From the Economist:
IF ANY industry ought to be seeing silver iridescence in the dark slick of oil gushing into the Gulf of Mexico, it is renewable energy. However, since what is perhaps the biggest environmental disaster America has yet seen erupted at BP’s Macondo prospect on April 20th the RENIXX index, which measures the world’s 30 largest publicly traded renewable-energy companies, has fallen by 15%. This is even worse than the 12% fall in the MSCI world stockmarkets index in that period. Moreover, it continues a longer-term decline of more than two-thirds from the index’s all-time high in December 2007.
The oil spill might have been expected to revive a sense of urgency that the world, and America in particular, should reduce its dependence on oil, not least by switching to cleaner, greener sources of energy. Instead it is increasingly common to hear investors asking gloomily, “Is green dead?”
The green-energy industry is still policy-driven rather than market-drivenThe economic downturn is clearly partly to blame for the decline in shares of renewable-energy companies. The industry is still policy-driven rather than market-driven, and the recession has increasingly called into question whether governments will be able to afford the sort of environmental policies they have been promising (including in their fiscal-stimulus programmes). These policy commitments had been an important factor in the bulging market capitalisations of green-energy firms two or three years ago. The recent problems in the euro zone have increased such concerns among investors, especially given the big contributions that wobbly countries such as Spain and Italy have been making to total global demand for solar and wind energy.
Add to that the failure at the Copenhagen summit to make any significant progress in reaching a global agreement to curb climate change. Add, too, the similar lack of progress in getting an energy bill adopted by America's Congress. Taking these failures together with the sharp fall in the price of carbon on Chicago’s
voluntary emission-permits market, it is easy to conclude that the Cassandras of early 2008 who talked about a bubble in green investing have been proved right.
Yet a case can be made—and the industry’s optimists are making it—that the green gloom is overdone. “The stockmarket is focused on the macroeconomic environment, not on the fundamentals,” argues Tom Werner, the chief executive of SunPower, a big American solar-energy firm. Although SunPower’s share price is currently around one-tenth what it was at its peak in December 2007, Mr Werner insists that green is anything but dead. “The secular move to renewables such as solar is an unassailable shift,” he says. A glut of solar panels is expected to hit the market in the coming year as new production comes online, especially in China. Even so, Mr Werner remains confident that his firm is “extremely well-positioned” to profit from that shift....MORE