Vestas Wind Systems: Riding Policy Winds in the Renewable Energy Race

The global renewable energy sector is at a crossroads, with policy shifts in key markets like the U.S. and EU reshaping the competitive landscape for companies like Vestas Wind Systems (VWS.CO). As the world's largest wind turbine manufacturer, Vestas is navigating a complex mix of regulatory tailwinds and headwinds. Recent amendments to U.S. legislation, combined with the company's strategic moves to counter European policy fragmentation and Chinese competition, position it as a critical player in the $1.5 trillion global wind energy market. For investors, the question is: Does Vestas' undervalued stock reflect a buying opportunity in a sector ripe for long-term growth?

U.S. Policy Shifts: A Lifeline for Project Timelines

The “One Big Beautiful Bill” (OBBBA), finalized in mid-2025, has been a game-changer for Vestas. While the bill initially caused panic due to stricter deadlines for renewable energy subsidies, its final form softened the blow:
- Extended Deadlines for Tax Credits: Wind projects initiated within one year of the bill's enactment can qualify for extended tax credits until 2027, giving Vestas a critical 12-month grace period to secure orders.
- Foreign Component Loophole Lifted: The removal of a proposed excise tax on projects using components from “foreign entities of concern” (e.g., China) reduces supply chain risks.

The result? A 10.1% rebound in Vestas' share price post-Senate approval, reversing an 8% dip from earlier drafts. The bill's clarity has stabilized near-term order flows, with analysts at Citi noting that U.S. offshore wind projects—where Vestas holds a 35% market share—are now “less exposed to subsidy cliff-edge risks.”

European Policy Challenges: A Call for Cohesion

While the U.S. provides clarity, Europe remains a battleground for Vestas CEO Henrik Andersen. His warnings about EU policy fragmentation are stark:
- Permitting Delays: In some EU countries, wind project approvals take up to nine years, versus Germany's streamlined process of just 1.5 years.
- Grid and Auction Woes: Outdated grid infrastructure and overly complex offshore wind auctions are inflating costs, stifling growth.

Andersen's solution? A three-pronged push for EU reforms:
1. Accelerate Permitting: Adopt Germany's model to cut approval times.
2. Simplify Auctions: Align tenders with project economics to attract investors.
3. Fund Grid Upgrades: The EU needs an additional 80 million km of grid expansion by 2040 (IEA estimate).

The payoff? A €49 billion GDP boost by 2030 and 500,000 jobs if reforms succeed. Without them, Andersen warns Vestas may relocate production to markets with clearer rules.

Competing with Chinese Giants: A Strategic Edge

Vestas faces intense competition from Chinese firms like Goldwind and Envision, which benefit from government subsidies and lower labor costs. Yet Vestas' moves to insulate itself are paying off:
- U.S. Manufacturing Hub: Relocating production to the U.S. (e.g., its Texas plant) has mitigated tariff risks and positioned it for domestic projects.
- Technology Leadership: Its V236-15.0 MW offshore turbine—capable of powering 70,000 homes—is a step ahead of Chinese rivals.
- Sustainability Pledge: Aiming for carbon neutrality by 2030 (without offsets) and zero-waste turbines by 2040 enhances brand appeal in ESG-driven markets.

Analysts at Barclays note Vestas' 25% global offshore wind market share and rising order intake (up 18% YTD 2025) as proof of its resilience.

Demand Drivers and Near-Term Catalysts

The long-term case for wind energy is unassailable:
- Offshore Boom: Global offshore wind capacity is projected to hit 25 GW annually by 2030, with projects like Germany's He Dreiht and Poland's Baltic Power relying on Vestas' tech.
- Policy-Backed Growth: The EU's Net Zero Industry Act (NZIA), set for full implementation in 2025, could trigger a 2026 investment surge.

Near-term catalysts include:
1. Policy Clarity: Finalization of the NZIA's permitting rules and U.S. tax credit guidelines.
2. Cost Efficiencies: A shift to a “pull-based” manufacturing model aims to cut lead times by 20%.
3. Order Backlog Execution: Vestas' $25 billion order book (as of Q1 2025) needs smooth project execution to hit its 10% operating margin target.

Investment Thesis: Buy the Dip

Vestas trades at a 20% discount to its 2020 highs, despite record orders and a robust pipeline. This undervaluation presents a compelling entry point for investors:
- Valuation: Forward P/E of 18x vs. industry average of 22x, with upside if margins hit 10%.
- Catalysts: EU grid reforms and U.S. subsidy clarity could lift sentiment.
- Risk-Adjusted Play: A 60% correlation to the First Trust Global Wind ETF (FAN) offers diversified exposure to sector tailwinds.

Conclusion: Winds of Change Favor the Prepared

Vestas is at a pivotal moment. While EU policy risks linger, the U.S. has provided a lifeline for its project timelines, and its strategic moves against Chinese competitors are paying dividends. With offshore wind demand surging and policy clarity on the horizon, now may be the time to bet on this renewable energy giant. For investors prioritizing leadership in a decarbonizing world, Vestas offers a blend of resilience and growth that few peers can match.

Investment recommendation: Accumulate shares of Vestas Wind Systems (VWS.CO) on dips below DKK 100, with a 12–18 month target of DKK 130.