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Domestically, offshore wind continues to be something that always seems to be "just a few years away." Nonetheless, America's waters remain turbine-free. It's quite the opposite in Europe, where offshore wind farms are constantly being developed. This is not to say that onshore wind farms are also a significant component of Europe's ever-changing energy landscape.
No small breeze
Earlier this week, Siemens AG (NASDAQOTH: SIEGY ) announced that it has received a contract for two German offshore wind farms from Danish state-owned energy provider, Dong Energy. The total combined capacity for the two wind parks is 582 MW, which is about enough to supply 600,000 German homes with power for a year. Supplying Dong Energy with 97 of its 6 MW turbines, Siemens did not reveal the specifics of the deal; however, sources close to the deal told Reuters that agreement is around 1 billion euros – a little under $1.3 billion. Construction is scheduled to begin in the first half of 2015.
To put things in perspective, let's look at the company's most recent earnings. For the fourth quarter, Siemens generated 179 million euros in profit -- a 34% increase over the same quarter for 2012. Profit margins also improved to 11.1% as compared to the 9.1% of the fourth quarter 2012; furthermore, Siemens believes that the increase in wind-farm installations in Europe largely accounts for the fourth quarter revenue improvement of 10% year over year. Despite the strong performance, the wind power segment saw a decrease in orders for the fourth quarter, about 34% year over year.
Bringing good things to life in Europe
GE (NYSE: GE ) hasn't been that productive in Europe as of late, in regards to wind turbine sales. For example, Germany, one of its core European markets saw, no turbines installed in 2012 and just one in 2013. Supposedly, things are turning around, though. In an interview with Windpower Monthly, Cliff Harris, GE's general manager for European renewable energy, claims that the company has a "strong" order book for Germany in 2014, totaling about 350 turbines or 70% of capacity at the Salzbergen facility.
GE is also innovating with regards to battery storage, allowing the turbines to store approximately 30 minutes worth of power. According to Harris, power companies have shown interest in terms of retrofitting existing turbines with the new technology.
The third quarter was not especially strong for the wind division, shipping 407 fewer turbines (down 40%) compared to Q3 2012. However, management does feel that the highlight for the quarter was the strength in the 477 orders placed during the quarter -- an improvement of 390 units.
More than a search engine
Synonymous with Internet searches, driverless cars, and high-tech glasses, Google (NASDAQ: GOOGL ) is often overlooked as a renewable energy company; however, Google has contributed more than $1 billion to green energy projects. In addition to constructing highly energy efficient facilities, Google has signed several power purchase agreements, or PPAs. One of which is a PPA with a 114 MW wind farm in Iowa; another is for 100 MW of wind power from a facility in Oklahoma.
Google is also interested in obtaining renewable energy in Europe, where it entered into a 10-year PPA for 72 MW of wind power in northern Sweden to power its Hamina data center in Finland.
Google has two other data centers in Europe, one in St. Ghislain, Belgium and one in Dublin, Ireland. Although these are not tied to any PPAs, it's fair to say that future data centers will be. Google is committed to planning for the future. On the most recent earnings call, management said that "infrastructure continues to be a key strategic area of investment" in regards to the majority of the $2.3 billion in capex for the quarter being spent on production equipment, data center construction, and real estate purchases.
The Foolish takeaway...
Wind power may never be as sexy as solar -- large, lumbering turbines are no competition for sleek, shiny panels. Nonetheless, wind power represents a substantial amount of new electricity added annually to the grid. Unlike the solar industry, the number of turbine manufacturers is much smaller, so investors do not have a lot to choose from if opting for a strict manufacturing play. Siemens and GE are two of the biggest players in the industry. Wind turbine sales do represent an overwhelming source of revenue for either company, but investors looking for exposure to the wind industry without assuming too much risk may want to consider Siemens and GE.
Google, on the other hand, is a more aggressive approach. With its concerted effort to investing in renewable energy, Google clearly appreciates the value that wind power (and solar too, but that's another article) offers, and I would not be surprised if Google makes a stronger push into the industry, looking to further capitalize on investments in wind farms.
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