WIND GROWTH – NO END IN SIGHT

Nobody ever talks about peak wind.

For years there has been speculation about peaking oil supplies. And, more recently, there have been extensive discussions about peak natural gas supplies and peak coal supplies.

There are even ongoing debates about peak uranium supplies for the nuclear energy industry and lithium supplies for the new energy storage technologies.

It makes sense. These are all finite commodities. The earth may or may not be rich in them but it is conceivable the supply could someday be exhausted.

But run out of wind?

No, no, no. In the case of wind, it’s not about running out of supply. It’s about running INTO maximum capacity. When the maximum capacity is built out, the industry can expect a financial plateau. Investors want to know when it is coming so they can sell.

According to Jeff Wilson, an investments analyst at Seeking Alpha, there are 3 possibilities.

(1) Peak wind could come when wind-generated electricity is being taken onto the existing grid at the current wires’ fullest capacity. Wilson’s assumption is that today’s grid can assimilate about 20% of the U.S. electricity supply from wind installations.

A widely accepted estimate puts current U.S. electricity consumption at 4500 terawatt-hours. 20% is 900 terawatt-hours. At present growth rates, U.S. wind capacity will, therefore, be at its peak of 900 terawatt-hours in 2015.

So sell wind stocks in 2014, just ahead of the peak and the plateau? Maybe.

(2) Another line of reasoning says U.S. cars, trucks, and SUVs could become electric vehicles and wind could be used to charge their batteries, theoretically giving the U.S. grid an "extended" capability. According to Wilson, the vehicles would use another 400 terawatt-hours, allowing a build-out of 1300 more terawatt-hours in wind capacity. The industry will reach that level in 2016 (at present growth rates).

So plan on holding those stocks another year? Yes, although if wind replaced all possible uses of oil, it could supply another 532 terawatt-hours. The total would then be 1932 terawatt-hours and that would be built out by 2017.

So that's it. 2016 is the year to sell. Unless…

(3) Wilson says that if real wind storage technologies are perfected (storage is the holy grail of New Energy), wind could be used for all of the U.S. electricity supply. That’s 4500 terawatt-hours. Wind will get there in 2019.

Conclusion: Buy now and plan on holding for a decade?

Unless U.S. electricity consumption goes up. Which it is expected to do. By 30% through 2030. And grid capacity will surely be built out to meet new demand.

The only logical conclusion: Buy enough wind stocks to live off the dividends.

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Investing in Wind Energy: When Will Growth Peak?
Jeff Wilson, November 9, 2008 (Seeking Alpha)

WHO
Jeff Wilson, investments analyst, Seeking Alpha; the wind energy industry; The leading wind industry manufacturers (GE Wind; Vestas; Siemens; Gamesa; Mitsubishi; Suzlon; Clipper; Nordex)

WHAT
The wind industry’s growth has been, continues to be and is expected to remain in the foreseeable future nothing short of remarkable.

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WHEN
- 2007: U.S. wind energy’s electricity-generating capacity grew 46%.
- October 3, 2008: Wind’s production tax credit (PTC) was extended through the end of 2009.

WHERE
- Top 7 manufacturers’ 2007 U.S. installed capacity:
GE Wind: 2,342 megawatts; Vestas: 948 megawatts; Siemens: 863 megawatts; Gamesa: 574 megawatts; Mitsubishi: 356 megawatts; Suzlon: 197 megawatts; Clipper: 47.5 megawatts;
Nordex: 2.5 megawatts

WHY
- The PTC extension promises another big year of growth, though the availability of credit could hamper it.
- If growth continues at its present rate, it will look approximately like this:
2006: 32 terawatt-hours produced;
2007: 47 terawatt-hours produced;
2008: 69 terawatt-hours produced;
2009: 100 terawatt-hours produced;
2010: 146 terawatt-hours produced;
2012: 311 terawatt-hours produced;
2015: 969 terawatt-hours produced;
2016: 1414 terawatt-hours produced;
2017: 2065 terawatt-hours produced;
2018: 3015 terawatt-hours produced;
2019: 4402 terawatt-hours produced;
2020: 6427 terawatt-hours produced;
- Growth will peak when (1) production exhausts the grid’s capacity to integrate it, or (2) production exhausts both the grid’s capacity to integrate it and the need for more electricity to charge electric vehicles, or (3) production meets all U.S. electricity needs.

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QUOTES
- Jeff Wilson, investments analyst, Seeking Alpha: “When will the growth peak? It depends on how wind energy will ultimately be used in the mix…”
- Jeff Wilson, investments analyst, Seeking Alpha: “…if technologies are developed that can store energy generated by wind, wind could generate all of the 4500 terawatt-hours per year that we currently use by about 2019…”