Investing in wind energy involves putting money into companies or funds focused on some aspect of the wind energy industry. Individuals can invest in the wind energy industry directly by investing in companies that operate wind farms or indirectly by putting money into companies that manufacture wind turbines or components.
Wind energy is one of the cornerstones of the renewable energy industry, providing a stable and cost-effective source of electricity generation. As more attention is paid to the effects of climate change and the need to reduce dependence on fossil fuels, more and more investors are turning to wind energy investments.
What Are Wind Energy Investments?
Wind energy investments are financial stakes in companies and projects focused on generating electricity through wind power. Wind turbines, sometimes called windmills, harness this power by collecting the energy created by wind and converting it into electricity.
Wind energy is often divided into two market segments, distributed wind and utility-scale wind.
Distributed Wind Market Segment
The distributed wind market is usually made up of smaller-scale projects, where wind turbines are used to generate electricity for homes, businesses, and even entire communities.
Utility-scale Market Segment
Utility-scale wind energy, in contrast, consists of turbines that generate more than 100 kilowatts of energy. The power generated by utility-scale wind projects is added to the electrical grid. Companies involved in utility-scale wind energy draw the most interest from individual investors.
Utility-scale wind energy projects can be land-based, where a group of wind turbines is grouped in a wind farm on land. Offshore wind farms built off the coast are another type of utility-scale wind energy, taking advantage of powerful ocean winds to generate large amounts of energy.
Individuals can invest in the wind energy industry by putting money into companies involved in some portion of the wind energy industry or, more rarely, by investing in specific wind energy projects.
Increased Popularity
Wind energy investments, and other socially responsible investments, are becoming increasingly popular as the focus on the need for sustainable energy grows. Because they rely on wind power rather than fossil fuels, these investments and projects cut down on emissions and pollution.
Furthermore, wind energy is becoming more acceptable because of declining costs, technological improvements, and government tax incentives. In the United States, wind power was the source of 9.2% of all electricity generation in 2021, up from 2.3% in 2010. By 2050, wind energy may make up 35% of all electricity generation in the US.
3 Ways to Invest in Wind Energy
Investors can invest in wind energy by putting money into the stocks and bonds of companies in the wind energy industry. Mutual funds and exchange-traded funds (ETFs) with wind energy or renewable energy-focused strategies are also potential investment vehicles for those interested in adding wind energy to their portfolio.
Regardless of the type of investment, investors need to remember that many companies and funds are diversified, meaning that they may be involved in sectors other than wind energy. For investors that want to invest in purely wind energy companies or funds, it’s essential to do research into potential investments.
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1. Stocks
Investors can put money into various publicly-traded companies involved in some aspect of the wind energy industry. These companies may include wind farm operators, which own and operate wind turbines to produce energy for customers and end-users, and manufacturers of turbines and other components of wind farms. Some utility companies may also be an option for wind energy investors.
Some companies involved in the wind energy industry include:
• Orsted: The Denmark-based power company is the largest developer of offshore wind power in the world
• Vestas Wind Systems: The Denmark-based company is one of the world’s largest manufacturers of wind turbines
• General Electric (GE): The US-based company installed 53% of all land-based wind turbines in the US in 2020
• NextEra Energy (NEE): The American energy company has 119 wind farms in operation
• Alliant Energy (LNT): The American energy company owns and operates wind farms across Wisconsin and Iowa
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2. Mutual Funds and ETFs
Investors who don’t want to pick individual stocks to invest in can always look to mutual funds and exchange-traded funds (ETFs) that provide exposure to wind energy companies and investments. A growing number of index funds invest in a basket of companies involved in the wind energy industry. These funds allow investors to diversify their holdings by investing in one security. However, not all wind energy funds follow the same criteria and may focus on different aspects of wind energy. These funds may also have holdings in traditional energy and utility companies that only are partially involved in the wind energy industry.
3. Bonds
The bonds of corporations involved in wind energy business practices can be a good option for investors interested in fixed-income securities. Green and climate bonds are bonds issued by companies to finance various environmentally-friendly projects and business operations.
Additionally, government bonds used to fund wind energy projects can be an option for fixed-income investors. These bonds may come with tax incentives, making them a more attractive investment than traditional bonds.
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Benefits and Risks of Investing in Wind Energy
The trend of investing in renewable energy sources like wind energy is rising as the public becomes more aware of the environmental and economic benefits of doing so. However, before investing in this sector, there are benefits and risks to consider.
Benefits
A benefit of investing in wind energy is that it is a renewable resource, so it will never run out as long as the sun shines and the wind blows. Additionally, wind energy is cost-effective. According to some estimates, wind is one of the lowest-priced energy sources. And because the power generated from wind farms is sold at a fixed price over a long period of time, it can provide reliable returns for investors.
Wind power is also a clean energy source, meaning it does not produce emissions that can harm the environment like fossil fuels and power plants. This can be attractive for investors focused on building a portfolio of green investments.
Risks
One primary risk of investing in wind energy is that it is a relatively new technology, so there is little data available on its long-term performance. Wind energy and all renewable energy sources must compete with traditional energy sources like oil, coal, and natural gas. Because of this, the long-term outlook for wind energy investments may change. Wind energy investments may be harder to stomach for investors who are not comfortable with the risk of newer technologies.
Additionally, wind energy projects may get pushback from communities where companies want to operate. Wind turbines cause noise and aesthetic pollution, potentially creating negative public perception.
How to Build a Wind Energy Portfolio
If you are ready to start investing and want to build a portfolio of wind energy investments, you can follow these steps:
Step 1: Open a brokerage account
You will need to open a brokerage account and deposit money into it. Once your account is funded, you can buy and sell stocks and other securities. SoFi Invest® offers a stock trading platform where you can start building your wind energy portfolio.
Step 2: Pick your assets
Decide what type of investment you want to make, whether in a company’s stock, a wind energy-focused ETF or mutual fund, or bonds.
Step 3: Do your research
It’s important to research the different companies and funds and find a diversified selection that fits your desires and priorities.
Step 4: Invest
Once you’re ready, make your investment and then monitor your portfolio to ensure that the assets in your portfolio have a positive social and financial impact.
It is important to remember that you should diversify your portfolio by investing in various asset classes. Diversification may help to reduce your risk and maximize your returns.
The Takeaway
Wind energy is a renewable resource that is becoming increasingly popular and is expected to grow significantly in the coming years. This makes it a potential growth investment for those looking to diversify their portfolios and reduce their reliance on traditional energy sources.
While the outlook for wind energy is promising, investments in wind energy may not always produce positive returns. When considering a wind energy investment, it is important to do your research and understand the risks and rewards involved with this nascent industry.
If you’re ready to invest in wind energy stocks and ETFs, SoFi Invest® can help. With a SoFi Invest investment account, you can trade stocks and ETFs with no commissions.
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