The Wind Industry Is Floating Away, and It's for the Best

Offshore wind is coming to the U.S., but it may still be out of sight.

Mar 6, 2014 at 2:37PM

The offshore wind energy numbers are staggering. So, let's simplify them.

Over 4,000,000 MW is equal to over 4,000 GW, and over 4,000 GW is equal to more than four times the generating capacity of all U.S. electric power plants. That's all available offshore -- within 50 nautical miles of the coast -- and the U.S. Department of the Interior recently took a step toward realizing some of this potential.

Into the Pacific
Earlier in February, the Department of the Interior granted approval to a Seattle-based company, Principle Power, which developed a ballast system that buoys wind turbines for a novel project. Secured by anchors, the turbines are able to be located as far away as 20 miles offshore. The planned 30 MW floating wind farm has an estimated cost of $200 million. Five Siemens (NASDAQOTH:SIEGY) 6 MW turbines will be located about 15 miles off of the Oregon coast. Connected by underwater cable, the turbines are expected to provide power to the grid by 2017.

Offshorewind

Source: Principle Power/ Windfloat Pacific


This isn't Principle Power's first project in deploying floating wind turbines. In 2012, the company installed a Vestas (NASDAQOTH:VWDRY) v80 2.0MW turbine 5 km off the coast of Portugal. Having successfully demonstrated the viability of the technology, Principle Power and the other parties in the joint venture are considering the next phase of the project: a greater than 25 MW pre-commercial array of turbines.

What's the big deal?
For a country that has no installed offshore wind capacity, it may seem overreaching to consider the development of floating wind turbines, but there are a number of advantages. For one, since the turbines do not have to be bolted to the seabed, they are able to be installed in locations where depth is not an issue, reducing significant installation costs. Habib Dhager, director of the University of Maine's Advanced Structures & Composites Center, is leading a project using a 12 MW turbine located off the Maine coast. Arguing for the advantages of floating turbines, Dhager says that doing away with the need to rent jack-up barges and cranes will save companies tens of millions of dollars, as the final assembly of the turbines occurs onshore.

By locating them out of sight, developers will avoid the complaints (and possible litigation) that seem to be inextricably linked to offshore wind projects. Donald Trump made waves in his opposition to an offshore wind farm located off of the Scotland coast -- a location which, according to Trump, would be an eyesore from his Aberdeen golf course. Closer to home, complaints arose over the Cape Wind project located in Nantucket Sound. William Koch, arguing that the facility would be "visual pollution" has donated over $5 million in an attempt to prevent the development of the project.

Old seadogs...
Who will benefit from the adoption of floating wind turbines? Siemens, supplier of the Principle Power project, is an obvious one. Having won a contract for America's largest onshore wind farm to date, Siemens is well-positioned to succeed in the U.S., but its global performance in this sector is also on the rise. According to the European Wind Energy Association, at the end of 2013 Siemens was the dominant leader for cumulative offshore installations with 60% of total capacity. For the most recently reported quarter, Siemens grew its wind power segment profit by 20% year over year, and the profit margin for the same period rose from 4.6% to 4.8%. Orders are also on the rise: For the quarter they grew 94% year over year -- from 1,162 to 2,258.  

Also a major player in the space is Vestas, which accounts for 23% of cumulative European offshore installations. Unlike the electronics and electrical engineering giant Siemens, Vestas solely operates in the wind industry. Without offshore installations, Vestas still prospers from its operations in the U.S. Growing its order intake 60% in 2013 over 2012, the company says it was "primarily driven by pick-up in the USA and new wind markets."

Unlike Siemens and Vestas, GE (NYSE:GE) is not a major player in European offshore wind installations -- it only has 0.5% of total installed capacity. Nonetheless, the company is a major player in wind turbine manufacturing. For the last quarter, the company saw equipment orders rise 81% in its power and water segment --  a rise which it attributes to "strong Thermal and Wind orders." Wind revenue also grew 6%. Looking to the future, GE is looking to use part of the $10 billion Ecomagination initiative for reducing the cost and increasing the output of its wind turbines.

Foolish takeaway
I, like many others, believe that we've reached the point where the widespread adoption of renewable energy is no longer "just around the corner." Innovations such as floating wind turbines are a testament to the fact that wind energy, like solar, are viable options for new power capacity. Vestas is a more aggressive approach to investing in the industry, but the potential for large gains is definitely there. Investors will have to dig deeper to see which company is most appropriate for them.

Another threat to OPEC
Imagine a company that rents a very specific and valuable piece of machinery for $41,000... per hour (that's almost as much as the average American makes in a year!). And Warren Buffett is so confident in this company's can't-live-without-it business model, he just loaded up on 8.8 million shares. An exclusive, brand-new Motley Fool report reveals the company we're calling OPEC's Worst Nightmare. Just click HERE to uncover the name of this industry-leading stock... and join Buffett in his quest for a veritable LANDSLIDE of profits!

 

Scott Levine has no position in any stocks mentioned. The Motley Fool owns shares of General Electric Company. 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.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers