Windy boom a boon for energy investors

Herald Sun
05/06/2007 Page: 31

A COUPLE of years ago Garry Weaven seemed to have made a brave call by paying $788 million to end a bidding war for listed company Pacific Hydro. Now the Industry Funds Management chair seems to have made an inspired choice in picking up the international wind and hydroelectric company. Around the world, renewable power sources in general and wind energy assets in particular are attracting premium prices.

As the world adjusts to the idea of reducing the use of carbon, wind energy has been backed by investors as the renewable energy of choice. Despite some misgivings about the fickle nature of wind energy and its potential to destabilise power grids, companies large and small are now backing the technology with some serious money.

European research group CLSA have estimated $180 billion will be spent on wind energy projects around the world in the next five years. "Wind has the biggest potential to meet renewable energy targets over the next decade compared with solar and biofuels," Philippe de Week told Bloomberg. Which is why the Pictet Clean Energy fund he manages for Pictet & Co is backing the technology.

The big beneficiaries of this wind boom are the windmill makers with shares in the biggest company in the field, Vestas Wind Systems, more than doubling in price over the past year. "Wind energy is cheaper than solar, it's a less risky form of investment," Michael McNamara told Bloomberg. "The demand for quality wind turbines is so high, we won't see supply meet demand for several years," said the London-based analyst at Jefferies International.

Behind this boom are major countries such as China and the US which are rapidly implementing wind energy. China plans to expand wind energy at an annual rate of about two gigawatts in the run-up to the Olympics. That is predicted to reach five gigawatts, enough to supply more than seven million homes, by 2010 and 30 gigawatts by 2020.

It is a similar story in the US which is rapidly installing wind energy. Some analysts have gone so far as describing the US as the "Saudi Arabia of wind" because the Midwest area is so windy and flat. Overall about one per cent of the world's power needs are generated by wind but that is much higher in some European countries such as Denmark (25 percent), Spain (nine percent) and Germany (seven per cent).