Doug Sheridan Decries
“What a giant "swing and miss" the clean energy gambit has been.”
Per the FT, renewable energy stocks have sold off sharply in recent months, significantly underperforming fossil fuel companies, as higher interest rates take a toll on the sector. The decline comes despite tens of billions of dollars in tax credits, subsidies and loans being offered by governments to green energy companies in the US and Europe.
Renewable groups’ business models are poorly suited to a high inflation, higher interest-rate world. “Most important is that a lot of these companies disappointed in their profitability,” said David Souccar, a portfolio manager at Vontobel Asset Management. “To support rapid growth, you need to keep leveraging the balance sheet or issue equity. In a zero-rate environment, this formula worked. In a higher-rate environment, it falls apart.”
Meanwhile, manufacturers in China, which dominates the solar supply chain, are nursing heavy share price losses of their own, having been caught up in this year’s sell-off in the country’s equity markets. Since January, Sungrow Power Supply Co., Ltd., JA Solar Technology and Risen Energy have fallen about 32%, 33% and 44% respectively.
Solar power and wind turbine groups have been among the hardest-hit stocks. Swedish wind turbine developer Vattenfall in July said its costs had climbed 40%, while Korean manufacturer CS Wind is down 28% since the start of August. US-based wind and solar generator NextEra Energy, Inc. announced a cut to its three-year growth expectations.
The threat of less generous tax credits and delays affecting the US manufacturers of turbine foundations have made life even harder for offshore wind companies such as Danish developer Ørsted, whose shares have tumbled about 30% since late August. Analysts at UBS estimate that sensitivity to higher interest rates could cost Ørsted between $709mn and $1.42bn.
Our Take 1: Kudos to FT for being one of the few outlets to point this out. If it was the fossil fuels sector that had seen share prices decline by 50% over the last 24 months—and by 38% over just the last year—we'd see at parade of headlines point to the "troubles engulfing" the sector.
Our Take 2: Renewables have been a favored class, annoited broadly in the past by an an unserious media and opportunistic Wall Street intent on doing their part to greenify the global economy... even if it means ignoring the flawed assumptions behind the supposed takeover and the misallocation of funds to poorly performing and expensive forms of untrustworthy energy. What a Per the FT, renewable energy stocks have sold off sharply in recent months, significantly underperforming fossil fuel companies, as higher interest rates take a toll on the sector. The decline comes despite tens of billions of dollars in tax credits, subsidies and loans being offered by governments to green energy companies in the US and Europe.
Renewable groups’ business models are poorly suited to a high inflation, higher interest-rate world. “Most important is that a lot of these companies disappointed in their profitability,” said David Souccar, a portfolio manager at Vontobel Asset Management. “To support rapid growth, you need to keep leveraging the balance sheet or issue equity. In a zero-rate environment, this formula worked. In a higher-rate environment, it falls apart.”
Meanwhile, manufacturers in China, which dominates the solar supply chain, are nursing heavy share price losses of their own, having been caught up in this year’s sell-off in the country’s equity markets. Since January, Sungrow Power Supply Co., Ltd., JA Solar Technology and Risen Energy have fallen about 32%, 33% and 44% respectively.
Solar power and wind turbine groups have been among the hardest-hit stocks. Swedish wind turbine developer Vattenfall in July said its costs had climbed 40%, while Korean manufacturer CS Wind is down 28% since the start of August. US-based wind and solar generator NextEra Energy, Inc. announced a cut to its three-year growth expectations.
The threat of less generous tax credits and delays affecting the US manufacturers of turbine foundations have made life even harder for offshore wind companies such as Danish developer Ørsted, whose shares have tumbled about 30% since late August. Analysts at UBS estimate that sensitivity to higher interest rates could cost Ørsted between $709mn and $1.42bn.
Our Take 1: Kudos to FT for being one of the few outlets to point this out. If it was the fossil fuels sector that had seen share prices decline by 50% over the last 24 months—and by 38% over just the last year—we'd see at parade of headlines point to the "troubles engulfing" the sector.
Our Take 2: Renewables have been a favored class, annoited broadly in the past by an an unserious media and opportunistic Wall Street intent on doing their part to greenify the global economy... even if it means ignoring the flawed assumptions behind the supposed takeover and the misallocation of funds to poorly performing and expensive forms of untrustworthy energy.
What a giant "swing and miss" the clean energy gambit has been.