The global energy transition to cleaner energy sources is a huge market opportunity. Renewable energy leader Brookfield Renewable Power (NYSE: BEP)(NYSE: BEPC) estimates that it will take an investment of over $ 100,000 billion over the next 30 years to advance a lower carbon future. This megatrend will fuel Brookfield’s steady growth for years to come.

Within this megatrend there are many smaller but still significant opportunities. An emerging high-yield investment opportunity for the business is wind power projects. Brookfield discussed his most recent project and why he sees so much potential in repowerings in his second quarter letter to shareholders.

Make a large wind farm even better

Brookfield Renewable recently purchased the Shepherds Flat wind farm in Oregon. He paid $ 700 million for the 845 megawatt project – one of the largest onshore wind projects in the country – which sold all of its electricity to a high-quality customer. This makes it a great choice as the wind farm will generate stable cash flow to help support its high level. dividend yield. However, this stable cash flow profile was not the primary reason Brookfield purchased this project. He saw the opportunity to generate even more renewable energy from the wind farm by re-engineering the turbines.

CEO Connor Teskey highlighted this project in the letter to the company’s shareholders in the second quarter. He noted that the company started repowering Shepherds Flat in June, which is one of the largest repowering projects in the world. He wrote that the company: “will replace the turbine hardware with longer rotors and more efficient equipment while maintaining the rest of the infrastructure. This is expected to increase production by about 25%, generating 400 gigawatt hours of energy. ‘additional clean energy per year, while significantly extending the useful life of the asset. He further noted that “by the time we complete the remotorization by the end of 2022, it It is expected that 320 turbines will have been upgraded with nearly 130 meter rotors and other technologically advanced equipment, as we continue to provide electricity and collect revenue under the power purchase agreement . “

By working on the turbines one at a time, Shepherds Flat will experience minimal disruption, allowing the project to continue to generate electricity and cash flow. This approach is very cost effective. Teskey said the remotorization project “costs only a fraction of a comparable greenfield project.” For this reason, Brookfield will not need to invest any additional equity capital in the project, as it can rely on additional debt supported by the higher production capacity. Therefore, Brookfield plans to “generate attractive returns for medium to high teens on this investment.”

A model for the future

Brookfield sees a huge market opportunity for wind power. Teskey wrote that “with estimated global wind capacity of 200 gigawatts reaching 15 years over the next five years, the global re-engine market is vast – Shepherds Flat is by no means the only opportunity – and is only the case. ‘a segment where we continue to grow our business with attractive returns. “While most modern wind farms have a useful life of 25 to 30 years, technology has advanced so much in recent years that it often makes sense from a financial point of view to replenish them earlier in their life cycle, which is why Brookfield sees a huge opportunity ahead in the renewal of the facilities as they reach 15 years of operation.

The company plans to leverage its expertise – including relationships with equipment suppliers, financial partners and electricity buyers – and its global reach to capitalize on other large-scale repowering opportunities. She can execute projects across her existing portfolio and acquire projects with repowering in mind, like Shepherds Flat. She believes this strategy will provide another way to generate attractive returns for her investors.

Another opportunity to create shareholder value

Brookfield Renewable has a long history of increasing shareholder value by making attractive investments, which is why it is one of the best dividend stocks in the renewable energy sector. He sees an abundance of opportunities ahead as part of the energy transition, including the potential to refuel more wind farms. These projects allow the company to generate more electricity from existing facilities at a fraction of the cost of building a new one. Therefore, these investments can generate excellent returns for Brookfield shareholders while providing cleaner energy to the global economy, making them win-win opportunities.