Wind Stocks: Why You Shouldn’t Lose Hope!

Last Updated: 7. November 2023By

As you surely know, wind power, alongside solar power, is the most important lever for the success of the energy transition. Wind energy is to cover not only a large part of future electricity supply, but also plays a decisive role in the production of climate-friendly energy carriers such as green hydrogen.

The basic potential of wind power is thus enormous. Nevertheless, the industry is currently going through a crisis. Below you will see an example of the development of newly installed wind power plants in Germany up to and including 2022:

Source: FA Wind ( )

It is clear that the expansion has stalled compared to record years like 2017. However, the old peak levels for expansion are still very far away.

Consequently, the major European wind power companies such as Vestas, Siemens Gamesa (Siemens Energy) or Nordex also had to take a hard hit at the stock exchange.

The current problems are manifold. In addition to the sometimes too complicated and too long approval processes, the macroeconomic environment also raises doubts. Especially the high interest rates make the capital requirement for new projects shoot up, which are usually financed on credit. In addition, there is fear of supply bottlenecks of important raw materials and components as well as a general shortage of skilled workers.

So the EU wants to help the industry out of the quagmire For the states this is a bitter pill. Because: if the wind power industry is in crisis, the achievement of the climate targets moves further and further away. Therefore, the European Commission recently announced further support. Perhaps you have already heard about it: Brussels announced a few days ago to establish new measures to accelerate the expansion of wind power in Europe.

For this purpose, the Commission intends to act on three levers. First: the approval processes. These should become significantly easier and faster already from mid-2024. Currently, such licensing processes can sometimes take several years. For the industry and the mentioned stocks, this is a significant brake.

To solve the problem, the EU wants to digitalize the national approval processes. In addition, Brussels wants to make financial aid available to authorities in order to train their employees.

Second: the subsidies. The wind industry in Europe should receive easier access to EU funds. In addition, the European Union’s Innovation Fund for sustainable technologies is to be doubled – to around 1.4 billion euros. Last but not least, Brussels called on the EU states to use their respective funding pots to the brim.

Third: protectionism. The awarding of EU funds should be even more closely linked to factors such as supply chain transparency, cyber security and social and environmental standards. In practice, this could mean that above all, domestic companies in Europe will be preferred. In any case, the Commission expressed reservations against actors from the non-European space and accused them of „potential unfair trading practices“.

Asian players in particular are currently trying to take advantage of the weakness in the European wind market in order to establish themselves here in the long term. According to EU data, for example, the prices of Chinese wind turbine manufacturers are on average 20 percent lower than those of their European or US competitors. Therefore, Brussels will now examine in detail whether, for example, Chinese players receive state subsidies from their home country. Should this be the case, the EU wants to initiate appropriate anti-subsidy procedures.

Wind stocks: my conclusion for you The European wind industry urgently needs new political tailwind – especially in these economically difficult times. Representatives of industry organizations had therefore sent out urgent warnings. These were apparently heard by Brussels.

It remains to be seen whether the new package of measures will ultimately have the desired effect. Some industry experts have expressed themselves rather positively in initial reactions to the EU’s strengthened wind offensive.

As an investor, however, you can take away an important insight: Politically speaking, with regard to the climate targets and the energy transition, there is a strategic interest in the wind industry flourishing. This is generally beneficial for the stocks, which gives you a certain investment security. So don’t let short-term declines unsettle you and approach the topic patiently.