Renewable energy stocks were popular well before the recent US elections. Since then, they’ve really blasted off, leaving a dearth of sector values, notes Roger Conrad, utility sector expert and editor of Conrad's Utility Investor.

One group of renewable energy stocks yet to feel the love is US offshore wind developers. Globally, business is booming. Falling costs are a big reason for rapid adoption.

By 2030, the global average levelized cost of energy (LCOE) for offshore wind farms is expected to drop by 41 percent. And in contrast to onshore wind and solar, facilities can be built on a very large scale to directly offset closures of major coal and nuclear plants.

Some non-US offshore wind stocks have already benefitted greatly from the boom. Since the start of 2020, sector leader Denmark-based Orsted A/S (Denmark: ORSTED) (OTC: DNNGY) has returned around 96 percent.

Northland Power (Toronto: NPI) (OTC: NPIFF), which operates a trio of North Sea offshore wind facilities, is up a bit less than 90 percent. And leading offshore wind turbine manufacturer Vestas Wind Systems (Denmark: VWS) (OTC: VWSYF) has returned nearly 140 percent.

US offshore wind developers in contrast have badly lagged over the same time frame. Avangrid Inc (AGR), would-be developer of the Vineyard offshore wind facility, is underwater by nearly 5 percent including dividends. That’s about seven points behind the Dow Jones Utility Average.

Dominion Energy (D), which has the only operating US offshore wind project at this time, is in the red by more than 7 percent.

Public Service Enterprise Group (PEG) with its big plans in New Jersey is up less than 2 percent including dividends. And EverSource Inc (ES), which has partnered with ORSTED in New England, is ahead by just 8 percent on that basis.

We see two main reasons why these companies are getting such little respect. Both should largely disappear in the next couple years, with resulting big gains for these stocks.

The first is investors want to see undeniable proof that offshore wind is economic as a source of electricity. The more developers in Europe and Asia demonstrate lower costs and reliable profits, the more investors will reward sector stocks.

US companies will have to prove they can manage construction costs and meet development deadlines as European firms have done. Fortunately, by not being first movers, they will be able to learn from others’ trials and tribulations.

Erratic and sometimes hostile regulation is the other major reason US offshore wind industry development has lagged that of Europe and China so far. But the bet here is the days of federal regulation as a roadblock to offshore development are numbered.

Mainly, pro-renewable energy Biden appointees look poised to slash through the red tape as they take control of the Interior Department and the Bureau of Ocean Energy Management (BOEM).

That’s apparently what US offshore wind developers are banking on with the aggressive permits they’ve filed this year. And companies are making huge new investments in equipment as well, such as the wind turbine installation vessel Dominion has commissioned for service in 2023.

Even a return to supportive regulation won’t make offshore wind a major supplier of US electricity until mid-decade. But having a clear path to startup at last should do wonders long before that for the stocks of the lead developers. So far, these companies have been left out of the renewable energy boom. But their turn is coming.

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