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How to invest in wind energy stocks
There are two ways that you can get exposure to wind energy stocks: trading and investing. Here, we’ll talk you through both, as well as what you need to know about the wind power industry and some key stocks to watch.
What are the types of wind stock investments?
There are a variety of stocks you can buy and invest in which provide exposure to wind energy services. These include:
- Wind energy companies, which distribute the energy produced by wind farms
- Wind farm companies, which have large offshore and onshore wind farms that are capable of producing large amounts of energy
- Wind turbine companies, which manufacture, install and service wind turbines
What you need to know about the wind power industry
The wind power industry is an exciting prospect for many traders and investors given the current shifting sentiment away from fossil fuels. As the world becomes more ecologically aware, it is likely that wind power stocks will become a major fixture in many share portfolios.
The wind power industry is still in its infancy when compared to other forms of energy generation. However, it is one of the most promising forms of clean energy currently available, and the environmental benefits of an expanding wind power industry are widespread.
The US Energy Information Administration (EIA) estimates that for America alone, electricity generation from wind has grown from less than 1% in 1990 to almost 7% in 2018,1 with further advancements made in Europe and China. As a result, wind could continue to expand as an industry in the coming years.
There are two main ways for you to take a position on the wind power industry: through investing in the shares and taking ownership of them directly, or by trading financial derivatives such as CFDs.
You can invest or trade with IG. Our share dealing service enables you to invest in our offering of wind energy stocks. By investing in shares, you can profit from any increases in price, as well as any dividends that a company pays to its investors.
Alternatively, if you’d prefer to speculate on the price of wind power stocks without having to own the underlying shares, you can do so by trading CFDs. These are financial derivatives which enable you to speculate on the price of an asset rising (known as going long) or falling (known as going short).
The degree to which your assessment of an asset’s price movement is correct determines your profit or loss. If you go short, you will need the price of an asset to drop for that trade to be profitable and if you go long, you will need the price to rise.
Best wind power stocks to watch
The below list of major wind power stocks has been ranked in no particular order, but the companies have a broad scope of operations and all have significant holdings in their respective fields. As a result, it includes wind power stocks, wind turbine stocks, wind energy stocks and wind farm stocks:
Ørsted is the largest energy company in Denmark and it owns the two largest offshore wind farms in the world: London Array and the Walney Wind Farm, both in the UK. Formerly known as DONG Energy, this wind energy company adopted its current name in 2017.
Ørsted acquired Deepwater Wind in 2018 to gain exposure to the American offshore market, and this acquisition gave the company a 25% market share in the global offshore wind market. It is committed to green energy, with aims to reduce its CO2 emissions by 96% and to phase out the use of coal in its operations by 2023.2
Ørsted has built more offshore wind farms than any other company in the world, and it has operations and offshore wind farms in Taiwan, the US, the UK, Germany, Denmark and the Netherlands.3
Since its renaming, the company has continued to experience significant upward movement in its share price, which is reflective in part of Ørsted’s market share and the projected future growth of the wind energy sector. Ørsted is listed on the Nasdaq Copenhagen Stock Exchange, and it trades under the ticker ORSTED.
Vestas Wind Systems
Vestas Wind Systems has installed more wind power than any other company in the world, estimated at around 68,000 turbines in 80 countries across six continents.4 As well as the turbines it installs, Vestas is also responsible for servicing 41,000 turbines, and it delivers 800,000 wind turbine parts annually.
The company is based in Denmark, with factories in a number of locations including the US, China and Spain. Vestas offers a range of products in the wind energy sector, including turbine installation, turbine maintenance, and knowledge and resource sharing to help with the optimisation of different wind farm locations.
Vestas trades under the VWS ticker on the Nasdaq Copenhagen Stock Exchange, and its price has seen overall increases over the last five years. With the growing interest in the wind energy sector it is likely that more and more wind turbines will need to be installed, making Vestas Wind Systems an important company to watch in the coming years.
Pattern Energy Group
Pattern Energy Group is a renewable energy company with operations based primarily in the US, Canada and Japan. It is the largest wind energy operator in Canada, and since its IPO in 2013, Pattern Energy’s portfolio of energy production and means of production under its management has almost tripled.5
The company trades under the PEGI ticker on the Nasdaq Stock Market in the US, as well as on the Toronto Stock Exchange in Canada. Pattern has reported a 12% increase in operating capacity for 2018 and an increase of 400 megawatts of wind power projects for 2019.6
Despite this, over the last five years its stock price has seen sporadic upwards and downwards movements. This means that Pattern Energy could provide opportunities to go short as well as long with CFDs.
NextEra Energy is an American-based utility company, which has risen to become the largest utility company in the world in terms of market capitalisation.7 According to its website, NextEra generates more wind and solar energy than any other company in the world, and it had the largest share of North American wind capacity in 2016.8
NextEra is slightly different to the other entries on this list as it uses a combination of wind, solar, natural gas and nuclear to generate electricity. However, this diversification should not be seen as a negative, because a number of utility companies use a variety of different sources to generate electricity to ensure energy security.
However, while it is diverse in its means of energy production, NextEra is not oblivious to the mounting public pressure for companies to develop more forms of renewable energy. This fact is reflected in NextEra almost tripling its wind energy capacity in the past decade. NextEra trades on the New York Stock Exchange under the NEE ticker.
General Electric Wind Energy
General Electric (GE) Wind Energy is a subsidiary of GE, an American conglomerate with operations in aircraft engines, electrical motors, software, healthcare and weaponry. As a result, GE Wind Energy trades under the GE ticker on the New York Stock Exchange. Because of this, a host of other factors will affect the share price of GE, other than simply the success of the Wind Energy subsidiary.
GE Wind Energy is primarily focused on wind power, including the manufacture and installation of wind turbines, becoming one of the leading turbine suppliers in the world with over 40,000 turbines installed globally at the time of writing.9
GE Wind Energy was created through an acquisition of the formerly Enron-owned Zond, which GE bought in 2002 after Enron filed for bankruptcy. Since then, the company has become a leader in the renewable energy sector, even going so far as to create the most powerful offshore wind turbine in the world: the Haliade-X 12 megawatt.
GE could continue to see expansion into the wind energy sector, especially on the back of growing opposition to some of the company’s more traditional methods of energy production. The test for GE Wind Energy in the coming years will be whether it can continue to develop, supply and install wind turbines at the rates it has for the last decade or so.
What to bear in mind before trading wind stocks
As with any trading opportunity, there are inherent risks associated with trading wind stocks. Because it is a relatively new sector when compared to more entrenched industries such as oil and nuclear, wind power relies on constant development and consumer interest to continue its largely upward trajectory.
However, because of the shifting public awareness to climate change and the environmental impacts of fossil fuels, it is likely that many traders and investors will seek to add wind stocks to their portfolio in the coming years. That being said, individuals should still ensure they have an effective risk management strategy in place before trading wind stocks.
Stops and limits can be one such way that a trader limits their exposure to risk, by cutting losses and locking in profits. Guaranteed stops will always close a trade when the price falls to a certain level, but they will incur a premium if triggered. Limits on the other hand, will cap profits at a requested level, which means that there is less of a risk of a winning opportunity turning into a losing trade.
How to trade wind energy stocks
There are five simple steps that will help you get started trading wind energy stocks:
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