So, How’s Your Green Energy Stock Doing?
Guest post By Steve Goreham Originally published in The Washington Times
Is green energy a fad that has run its course? The investment community seems to think so. RENIXX® World, the Renewable Energy Industrial Index of the world’s top green energy companies, hit an all-time low below 146 on November 21, down more than 90 percent from the December 2007 peak.
The RENIXXindex was established in 2006. It’s composed of the world’s 30 largest renewable energy companies with more than 50 percent of revenues coming from wind, solar, biofuel, or geothermal energy, or the hydropower or fuel cell sector. The index includes equipment producers, such wind turbine companies Vestas (Denmark), Gamesa (Spain), and Suzlon (India), solar equipment companies such as First Solar (USA), Suntech Power (China), and Sun Power (USA), and also utilities such as Enel Green Power (Italy) and China Longyuan Power Group. Of the 30 companies, 10 are headquartered in China, 10 in Europe, and 7 in the US.
During the heydays of 2007 and 2008, the RENIXX index was on a roll. Former Vice President Al Gore’s book An Inconvenient Truth reached number one on The New York Times best seller list in July, 2006. His documentary movie by the same name became a worldwide hit the same year. In December 2007, Mr. Gore shared the Nobel Peace Prize with the Intergovernmental Panel on Climate Change. The world was whipped into global warming frenzy.
Subsidies and mandates for green energy existed for many years, but during 2006—2008 governments redoubled the emphasis on renewables. California enacted the Global Warming Solutions Act in 2006, establishing greenhouse gas emissions targets and renewable mandates. Illinois, Michigan, and other states passed or strengthened Renewable Portfolio Standards, requiring electrical utilities to buy an increasing percentage of renewables or pay fines. The European Union approved the Climate Action and Renewable Energy package in 2008, requiring increased renewable energy and biofuel use and tighter emissions restrictions.
Money poured into green energy stocks. Kevin Parker, Director of Global Asset Management at Deutsche Bank, talked about Mr. Gore and a green investment fund that the company created: “He [Al Gore] impressed us all at Deutsche Bank Asset Management. We invited him to an internal meeting in April, 2007 during which we discussed the issue of climate change extensively. A few months later, he received the Nobel Peace Prize for his commitment. We then created a fund that invests in companies that position themselves as climate-neutral. Within two months almost 10 billion dollars flowed into this fund. Can you imagine? 10 billion! There has never been such an overwhelming success.” The RENIXX index rocketed to over 1,900 in December of 2007.
But the subsidy-driven green energy wave soon hit a brick wall of fiscal reality. Spain paid solar operators up to ten times the rate for conventional electricity with a 20-year subsidy guarantee. With a guaranteed annual return of 17 percent, every hombre entered the solar business, making Spain the largest solar cell market in 2008. But the nation’s subsidy obligation soon mounted to $36 billion dollars. In 2009, Spain cut the subsidies and its solar market dropped by 80%.
In Germany, feed-in tariffs of eight times the market rate resulted in the installation of over one million roof-top solar systems by 2010. But the 20-year guarantee also produced a subsidy obligation of over $140 billion. German electricity rates climbed to the second highest in the world and continue to climb to pay for green energy. To stop the bleeding, Germany cut feed-in subsidies three times in 2011 and announced a complete phase-out by 2017. Spain, Germany, Italy, Netherlands, the United Kingdom, the United States, and other nations cut subsidies for wind, solar, and biofuels during the last three years.
At the same time, solar manufacturers built huge capacity to meet expected demand for green energy. But with cuts in subsidies, demand crashed and so did solar cell prices. Dozens of companies went bankrupt, such as German companies Solon and Solar Millennium, and US-based Solyndra.
The failure of global climate negotiations also drove the RENIXXindex down. Investors expected a binding agreement from negotiations, but no pact could be reached at the 2009 Copenhagen, the 2010 Cancun, or the 2011 Durban conferences. The current climate conference in Doha, Qatar is also unlikely to produce a binding agreement.
It’s interesting to note that a single oil company, Exxon Mobil, has a market capitalization of over $400 billion, or about 40 times the capitalization of the RENIXX index of the world’s top 30 renewable companies. It looks like investors are betting on oil and not green energy.
Steve Goreham is Executive Director of the Climate Science Coalition of America and author of the new book The Mad, Mad, Mad World of Climatism: Mankind and Climate Change Mania.
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I knew I should have got into the carbon credit scam while the scamming was good.
To late for me to rake in the big Green bucks, I guess.
I like how the graph falls perpetually around the time of the Climategate scandal. Would be nice to hear how the warmists explain that one away!
So, How’s Your Green Energy Stock Doing?
Ouch! Before I actually looked at the science, many years ago, I lost thousands on Astropower (APWR). Should have looked at the science first! Lesson paid for and learned.
It’s hard to figure out the total subsidies in the US to produce a kWh of energy. I have read that it is as high as $1 per kWh produced. Does anyone have information on how to find out in one place, what the total subsidies are? There’s FIT, Loans, grants, tax write offs for manufacturers, and tax breaks to purchase. I would like to have some numbers if someone has them.
Mario
Our (UK) government seems to be in two minds on renewables. Whilst still supporting them with massive subsidies there is at last a move towards the shale gas option. This is some sort of good news.
We should never stop researching and developing clean and renewable power sources.
Rolling them out on an industrial scale was utter folly. Looks like a bunch of economists believed their own hype and the warmist hype. Our governments are populated with idiots who studied politics and know nothing of basic engineering estimate.
Nothing new there then.
It would appear that reality does have an effect on the bean-counters!
Long may it continue.
Green energy (or renewables, if you prefer) needs to stand on its own two feet – subsidies will only delay the inevitable demise of anything that is inherently inefficient or uneconomic. The issue of green energy was pushed on the assumption of the carbon credit type regimes to be imposed (which are, if you like, yet a further indirect subsidy, by ‘taxing’ the fossil fuel industry). Whilst not wishing to prolong the economic problems of the world – it is only this that has taken the wind from the green sails – in times of austerity, investors (or even your average Joe) will only put money into something worthwhile. Clearly, green energy is VERY low on the list of things that need saving! and that is because it simply isn’t (currently) a valid economical proposition and they cannot make it so. I reckon we have a lot to thank the crash of 2008 for!
Coke:
Your post at December 6, 2012 at 2:50 pm says
You are right, but Climategate was not the reason for the decline in the value of renewables stocks.
In the months prior to the CoP held in in Copenhagen during December 2009 it became clear that a successor Treaty to the Kyoto Protocol would not be achieved. Renewables rely on subsidies and without the successor Treaty those subsidies would reduce. Therefore, investors started to withdraw from renewables.
Richard
I found this goldmine of information on total subsidies. Does anyone have any comments on the validity of it? I could not connect to some of the links to the source references.
http://www.instituteforenergyresearch.org/hardfacts-uploads/NJI_IER_HardFacts_ALLpages_20120423_v8.pdf
So what you’re saying is if liberals had to put their money where their mouth is, they’d be a little more pragmatic about green energy? Liberals don’t want to invest their own money. They want to invest your money.
Being skeptical, I notice that this chart is an industrial index chart and that it correlates very nicely with the Dow Jone Industrial Index for the same time period.
I believe what you are seeing is the decline in investment in renewable energy sources which corresponds to the general economic decline rather than evidence of an overall decline in interest in renewable energy sources.
As long as you see a rise in the price of the current energy source you will see an increase in the interest in alternate energy sources. The real breakthrough and conversion comes when the cost of the alternate energy source is less than the cost of the current source.
I advised my parents, who are retired and living off investments, to get out of anything labeled “green” some years back. They talked to their money guy and he was still hyping the whole “green” thing, but did move their stuff away from self-described “green” funds.
Today, many of their friends are lamenting their reduced finances, while my own parents are still chugging along with a nice income.
By the way, I also got my parents into a sizable chunk of Microsoft stock back in the 80s… despite their money guy saying it was like throwing money away. I know he still kicks himself for not buying more himself.
I have no problem with cheap green energy, other than perhaps the aesthetics of wind turbines, which are not cheap, and the potential ecological damage of river barrages. Well managed nuclear and geothermal would be good and clean. But while carbon based fuels are relatively cheap and climate change is a scam, to me it’s a simple exercise of cost effectiveness.
Richard,
Thank you for your insight – Since I made that post, I was browsing the internet looking for possible reasons as to the wavering interest in renewables, and your post was most edifying 🙂
Gore and Strong both got out while the getting out was good.
Pulpit-pounding idealism + cynical pragmatism = Wealth.
Most of us have only one half of the equation. Either side.
Al Gore already left.
Michael Tremblay: You appear to be mistaken. The Dow Jones Has fully recovered from the 2008 crash (to within 4%). There is almost no correlation between these two indicators
Michael Tremblay……not even close to the truthdow fell by half and has recovered to the 90% level not your Green’s current value of 10%
The chart above is down 90% from its peak in 2008. The Dow is down maybe 15% from its peak.
The charts are similar in their big drops in the fall of 2008. The chart above differs in that it failed to recover most of its losses starting in 2009. Instead, it resumed falling.
Schadenfreude!
Michael Tremblay says:
December 6, 2012 at 3:30 pm
Being skeptical, I notice that this chart is an industrial index chart and that it correlates very nicely with the Dow Jone Industrial Index for the same time period.
—————————————————–
Ummm – no. I don’t think the DJII is now worth one ninth of what it was in 2007. It may be that the shape of the graph is similar, but in terms of value, there is no comparison.
I feel sorry for people whose superannuation funds invested in these turkeys.
Here’s text from an article on Seeking Alpha yesterday, for those who want to be fooled twice–or who want a good short sale candidate:
All energy, less nuclear, renews at less than 1350 W·m^-2 ~ 5kWh·m^-2·day^-1 More demand than that indebts the future as fossil fuel has done.
We took the Longyuan in the Enel all right but the Gamesa has nearly Rennix course.