New Lease of Life for Wind Power

Cleantech Investing

There is a breath of fresh air for wind companies as the production tax credit is extended.

The wind production tax credit (PTC), extended by Congress for four years in December 2015, spelled great news for renewable power developers. The value of the PTC will shrink as each year passes, so if companies and investors haven’t participated in this trend yet, then 2017 is the time to still make gains.

PTC

According to PricewaterhouseCoopers, there will be “a renewables boom as a direct result of the renewable energy tax credits extension.” Indeed while projects started in 2016 accessed 100 percent PTC, there is momentum building for 2017, when the PTC worth reduces to $18.4 per MWh, which is 80 percent. There is a five percent Safe Harbor requirement that means companies must achieve five percent spending on equipment before the close of 2016 in order to receive 100 percent PCT value.

Replace and retool

America’s wind power facilities are reaching the end of their life so companies are repowering rather than repairing or decommissioning and starting anew. Financial incentives are not the only contributing factor. In practical terms, wind farms are often in prime windy spots so moving to another site does not make sense. Wind turbines are now also bigger and more efficient so updating the existing models is the way forward.

Companies

NextEra Energy Inc (NYSE:NEE) amassed $73 million PTC and have 110 farms in America. Year-to-date they are up 9.13 percent trading at $113.42 per share. Analysts rate the utilities stock a Buy.

Manufacturing companies are benefitting from the PTC window. Vestas Wind Systems A/S (CPH:VWS), based in Denmark, have received an order for turbine components from a US company that satisfies PTC regulations. These will be made in Vestas’ Colorado factories. Year-to-date they are down 9.01 percent, trading at $440.20 per share. They took a hit after Trump was voted in as the President-elect is not a fan of wind energy.
Beyond 2019 there could be a bust in renewables so now is the time for investors to capitalize on the effects of the PTC.
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Securities Disclosure: I, Emma Harwood, hold no direct investment interest in any company mentioned in this article.

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