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How to Invest in Wind Power, a Major Clean Energy Source

Wind power makes up about 10 percent of all electricity production in the U.S. and is likely to take on a bigger share in years to come.
Photo of a wind turbans in the countryside with text overlay that reads "How to Invest in Wind Power"

Wind farms on land account for nearly all of the power produced by wind in the U.S.

What Is Wind Power?

Wind power refers to energy from wind used to generate mechanical work or electricity. The classic mechanical illustration of wind power is a windmill, a device with sails or blades that uses wind to turn a wheel that grinds grain. Nowadays, wind power typically refers to rows of purpose-built towers that harness the kinetic energy of wind to turn a turbine that generates electricity to turn on lights and electronics at homes, offices, and factories.

Costs for large-scale construction and installation of wind power have fallen significantly since the 2010s due to the proliferation of wind farms and increased production of turbines. Utility providers are the largest collectors of wind energy, but, as with solar energy, noncommercial use is catching on, and homeowners with enough space are installing small turbines for their residences.

With zero carbon emissions, wind is an increasingly viable source of clean, renewable energy to produce electricity. According to U.S. Department of Energy statistics, total annual U.S. electricity generation from wind energy surged from about 6 billion kilowatt-hours (kWh) in 2000 to about 380 billion kWh in 2021.

In 2021, wind accounted for 9.2 percent of total utility-scale electricity generation, beating out solar with its 3 percent share in production. In 2020, a typical American residential utility customer used 10,715 kWh each year, indicating that tens of millions of households’ worth of electricity was produced by wind.

Europe accounts for the majority of wind power production worldwide, and companies based in countries such as Germany, Denmark, Spain, and the U.K. have more experience than companies in the U.S. in the manufacturing and installation of wind power equipment.

How Is Energy Collected From Wind?

There’s a maximum efficiency at which wind turbines can collect energy from the wind, and that is known as the Betz limit—set at 59.3 percent. The latest turbines can capture as much as 50 percent, suggesting there’s room for improvement as turbine technology advances further.

Wind can be collected from vertical or horizontal structures. The dominant form is the horizontal structure, in which the blades turn toward the direction of the wind, and that kinetic energy spins the blades that power the turbine housed in what’s known as a nacelle to produce electricity.

Innovations in blade design allow blades—typically made of glass fibers and resin—to twist and bend with the wind to avoid snapping during strong winds, and a single turbine can produce enough electricity to power thousands of homes continuously.

Where Is Wind Power Generated?

Wind farms on land make up almost all of the electricity production from wind in the U.S., but installations of towers offshore are gaining traction. Maps from the Energy Department show areas on land and coasts where capturing wind is most efficient.

Land

Most wind turbines are installed on extremely tall towers averaging about 280 feet in height. Rural areas are ideal for installation, while urban areas aren’t due to the space required for installation. In the U.S., the areas in and around the Great Plains are ideal for wind farming. Parts of Kansas, Oklahoma, and Texas show the most potential in harnessing the kinetic energy of wind for electricity production.

Offshore

The east and west coasts of the U.S. and the Great Lakes have the potential to produce tremendous amounts of wind power due to strong winds. Shallow water is best for installing towers, but such areas around the country to set up fixed-bottom structures are limited.

Offshore structures, such as a tether system that connects a floating structure to the ocean bed, make it feasible to use wind turbines in deeper water. The only offshore wind farms operating in the U.S. are off the coasts of Rhode Island and Virginia. (Fixed bottom vs. floating)

How to Invest in Wind Power

Unfortunately, there is no market to trade on electricity from wind power generated in the U.S. But the industry has a wind index futures contract based on renewable energy in Germany that trades on the Nasdaq known as the Nasdaq Renewable Index Wind Germany (NAREX WIDE). The contract first traded in 2015, and it’s primarily used to help companies hedge against risks tied to changes in wind production.

Indexes

Created in December 2005, the ISE Global Wind Energy Index is one of the oldest indexes tracking publicly traded companies in the wind energy industry globally. The benchmark’s holdings range from utilities such as Engie SA (ENGI: IM) of France and Ibredrola (IBE: BMAD) of Spain to turbine makers such as General Electric (GE: NYSE) and ABB (ABB: NYSE).

Another example is the Solactive Wind Energy Index, which focuses on companies involved in the development of manufacturing of wind turbines as well as in power generation, wind technology, and services.

Below is a graph of the ISE Global Wind Energy Index from May 2013 to August 2022. The data show returns on investment in wind power-related companies were steady from 2013 to 2020 and surged during the later years of that period.

Graph of the ISE Global Wind Energy Index from May 2013 to August 2022.

Investment returns on wind started to pick up in 2020. 

ETFs

Many fund management companies have started to capitalize on wind power with their ETFs, and some use the Solactive Wind Energy Index as the benchmark. Among the most popular ETFs are the First Trust Global Wind Energy ETF and the Global X Wind Energy ETF.

Holdings in wind ETFs are skewed toward utilities outside the U.S., namely in China, Canada, and European countries, as well as turbine equipment manufacturers.

Stocks

Utilities play a dominant role in wind energy, from setting up wind towers to distributing electricity generated from wind farming. Public Service Enterprise Group (NYSE: PEG), for example, is working on a wind farm off the shores of southern New Jersey. The more wind turbines utilities install, the less they will need to rely on fossil fuels such as natural gas to power their generators. Wind has become an abundant and free source of energy for utility companies, helping them to reduce costs in the long run.

Companies that produce the structures and equipment for wind turbines tend to benefit from booms in wind power. Just four turbine manufacturers, led by General Electric (NYSE: GE), supplied all of the U.S. wind power capacity installed in 2021. The other three companies were Siemens-Gamesa Renewable Energy (OTCMKTS: GCTAY), Vestas (OTCMKTS: VWDRY), and Nordex (OTCMKTS: NRDXF)—all of which are based in Europe.

What’s the Bottom Line on Wind Power?

More states are getting involved in wind production, both onshore and offshore. With about 10 percent of total electricity generated in the U.S. originating from wind, there remains a greater potential to gain market share from fossil fuel-based power generation. As legislation on both the state and federal levels includes the development of wind energy on land and offshore, power produced from wind is likely to increase.

Wind farms on land make up almost all of the power produced by wind in the U.S., but offshore wind power production offers more substantial potential for increased electricity production due to underdevelopment compared to land.

The Inflationary Reduction Act, passed in August 2022, provides incentives for clean energy production, including from wind, and that is setting the U.S. on its path to achieve its clean energy goals for 2030 and beyond. China and Europe have the edge in wind power production, but the U.S. could catch up and take the lead.

Turbines and blades are likely to become more efficient, and towers could become taller as wind technology continues to improve. While energy produced from wind may fluctuate throughout the day, electricity-storing batteries may provide a balanced output to consumers. Lithium-ion battery manufacturers such as Tesla (NASDAQ: TSLA) stand to benefit from battery storage usage.

Frequently Asked Questions (FAQ)

The following are answers to some of the most common questions investors ask about wind power.

Is Wind Power More Efficient Than Solar?

Wind can generate electricity around the clock, whereas solar is dependent on sunshine. Setting up wind farms, though, tends to be more expensive than setting up solar farms, and they also require more maintenance. Utility companies are looking at storing power produced from wind via batteries.

What Are the Downsides to Wind Power?

Wind isn’t constant, and fluctuations can disrupt the amount of power generated. The noise generated from wind turbines can be very loud, and the spinning blades can kill birds. Blades also have a finite lifespan, and thousands of blades each year end up in landfills. Some companies, though, are trying to find ways to recycle and reuse discarded blades.