5 Alternative Energy Plays to Watch

David Fessler By David Fessler
Energy and Infrastructure Strategist

Alternative Energy

2018 will likely be remembered as the tipping point for the U.S. offshore wind industry.

Just eight years ago, there were few plans to develop offshore wind power here in the U.S. This was puzzling, since Europe was already well into the development of its wind farms.

But what a difference a few years made…

Massachusetts, Connecticut, New York, Virginia, New Jersey and other states made major strides and commitments regarding offshore wind power in 2018. Together, the U.S. offshore wind project pipeline is on a path to 10 gigawatts (GW) by 2030.

The East Coast of the U.S. is ideal for offshore wind, as the continental shelf is relatively shallow.

But the West Coast is starting to jump on the offshore wind bandwagon too.

Both coasts have the potential to generate more than 2,000 GW of wind power. That’s almost twice what America is using at any given moment.

Not surprisingly, California has shown interest in offshore wind. A 650 to 1,000 megawatt (MW) project has been proposed off the coast of Morro Bay, California.

But California and the rest of the West Coast states have a problem. They lack much of a continental shelf. In parts of California, the shelf doesn’t extend much beyond half a mile from the coastline.

So offshore wind development in the Pacific would require floating turbine towers. These are anchored – but not fixed – to the ocean bottom. Unfortunately, this technology is still in its infancy in the U.S.

Not so in Europe, where there is already an operating floating wind farm, the 30 MW Hywind farm in Scotland.

Europeans are the leading developers of floating wind tower technology. And I believe they will continue to make rapid progress in this area.

Though the U.S. is making strides in offshore wind technology, its knowledge base is nothing compared with that of Europe, where more and more countries are taking charge of their own energy futures.

Today, Europe has about 16 GW of offshore wind capacity. By 2027, an additional 47 GW will be capturing offshore breezes.

5 Plays to Watch

European companies like Denmark’s Ørsted A/S (Copenhagen: ORSTED) are proactively teaming up with U.S. firms to design and develop offshore wind projects. Ørsted was instrumental in the 400 MW Bay State Wind and the 30 MW Vineyard Wind projects. In the meantime, investors have a few choices – in addition to Ørsted – when it comes to investing in renewable energy pure plays.

GE (NYSE: GE), Vestas (Copenhagen: VWS) and Siemens (OTC: SIEGY) are all producers of offshore wind turbines and blades. Vestas and Ørsted are focused solely on wind power.

Additionally, one of the best ways to invest is through exchange-traded funds (ETFs).

Take VanEck Vectors Global Alternative Energy ETF (NYSE: GEX) for example. This fund has done extremely well and is up more than 17% since the start of the new year.

Its top 10 holdings include solar, wind and renewable technology companies. They make up more than 65% of the fund’s holdings by weight. The fund has $90 million in total assets under management and currently trades very close to its net asset value.

Investors interested in a diverse basket of renewable energy stocks might consider the VanEck Alternative Energy ETF.

Within five years, we’ll see plenty of other companies springing up here in the U.S. to support the offshore wind power industry. And you can bet I’ll be on top of them.

I believe every investor should consider renewable energy companies. This disruption isn’t going away.

You can read more about the coming disruption in energy in my new book, The Energy Disruption Triangle, now available online by clicking here.

Good investing,

Dave