U.S. Wind Industry to Maintain Momentum: 3 Stocks in Focus

The United States currently has the second-largest wind energy market in the world after China. According to the American Wind Energy Association, wind power is expanding rapidly in many regions across the nation which ramped up wind energy project development activities in the second quarter of 2019.

Impressively, during the first half of 2019, the U.S. wind industry installed 1,577 megawatts (MW) of new wind power capacity, reflecting a 53% increase over the first half of 2018.

Factors Driving Wind Energy Growth in US

Over the past few years, the U.S. wind energy market has witnessed considerable growth on several major factors with increasing corporate investments, reduced cost of components and the primary one, coming in the form of favorable tax credits.

Per a report by National Renewable Energy Laboratory, wind energy investment in the United States has averaged nearly $13.6 billion annually, since 2006. Last year, installed wind energy projects represented more than $12 billion of new private investments. Such growing investments are boosting the adoption of wind power-purchase agreements (PPA).

Meanwhile, factors like declining turbine prices and operating costs and low interest rates have dragged down wind PPA prices below 2 cents per kilowatt-hour (KWh) per a report by the U.S. Department of Energy.

Over the past few years, wind power development in the United States has been extensively supported by production tax credits. A couple of months back, two bills were introduced by the U.S. Senate to extend the federal Investment Tax Credit (ITC) for offshore wind energy projects. The introduction of these bills is expected to generate additional infrastructural investments.

In fact, improving project economics and favorable state policies have been boosting offshore wind activities in the United States of late. According to a report by the American Wind Energy association, the country's offshore wind sector is poised to rapidly increase installations to a total of 22,000 MW of offshore wind projects by 2030 and 86,000 MW by 2050. Thanks to the abundant opportunities, the offshore wind sector has been seeing high investments.

Expanding U.S. Wind Industry Prospects

The industry has a record amount of wind generation projects expected to commence operations in the near future, with staggering 35,135 MW of wind capacity either under construction or in the advanced development stage across 31 states. Moreover, the U.S. Energy Information Administration (EIA) expects wind to emerge as the leading source of renewable electricity generation in the United States by 2020.

Stocks to Consider

We have zeroed in three big players in the wind industry that investors might want to keep a tab on.

NextEra Energy NEE, a Zacks Rank #3 company, has an average earnings surprise of 2.92% for the last four quarters and an estimated long-term earnings growth rate of 8%.

Avangrid, Inc. AGR, a Zacks Rank #3 company, has a year-over-year earnings growth estimate of 8.55% for 2020 and an estimated long- term earnings growth rate of 7.5%.

Southern Company SO, a Zacks Rank #3 company, has an average earnings surprise of 5.46% for the last four quarters and an estimated long-term earnings growth rate of 4.5%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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