The United States currently ranks second in the world for total wind energy generation, yet wind power projects are being pursued in over 100 countries1 worldwide. Land-based, dispersed, and offshore wind offer affordable and efficient energy sources for countries looking to reduce their emissions, enhance their energy independence, and create well-paying jobs. But wind is still considered a relatively new technology. As of 2021, wind power accounted for just 5% of total global electricity generation2. In the United States, wind power accounts for the greatest portion of renewable energy3, and the Department of Energy has set forth a vision4 to increase the percentage of total electricity generation from wind from 9% today5 to 35% by 2050. The ambitious growth projections of not only the US but of many other countries around the world indicate that renewables generally, and wind power in particular, are expected to face steady and intentional growth in the coming decades.
To achieve these goals, significant investments in wind power need to accelerate. Wind accounted for 32% of US energy capacity growth5 in 2021, making it one of the fastest-growing energy sources in the country. In fact, the US has consistently increased its wind capacity 30% YOY4 over the last decade. In December 2020, Congress passed a 30% tax incentive4 for all new offshore-wind projects started by the end of 2025. Not only was the Production Tax Credit (PTC)5 recently extended via the Inflation Reduction Act for another 10 years, but the Act also ensured other tax incentives along the supply chain, including for the construction of transmission lines and the manufacturing of wind components.
The extension of these and other tax incentives have buoyed the wind industry by providing it with a stable and clear path toward economic feasibility for the foreseeable future. Alongside favorable government policy has been a swift and matched response in global investment. In 2019, $282 billion6 was invested in renewables, nearly half of which went toward wind capacity alone. Broadly speaking, clean energy investment accounts for close to three-fourths of the growth7 in overall energy investment.
Investments in wind energy, according to the ISE Clean Edge Global Wind Energy Index, have increased steadily over the last decade, with a significant surge in recent years. Despite its relative nascency, we believe wind power presents a unique investment opportunity to enter an early stage growth sector. Electricity from wind is purchased in long-term contracts3, sometimes in 20-year increments, at a fixed price. Compared to other energy alternatives like fossil fuels, this can potentially help to insulate wind from dramatic price fluctuations. And because wind power is produced and consumed domestically, it is less likely to be affected by overseas supply chain issues.
For those concerned about investing in a new technology, consider that the return on investment for wind power tends to be relatively fast. Turbines generally last about 20 years and can potentially start returning a profit in the first 5 to 8 months8. Very few other new technologies can say as much. In fact, innovations in wind power technology have increased efficiency by 9% from 2020 to 20215 alone and the total cost of wind power has declined by 49%6 over the past decade. Wind is now one of the most affordable energy sources available — building new wind capacity is now cheaper6 than building new coal or gas capacity in a majority of the world.
Private investment in wind energy can, and should, be diversified. Portfolios can include wind farm operators, utility companies, turbine and parts manufacturers, grid supply and maintenance, and transportation. We believe the best way to include wind in a diversified portfolio is to combine it with other renewables. The TrueShares Eagle Global Renewable Energy Income ETF (RNWZ) is an actively managed ETF of 20-30 equities of domestic and international companies focused on renewable energy infrastructure. The target companies for the portfolio primarily own and operate renewable energy facilities like wind farms and solar fields, energy storage, and electric transmission assets. We believe renewables, with wind at their core, represent a strong long-term investment opportunity given the extended timelines of many government incentives, continued gains in efficiency and cost reduction, and theoretically limitless growth potential.
Sources:
1 – https://www.iea.org/reports/wind-electricity&sa=D&source=docs&ust=1679513163821425&usg=AOvVaw3YbUC68oWFYdfTSsLBUQr0
2 – https://ourworldindata.org/renewable-energy
3 – https://www.jec.senate.gov/public/_cache/files/537153fd-1111-4501-a895-3d5573d54c82/wind-energy-brief-final.pdf
4 – https://www.investopedia.com/wind-investments-how-to-invest-in-wind-energy-5220593
5 – https://www.energy.gov/articles/doe-finds-record-production-and-job-growth-us-wind-power-sector
6 – https://www.bloomberg.com/graphics/climate-change-data-green/investment.html?leadSource=uverify%20wall#xj4y7vzkg
7 – https://www.weforum.org/agenda/2022/07/global-renewable-energy-investment-iea/
8 – https://thumbwind.com/2020/12/03/why-pursue-wind-energy-development/&sa=D&source=docs&ust=1679513478755979&usg=AOvVaw0kWNgmykQZdKNMOm3b0DZW
The Fund may not achieve its objective and/or you could lose money on your investment in the Fund. The Fund is recently organized with no operating history for prospective investors to base their investment decision which may increase risks.
Because the Fund invests in Renewable infrastructure Companies, the value of Fund shares may be affected by events that adversely affect companies in that industry. These can include contract counterparty defaults, adverse political and regulatory changes, poor weather conditions for renewable power generation, falling power prices, losses on financial hedges, technological obsolescence, competition and general economic conditions.
Focusing on environmental factors may forgo opportunities that might otherwise yield favorable investment results.
