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Renewable Energy: The Fed says no, but stocks say yes

Posted March 12, 2008

"With all of these odds stacked against it, the wind-energy industry is… blowing past everyone’s expectations and pulling down record sales." — Stephanie Grimmett

by Stephanie Grimmett

Baltimore – (TFN): The federal renewable energy tax credit is running out of wind. And the new version of the credit is suffocating waiting for approval from the Senate.

Even if the Senate does approve it, President Bush has already vowed to veto any energy bill that sucks money out of Big Oil subsidies to inflate the renewable energy tax credit.

With all of these odds stacked against it, the wind-energy industry is… blowing past everyone’s expectations and pulling down record sales.

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Wait, does that sound a little off to anybody? Four years ago, when Congress failed to renew the tax credit in time, wind turbine sales came to a near standstill. But this time, orders are actually growing in the face of a possible credit expiration.

It seems that federal subsidies are no longer the driving factor behind renewable energy production. Or possibly, the states, municipalities and companies that use the tax credit aren’t taking all of the hot air over renewing it seriously.

With ten months left in office, Bush has little to back up his veto. The tax credit, you see, lasts through December. And come January, a fresh, probably not very Bush-like president (with a trunkload of new campaign promises to fulfill) will be in the driver’s seat.

While we’re talking about campaign promises, many states voted in minimum-percentage requirements for renewable energy in the last few legislative rounds. As much as 30% of new energy has to come from renewable sources in some states, meaning the scramble to find those sources has just begun.

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With orders ramping up, GE’s wind turbine division is celebrating its 2008 sales already and predicting a new record somewhere around the $6 billion mark, a 25% increase from last year. Granted, GE (GE: NYSE) is a $173 billion-per-year company, but the wind division has certainly moved up in ranks from its $300 million price tag when the company bought the production facilities from Enron six years ago.

The largest U.S. supplier of wind turbines, GE Wind is the fastest growing division in its parent company. The division could bring its profit margin above 10% this year, a coup among its peers. And the entire industry’s profit margin could move up a combined 2% by the end of the year.

GE’s major competitor, Denmark-based Vestas (VSW: Copenhagen) just opened its first U.S. manufacturing plant in Colorado last week to support its sales in the country. GE is working with two companies to expand its wind-blade production in New York and Iowa. And the two companies are still having trouble keeping up with demand for their products.

Whether it’s by this president or the next, the renewable energy credit will be restored. It’s only a matter of time. And perhaps before that time comes, you should find yourself a nice windy stock to pull in gains from the coming alternative-energy gale.

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Posted by Stephanie Grimmett · Filed Under Oil and Energy 

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