Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Silver Notches Best Month Since 1979 - 12th Aug 20
Silver Shorts Get Squeezed Hard… What’s Next? - 12th Aug 20
A Tale of Two Precious Metal Bulls - 12th Aug 20
Stock Market Melt-Up Continues While Precious Metals Warn of Risks - 12th Aug 20
How Does the Gold Fit the Corona World? - 12th Aug 20
3 (free) ways to ride next big wave in EURUSD, USDJPY, gold, silver and more - 12th Aug 20
A Simple Way to Preserve Your Wealth Amid Uncertainty - 11th Aug 20
Precious Metals Complex Impulse Move : Where Is next Resistance? - 11th Aug 20
Gold Miners Junior Stcks Buying Spree - 11th Aug 20
Has the Fed Let the Inflation Genie Out of the Bottle? - 10th Aug 20
The Strange Food Trend That’s Making Investors Rich - 10th Aug 20
Supply & Demand For Money – The End of Inflation? - 10th Aug 20
Revisiting Our Silver and Gold Predictions – Get Ready For Higher Prices - 10th Aug 20
Storm Clouds Are Gathering for a Major Stock and Commodity Markets Downturn - 10th Aug 20
A 90-Year-Old Stock Market Investment Insight That's Relevant in 2020 - 10th Aug 20
Debt and Dollar Collapse Leading to Potential Stock Market Melt-Up, - 10th Aug 20
Coronavirus: UK Parents Demand ALL Schools OPEN September, 7 Million Children Abandoned by Teachers - 9th Aug 20
Computer GPU Fans Not Spinning Quick FIX - Sticky Fans Solution - 9th Aug 20
Find the Best Speech Converter for You - 9th Aug 20
Silver Bull Market Update - 7th Aug 20
This Inflation-Adjusted Silver Chart Tells An Interesting Story - 7th Aug 20
The Great American Housing Boom Has Begun - 7th Aug 20
NATURAL GAS BEGINS UPSIDE BREAKOUT MOVE - 7th Aug 20
Know About Lotteries With The Best Odds Of Winning - 7th Aug 20
Could Gold Price Reach $7,000 by 2030? - 6th Aug 20
Bananas for All! Keep Dancing… FOMC - 6th Aug 20
How to Do Bets During This Time - 6th Aug 20
How to develop your stock trading strategy - 6th Aug 20
Stock Investors What to do if Trump Bans TikTok - 5th Aug 20
Gold Trifecta of Key Signals for Gold Mining Stocks - 5th Aug 20
ARE YOU LOVING YOUR SERVITUDE? - 5th Aug 20
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Green Energy Stocks 90% Price Collapse

Companies / Renewable Energy Dec 12, 2012 - 12:06 PM GMT

By: Andrew_McKillop

Companies

TIME WAS
In late 2007 the RENIXX index of 30 leading clean energy stocks reached its peak: since then it has almost constantly fallen, and to early December 2012 has lost more than 90% against the peak.



Explaining the fall through 2010-2012 could seem difficult. Other stock indices outside the renewable enery sector covered by RENIXX, which includes a few diversified companies operating in fuel cells, power transmission, biotech and smart metering as well as wind and solar, have shown sometimes massive recovery and growth since the 2008-2009 stock panic. The bounce was of course a fake and lent heavily on extreme or massive government handouts and bailouts, but why did it not also tweak green energy stocks?

For 2010 and 2011 according to Germany's IWR renewable energy institute, which created and maintains the index, the RENIXX index lost 29.3% followed by 54.4% against year previous.

This could be called a normal thing for "early mature" market sectors, or due to growing investor disappointment with bad financial performnce, or continuing headwinds from the 2008 crisis, or similar arguments, but other explanations are in fact needed. The IWR's attitude is stoic. It says all fundamentals able to power the growth of renewable energy company stock and able to outperform other market sectors, are still in place. Its one-liner is "The finite nature of fossil energy resources".

SHIFTING SANDS
IWR still claims its 30 leading companies are "Global companies with more than 50% of revenues coming from the wind energy, solar power, bioenergy, geothermal energy, hydropower or fuel cell sector", but starting with the 22 listed solar photovoltaic and windpower companies, almost all of these these are so government friendly they are government dependent. This is mostly because these companies had no choice. They had the choice of going out of business - for whatever reason - and staying in business but depending on big government. To be sure IWR can argue that a certain, but declining number of the companies in its index are genuine free market entities pursuing normal goals without undue or special interference by government.  Putting things bluntly, global renewable energy business may have started with stars in its eyes, but certainly since 2008 has become crony capitalist.

This itself can explain investor disenchantment. Governments have a way of walking away from their self-assigned "burdens" in the economy and society. They can quickly abandon the honeymoon quest of helping or saving solar, wind, biofuel, wave energy, electric car, battery tech or other government-friendlies from a growing list of New Energy pink elephants and Pink Sheets. The official reason is always that costs grew like wildfire, job costs were too high to protect, there were no national security issues, the Chinese or Indians can do the tech better and cheaper, and so on. Previous to this, of course, the exact opposite was argued.

12 of the companies listed by the RENIXX are Chinese and 10 of them are solar-based or oriented - but these companies are now sure and certain "wards of state", with zero freedom of company board decision. Chinese government treatment of them may be as simple and brutal as shrinking these 10 companies to 5-only by 2015, or before. This pending government action is well known, and the causes of it are also well known. China's production capacity in solar PV is approximately two times world total market absorbtion capacity, offering the choices of "waiting for the world to catch up" or more likely not waiting. Just as revealing but in a different way, the world's No 2 producer of solar PV, Germany, has only one entrant company from the solar PV sector, in the RENIXX index. The rout of major solar power equipment producer companies in Germany helps explain the IWR's choice.

The only difference is the German solar rout already happened; the Chinese one is yet to come.

There is little need to look at Gamesa of Spain, India's Suzlon or Denmark's Vestas in the windpower sector of this index: all three are as heavily in need of government support to stay in business, as the straight majority of German and Chinese solar PV equipment producers. Overall, 22 out of the 30 companies listed by the RENIXX are solar and windpower producers, identifying the real causes of the index crash since 2008.

TECHNOLOGICAL TRIUMPH-FINANCIAL DISASTER
Even before 2008 the writing was on the wall for "classic type" company growth paths and strategies, in the green-and-clean alternate energy sector. By "classic" we can look at the Silicon Valley growth model, and try applying it in the same way as several Barons of the Valley tried. These included Bill Gates, Vinod Khosla, Peter Thiel, Bill Joy, Elon Musk and several other big names - their ventures either folded in a sea of red ink or still today stumble on from one government handout to another.

The number of technological but especially industrial differences between IT and coummunication technology on one hand, and alternate energy on the other are all we need to explain why the Barons of the Valley hit a brick wall, despite solar PV using semiconductor technology! Quick and drastic changes in activity, production, operating systems, infrastructures, user habits and expectations - for example - are all possible in IT and communications, but not in energy. Industrial plant for alternate energy is very often, for example solar power, at least as high cost and capital intensive as fossil energy equipment plant and manufacturing. Extreme rapid growth of alternate energy manufacturing capacity, driven by government handouts, feed-in tariffs, tax breaks, and other support including a surge of investor enthusiasm around 2005-2008, has strapped producers to the mast of their corporate ships, condemned to sail forward or abandon ship.

Renewable energy is often compared with the ultimate government protected White Elephant of nuclear  power. Some comparisons are possible, but the real difference is clean energy will and does work, unlike nuclear power. Major changes in the energy infrastructure needed to integrate green energy, and the long-term nature of this adaptation and transition also make it certain that green energy will stay dependent on and close to government, like nuclear power. For stock market players looking to choose the right numbers on the spinning roulette wheel this long term need for government aid and support is a sure reason to stay away from alternate energy stocks.

Drawing down surplus production capacity in green energy, at the same time as government subsidies and feed-in tariffs are slashed, makes for a long dark tunnel ahead. Adding in the transformation of world energy since 2008, both supply side and demand side, the nearterm future outlook for the sector remains troubled and will surely include major mergers, restructuring and downsizing. These will create sure prospects for stock gains, in the sector that as the IWR proudly announces, continue to have double digit annual growths of production and output - not profits.

By Andrew McKillop

Contact: xtran9@gmail.com

Former chief policy analyst, Division A Policy, DG XVII Energy, European Commission. Andrew McKillop Biographic Highlights

Co-author 'The Doomsday Machine', Palgrave Macmillan USA, 2012

Andrew McKillop has more than 30 years experience in the energy, economic and finance domains. Trained at London UK’s University College, he has had specially long experience of energy policy, project administration and the development and financing of alternate energy. This included his role of in-house Expert on Policy and Programming at the DG XVII-Energy of the European Commission, Director of Information of the OAPEC technology transfer subsidiary, AREC and researcher for UN agencies including the ILO.

© 2012 Copyright Andrew McKillop - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisor.

Andrew McKillop Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules