Renewable Energy Battle: Wind vs. Solar

The wind and solar industries are often lumped into the same category when discussing renewable energy. They're two of the most natural energy sources we have on Earth and are two of only a few truly renewable sources of energy we have.

There are big differences between wind and solar, though. Differences that investors should consider when looking at renewable energy stocks. Let the battle begin.

Space matters
The sheer area it takes to generate renewable energy is one of the drawbacks compared to traditional fossil fuel sources. Anyone who's driven past wind farms in Iowa, Texas, or California has seen just how expansive they can be.

Below I've outlined the size density of four renewable energy projects to show how much energy we can get from the land (or sea) we have available.

Project

Power Type

Size (Power)

Size (Space)

Energy per Area

Cape Wind Wind 468 MW 25 sq. miles 18.72 MW/sq. mi
Roscoe Wind Farm Wind 781.5 MW 156.25 sq. miles 5 MW/sq. mi
California Valley Solar Ranch Solar 250 MW 2.34 sq. miles (for solar arrays) 106.8 MW/sq. mi
Topaz Solar Farm Solar 550 MW 5.47 sq. miles 100.6 MW/sq. mi

Solar clearly packs more power into the space it has available, but wind has its own advantages. Much of the space under a wind farm is still available for farming or other uses, while solar plants aren't really multipurpose plots of land.

The land viable for building solar and wind plants is also very different. Wind development has been focused on a relatively small sampling of land where wind blows consistently. Solar, on the other hand, is generally viable in more locations.

Base load vs. peak power
Wind and solar have different power-generation profiles that depend on the weather and how the world turns. Both require backup power or energy storage to smooth out generation peaks and valleys. But how should we look at their generation profiles?

Wind is more comparable to a base-load power source because it can generate power 24 hours a day. Solar, on the other hand, generates power only during the daytime hours, making it a perfect peak power source. This doesn't make one better than the other, though; in fact, it means they complement each other quite well.

Cost trajectory
Costs have been falling for both wind and solar, but the trajectory of solar has definitely outpaced wind in the last 12 months. According to GTM Research, solar module prices will fall from $1.80 per watt at the start of 2011 to $0.70 per watt by the end of 2012. As innovations like tracking, integrated inverters, and more efficient cells spread through the market, costs for modules and the balance of the system will continue to fall.

Wind, on the other hand, is a relatively mature energy market by comparison. Onshore turbines from General Electric (NYSE: GE  ) , Siemens, Vestas, and other manufacturers aren't seeing costs fall 50% per year like solar, and improvements are made by making wind turbines bigger.

American Superconductor (Nasdaq: AMSC  ) as well as other manufacturers have their eyes on turbines up to 10 MW for offshore markets. For now, a project like Cape Wind is providing electricity to the grid for $0.244 per kWh, partially elevated because the infrastructure for offshore development isn't as strong as onshore. Nevertheless, the cost trajectory of wind just isn't on the same steep downward path as solar.

Will solar crash like wind?
The similarities between the development of wind and solar technologies, as well as wind and solar companies, are striking. Both were initially developed in the U.S. and Europe, where most of the demand has been for decades. China entered both wind and solar at a fast and furious pace over the past decade, taking market share and putting pressure on older manufacturers.

That's left many of the traditional wind manufacturers struggling in the current environment. Vestas recently reported that 2011 revenue fell 16% from a year earlier, partly because of competition, but also because wind installers have exploited the easy-to-develop areas. Future developments offshore and further off the current grid require more infrastructure, which will impact both wind and solar.

Solar manufacturers will have to continue cutting costs to make sure the industry doesn't stagnate the way wind has in recent years. First Solar (Nasdaq: FSLR  ) and SunPower (Nasdaq: SPWR  ) , established U.S. manufacturers, have felt the pressure from Chinese manufacturers just like GE, Vestas, and Siemens have in the wind business, and the pressure will continue. But there are ways for investors to profit from this pressure, including top-tier suppliers Trina Solar and Yingli Green Energy.

I think the big difference between the industries is how technology impacts them. This might save U.S. solar manufacturers from suffering a fall in demand long term like wind manufacturers have.

Betting on the future of energy
No doubt, wind will play a role in our energy future. But based on the cost trajectory, energy density, and diverse installation applications, I think solar is the real future of renewable energy. Investors should look for companies differentiating themselves on cost or technology to find winners in the industry.

Trina Solar and Yingli Green Energy are both low-cost leaders in China, benefiting from easy money there. In the U.S., SunPower provides the most efficient panels and has a large pipeline of projects. It's also my pick as top energy stock for 2012.

For another top energy pick from our analysts, check out our report: "The Only Energy Stock You'll Ever Need." It's free, while it lasts.

Fool contributor Travis Hoium owns shares of First Solar and SunPower and also manages an account that owns shares of SunPower. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

The Motley Fool owns shares of First Solar. Motley Fool newsletter services have recommended buying shares of First Solar. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 14, 2012, at 11:34 AM, import2udirect wrote:

    only one company is working on a combination unit combining solar and wind into one a hybrid look for more of these hybrid types to come in the future with many different designs

  • Report this Comment On February 14, 2012, at 9:37 PM, sailrick wrote:

    Indeed, wind turbines only occupy about 2.5% of the land where they are sited. Wind doesn't need such steep decline in costs as solar, as the prices are relatively inexpensive already.

    As for balancing grids to accomodate wind and solar intermittency, take a look at the work being done on microgrids.

    Microgrids: Efficient, Secure, Resilient

    "A number of institutions across the country, including many military bases, are looking at insuring reliable, resilient and efficient electricity production in the age of peak oil and terrorism. Above, a Sandia Lab video describes the concept."

    "This technology is being pioneered, like transistors, computers, microchips, jet engines, global positioning, the internet, and now renewable energy, by the military, as a template for future wide civilian deployment."

    http://climatecrocks.com/2012/02/09/microgrids-efficient-sec...

    While solar thermal is still pretty expensive, the potential is enormous, especially if equipped with molten salt heat storage. Then you essentially have base load solar, that can also follow the load. This makes it easier to integrate PV solar and wind into the grid. More flexible than nuclear or coal plants. And these plants can command a higher price for their more valuable dispatchable firm capacity power.

    We easlily have potential for 1,000 GW of solar thermal in the southwest states, using a tiny fraction of the land that is suitable and available.

    Solar thermal, or CSP, can have capacity factors as high as 70% for power towers and 50% for parabolic trough systems, if they have the heat storage installed.

    PV solar, wind, and solar thermal could form the backbone of our energy capacity. They all compliment each other.

    A big reason for the slowdown in the wind industry has to do with lack of financing since the recession hit. And much of it has to do with reluctance of politicians when it comes to incentives. I think we all know which party that is.

    The one that is the only political party in the world to deny global warming. - And which gets 80% of oil industry political contributions and 90% from the coal industry.

    "Wth Tax Credit in Doubt, Wind Industry Ponders if It Can Stand on Its Own"

    "ccording to AWEA, 35 percent of all new generating capacity added in the United States over the last four years has come from wind turbines. The organization reported in August that there had been 2,151 megawatts of new wind energy capacity installed in the first half of 2011, up 72 percent from the same time period a year before"

    "This (uncertainty) doesn’t happen with oil and gas industries, where the tax incentives have been permanent for 100 years," Borgia said. "That provides clear, consistent signals for an industry. If we want to boost renewable energy, we need to provide stable signals to the market, and the current situation has really been this start-stop, constant uncertainty, and that needs to stop."

    http://insideclimatenews.org/news/20110927/tax-credit-doubt-...

  • Report this Comment On February 14, 2012, at 9:42 PM, sailrick wrote:

    "Europe’s renewable power continues to increase"

    from Hot Topic, in New Zealand

    " 9,616 MW of wind power capacity (worth some €12.6 billion) was installed in the EU during 2011, a similar figure to the previous year (9,648 in 2010);

    Wind power accounted for 21.4% of total 2011 power capacity installations

    The National Action Plans show that one third (34%) of EU electricity demand will be supplied from renewables by 2020

    Renewable power installations accounted for 71.3% of new installations during 2011: 32,043 MW of a total of 44,939 MW of new power capacity;

    More renewable power capacity was installed during 2011 than any other year, an increase of 37.7% compared to 2010;

    More power capacity was installed in 2011 than ever before - an increase of 3.9%, due entirely to increasing renewable power installations."

    http://hot-topic.co.nz/europes-renewable-power-continues-to-...

  • Report this Comment On February 15, 2012, at 10:37 AM, Brettze wrote:

    I am surpirsed that wind turbines takes up far more real estate than solar arrays. I think this is important to know, but it doesnt say how constant the wind is against the sunlight per weather conditoins. Anyway, you have to take in account of the space it takes to lay oil or natural gas pipelines or coal transporation and minefields as well as oilfields .. An oil field is very huge.. Ah, also include the refinery and storage facilities. Then the air pollution which is very expansional !!! Air air, we cannot breath!!

  • Report this Comment On February 15, 2012, at 10:41 AM, Brettze wrote:

    Travis, still; owning FSLR??

  • Report this Comment On February 15, 2012, at 10:41 AM, Brettze wrote:

    Ban firewood , too!

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