Alternative energy is a $5 billion-a-year industry. Even before last week’s blackout, analysts said that number could more than double by the end of the decade. But can investors turn green energy into cold hard cash?
WIND ENERGY is one of the few mature technologies within the renewable sector. Though it only accounts for about 10 percent of that $5 billion total, revenue in the sector is growing at 30 percent a year. It’s attracting big name investors like Warren Buffet and big name critics in places like Nantucket island in Massachussetts.
They are showing up in backyards in 27 states. Wind turbines power more than 1 million homes right now. And 28 percent more wind power will come online next year.
Juno, Fla.-based FPL Energy operates some of the largest wind farms in the country, including a West Virginia operation CNBC recently visited with FPL executive Dan Giordano.
“We’re kind of along ridge here,” he said on a recent tour. “That’s very important. The idea is that we want as little impact from the terrain on the flow of wind to the turbines.”
Each of the turbines are as tall as the length of a football field. The wind farm stretches six miles and creates enough energy to power 15,000 homes. The utility gets a quarter of its energy from 30 wind farms in 10 states. FPL Energy CEO Lew Hay says that’s paying off.
“Today our wind projects are providing returns on our equity of between 18 and 22 percent.”
At Mid American Energy, winds are blowing in profits as well. So much so that Warren Buffet took a stake in this utility that serves four Midwestern states.
“Certainly we see investment opportunities with all of these players,” said Eric Prouty, a securities analyst who follows the group for Adams Harkness and Hill. He sees plays in wind utilities and in the companies that make the turbines. The largest is General Electric, the parent of CNBC and NBC. (MSNBC is a Microsoft-NBC joint venture.)
“We believe the industry now is getting very mainstream,” said Prouty. “Globally last year, there was over $7 billion of wind turbines shipped. So we believe this is a real international market with tremendous growth rates.”
Still, this industry is not without potential turbulence. Right now a federal subsidy shaves roughly 25 percent off the cost of wind production. That puts it on par with fossil fuels in many areas. But that subsidy ends this year. Though a replacement is currently being considered in Washington, there’s no guarantee it will pass.
“We will not do it without the credit,” said Jack Alexander at MidAmerica Energy. “It’s just not economically feasible.”
Of course, there are many days when the wind simply isn’t blowing: The blades only turn average of 70 percent of the time. And on other days, they are actually a drain on the utility’s energy.
No community will ever be able to depend solely on wind. And some communities don’t want to.
The first North American offshore wind farm is facing stiff opposition from Nantucket residents. Critics say the project would mar the natural landscape.
But as Americans continue to consume 1.5 percent more energy every year, communities will be forced to make sacrifices.
When legislators get back to work this fall, they’ll tackle an energy bill that contains a new version of the wind subsidy. Meanwhile, no start date has been set for the proposed $700 million wind farm in Nantucket Sound.