contracts for natural gas.
  7. Mutual Funds & ETFs

    ETF Analysis: iShares Floating Rate Bond

    Explore detailed analysis and information of the iShares Floating Rate Bond ETF, and learn how to use this ETF as a defense against rising interest rates.
  8. Mutual Funds & ETFs

    ETF Analysis: ProShares UltraPro Short S&P500

    Find out information about the ProShares UltraPro Short S&P 500 exchange-traded fund, and learn detailed analysis of its characteristics and suitability.
  9. Mutual Funds & ETFs

    ETF Analysis: SPDR Barclays Investment Grd Fl Rt

    Learn more about the SPDR Barclays Investment Grade Floating Rate Fund, which tracks an index of highly rated floating debt securities.
  10. Mutual Funds & ETFs

    ETF Analysis: ALPS Medical Breakthroughs

    Learn more about a unique and innovative exchange-traded fund (ETF) in the biotechnology industry: the ALPS Medical Breakthroughs Fund.
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. Benchmark Crude Oil

    Benchmark crude oil is crude oil that serves as a pricing reference, ...
RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. 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 >>
  4. 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 >>
  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. 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 >>

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!