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US Senate Extends Offshore Wind Tax Credits: Stocks in Focus

Aparajita Dutta
American Electric's (AEP) subsidiaries seek approvals to buy three wind projects of Oklahoma. These facilities are likely to supply more than 5.7 million MWh of electricity annually.

Wind industry players received encouraging news as the U.S. Senate introduced two bills last week to extend the federal Investment Tax Credit (ITC) for offshore wind energy. The legislation comes at a crucial time as U.S. energy developers are set to start construction of the nation’s first wave of large-scale wind farm projects.

The two bills — the Offshore Wind Incentives for New Development Act and the Incentivizing Offshore Wind Power Act — will extend ITC at 30% of the project’s total value for six years and eight years, respectively. Consequently, the bills are expected to generate more infrastructural investment and jobs in the U.S. wind energy space.

America’s Offshore Wind Revolution

The country has vast offshore wind energy resources. Notably, offshore winds tend to blow harder and more uniformly than on land. Since high wind speeds can produce significantly more electricity, U.S. developers are increasingly interested in pursuing offshore wind energy resources.

Per a report by American Wind Energy Association, the U.S. shores possess a power potential of more than 2,000 gigawatts (GW), nearly double the nation's current electricity use. This has set the stage for constructing more offshore wind farms, backed by favorable state policies available in Maryland, Massachusetts, New Jersey, New York and Rhode Island. The latest legislation is expected to further aid the U.S. offshore wind industry to continue its revolution.

Prospects of Wind Industry

With world-class resource potential off the U.S. East Coast, West Coast and the Great Lakes, offshore wind is capable of meeting demand for large amount of reliable clean energy near America’s largest population centers. With the entire nation shifting to green energy, U.S. stocks are increasingly investing in offshore wind industry.

According to the University of Delaware’s Special Initiative on Offshore Wind report, America's growing offshore wind power industry — now projected to generate 18.6 GW of clean, cost-effective power in seven states on the Atlantic Seaboard by 2030 — presents a nearly $70 billion CAPEX revenue opportunity to businesses in the offshore wind power supply chain over the course of the next decade. This surely reflects the enormous growth opportunity that the U.S. offshore wind industry offers to the nation’s wind-energy oriented stocks.

Stocks to Consider

We have zeroed in four U.S. stocks that investors might want to keep a tab on as they are significant players in the offshore wind industry.

Starting this month, Dominion Energy D has begun installing cables for a wind farm in the Atlantic Ocean near Virginia, America’s second offshore wind farm. Between this project and commercial-scale development, Dominion Energy plans to invest up to $1.1 billion in offshore wind through 2023.

General Electric Company’s GE renewable energy unit is one of the world's leading offshore wind energy companies, with a portfolio of offshore wind turbines ranging from 6 MW to 12 MW. It has invested more than $400 million to develop the most powerful offshore wind turbine to drive down offshore wind’s levelized cost of energy (LCOE).

Siemens AG’s SIEGY renewable unit is one of the pioneers in the offshore wind industry. Last year, Siemen and Orsted signed a subcontract to supply wind turbines to Coastal Virginia Offshore Wind.

MHI Vestas, a joint venture between Vestas Wind Systems AS VWDRY and Mitsubishi Heavy Industries, received a contract for constructing a 800-megawatt (MW) capacity wind farm, the first large-scale offshore wind project in the United States.

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Dominion Energy Inc. (D) : Free Stock Analysis Report
 
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Vestas Wind Systems AS (VWDRY) : Free Stock Analysis Report
 
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