Green energy shares
September 28, 2011
When German Chancellor Angela Merkel rang the death knell for her country's nuclear industry, it shook major energy companies to their core and gave the renewables sector something to smile about. While the former grappled with the prospect of an uncertain future and massive financial losses, the latter experienced a boost on the stock markets. Albeit it a short one.
Although sustainable power sources are the great clean hope of the energy world, wind turbine and solar panel manufacturers are far from the darlings of the stock exchange. According to Renixx, an index of the world's 30 most important companies operating in the renewables sector, the industry is still trying to regain the composure it lost during the financial crisis.
The index, which stood at 289 points at close of play earlier this week, has dropped more than 40 percent since the start of 2011. It has shed almost 85 percent of its value since 2007, when it reached an all-time high of 1918 points.
Pressure on prices
The director of the International Economic Platform for Renewable Energies (IWR), Norbert Allnoch, says there are tangible reasons for the persistent decline. One of the main factors is banks' reluctance to invest in clean power projects - particularly when it comes to wind turbine manufacturers.
In the case of the solar power industry, the problem is one of supply and demand, Allnoch told Deutsche Welle. A surplus in Spanish and German capacity has restricted market access.
"And these excess capacities put pressure on prices, and subsequently on company profits."
The director says recent talk of renewables replacing nuclear power in the wake of Japan's Fukushima catastrophe gave the industry a surge of confidence, but nowhere near enough to propel markets towards a new high.
Focus on China
Chinese wind and solar company shares have been particularly affected by the downward trend, which is largely a result of excess capacities in Europe.
As far as Allnoch is concerned the solar market is saturated, and because China's markets are not yet sufficiently developed, domestic business opportunities are limited.
"Ultimately China and even the US are doing too little on their home markets," the IWR director said. "China in particular, is putting all its effort into exporting the technology."
Add to this the state's move away from subsidizing the projects it was eager to support while the going was good, and it is hardly surprising that clean energy suppliers are in a tight spot.
Blame it on the banks
Harald Gruber of Silvia Quandt Research in Frankfurt told Deutsche Welle it stands to reason that governments can't afford to hand out subsidies in times of serious debt, and that the whole issue of climate change has been obscured by financial crisis.
"I believe solar shares have come under pressure because the debt crisis has paved the way for difficulties in the banking system," Gruber said, adding that such clean energy projects were often largely financed by bank loans.
For Gruber, there is one word which aptly describes the mood in the renewables industry, and that word is "uncertainty." Germany's nuclear phase-out may now be a given, but the energy sector still has a lot of work to do to reposition itself.
Reporter: Monika Lohmüller / tkw
Editor: Sam Edmonds