By Gerard Wynn
LONDON Jan 17 Green investing a loser's
Investors have had to navigate treacherous shoals to hunt a
few niche environmental winners, but there are glimmers of clean
technology opportunities among the wreckage.
Renewable energy may merit a stock-picking approach, after
momentum, or index-based investing deserted the sector last
In the wake of Lehman's demise and the financial crisis, the
MSCI basket of global, publicly traded companies hit a low on
March 9, 2009.
Since then the MSCI index has risen 75 percent. By
contrast, indices show wind turbine makers down a fifth,
solar manufacturers by a third, and benchmark European
carbon futures off by 40 percent.
Renewable energy manufacturers and carbon markets have faced
common problems: prices for energy equipment and emission
permits have fallen on over-capacity following the financial
And there are new headwinds in government support after boom
years when climate change topped the political agenda in
In the case of wind and solar, however, these problems are
slowly working through. Continuing demand growth will help
absorb excess capacity and improve manufacturer margins in a
year or two.
In solar in particular, an expected shakeout this year will
see under-performers go to the wall and excess capacity shut,
leaving opportunities for surviving manufacturers and developers
which have actually benefited from price falls.
Global demand for wind turbine grew last year, as
energy-thirsty emerging economies, in Latin America and Africa
for example, took the baton from troubled developed countries.
Problems in the other big environmental market, European
emissions trading, may be more deeply rooted, however:
industry and regulators don't seem to have the appetite for the
scale of recalibration needed - one which would require either a
vast skimming off of surplus emissions permits or a floor price.
In solar photovoltaic (PV) manufacturing, an estimated
global over-capacity of 50-100 percent has collapsed prices and
will probably trigger a wave of bankruptcies and consolidation
this year among panel, or module, makers.
Chinese manufacturer Yingli said it saw prices
stabilising this year, falling by some 5 percent, to about $0.90
per watt at the end of the year, compared with a 40 percent
slide last year.
Bloomberg New Energy Finance sees prices ranging from
$0.94-$1.06 per watt in 2012.
Surviving manufacturers may benefit: an uptick in solar
equities last week was an early sign of that, after news of a
demand surge in Germany and new installation targets by China's
National Energy Administration (NEA).
Meanwhile developers and manufacturers with project
pipelines may benefit as investors seek locked-in profits from
falling equipment prices and government support.
Recent U.S. deals include the acquisition by Warren
Buffett's power company, MidAmerican Energy Holdings, of a solar
farm from U.S. module maker First Solar, and Google's
partnering with private equity firm Kohlberg Kravis
Roberts & Co (KKR) to buy projects developed by a subsidiary of
diversified manufacturer Sharp Corp.
In Europe, KKR and German reinsurer Munich Re
recently bought a stake in privately-held solar PV projects
across Spain and Italy. China's Solar Power Inc, an arm of
manufacturer LDK Solar, acquired projects in Greece from
developer EDF Energies Nouvelles Group, an arm of French utility
In wind markets, turbine demand rose by about 10 percent in
2011, according to early estimates, partly on a rush to beat the
expected expiry this year of a U.S. tax credit.
That reverses a fall in 2010, but over-capacity remains,
explaining a roughly 5 percent fall in benchmark turbine prices
In a fragmented demand market, Asia and North America fared
better than Europe in 2011, and in Europe offshore turbines
better than onshore.
One important emerging market is Brazil, where aggressive
bidding by developers on a tender last year reflects risks in
developed country markets, including a credit squeeze in Europe
and an imminent end to tax credits in the United States.