Download now: Cannabis Cash

Bad News

Energy and Capital's Weekend Edition

Written by Nick Hodge
Posted April 15, 2012

Make no mistake, I'm as ardent a supporter of a clean energy future as anyone else.

But fact are facts. And the industry as a whole isn't doing so good right now.

There are and will be individual winners to be sure.

On a broader scale, though, there are some issues. Here's what I'm seeing...

Hen in the Henhouse

Normally the grim green news comes from an oil money-backed think tank or other organization that stands to benefit from a delayed cleantech revolution.

But these days even renewable energy's own industry rags don't have much good news to report, only ambitions.

Here's a piece of a recent update from Bloomberg New Energy Finance, which has been one of the biggest renewable energy trumpet blowers for years:

Solar manufacturing companies in the US and Europe have been hit by the oversupply in the market - and the consequent drop in prices. Germany's Solarworld for instance reported a loss of EUR 299m for 2011, and said that it could not forecast 2012 sales due to uncertain solar market conditions. Other manufacturers in the country, like Q-Cells and Conergy, are also struggling.

Germany's solar manufacturing industry will disappear within five years because of competition from Chinese companies, said Klaus-Dieter Maubach, a member of E.ON's management board. Norway's Renewable Energy Corporation announced that it would permanently close its 300MW mono-crystalline wafer plant in Norway after failing to cut costs enough to make it profitable.

Solar companies in China also have their share of troubles. LDK Solar reported fourth-quarter sales at the bottom end of its forecast and less than half the USD 921m reported the year earlier. It is slated to announce its audited earnings next month and may post a negative gross margin.

The publication went so far as to call it a period of “gloom.”

That was three weeks ago.

Last week, the update from Bloomberg New Energy Finance was entitled, “Search for Silver Linings.” But it reported the clouds first:

The WilderHill New Energy Global Innovation Index, or NEX, which tracks the fortunes of 97 clean energy stocks worldwide, slipped to 135.55 at the close on Monday 2 April, from 140.1 a week earlier. Its latest level was just a dozen or so points above its eight-year low of 122.57 reached last December.

In the first quarter of 2012, the NEX gained 4.2% - but this compared to a much more impressive 11.8% surge for the broad-based US S&P 500 index.

Worse, there continue to be casualties among quoted clean energy stocks. On Monday this week, US units of Solar Millennium, the German solar thermal electricity generation specialist, filed for bankruptcy protection. The parent company is already in insolvency proceedings in its home country. Also on Monday, Q-Cells, one of the pioneering German PV manufacturers, saw its shares plunge 41% after it said that it was "legally bound to file for insolvency".

Q-Cells was once the largest solar manufacturer in the world. Now it's insolvent.

Here's what a one-year chart of that clean energy index looks like next to the Dow:

NEX vs. Dow

And what of the silver linings?

The journal reported Japan is “looking to speed up solar, wind, and geothermal deployment.” The World Bank “is studying renewable energy project funding for Morocco and Jordan.”

And in a statement of lukewarm confidence, World Bank investment officer Adam Schwartzman said, “These are countries with strong renewables potential where the sector could potentially be a competitor with industrial sources of generation.”

To summarize the current silver lining for renewables...

Japan is looking to do something. The World Bank is studying something. And those things being studied could “potentially be a competitor.”

Forgive my cynicism.

Clean energy is the future.

But the real profits won't come until they are unequivocally competitive, not potentially.

We'll be bringing the investments that make that a reality.

Call it like you see it,

Nick Hodge
Editor, Energy and Capital

The Money Behind the Money:
Investing at the Source

As graphite finds itself in a rare earth-type situation, in that China has a near stranglehold on the market — and is already adding export and Value Added Taxes (VAT) as graphite's dominant future creeps closer and closer — investors are turning to this company outside of China that's producing this all-important element.

Avoid Paying Out the @#$ for Investment Advice: A Must-Read for Financial Newsletter Subscribers
The same research that has led to 300%... 332%... even 547% gains can be yours for $5 a month — without any extra cost... upgrades... or any hidden fees. Find out why and how today.

The Cost of Debt: Debts DO Matter
Greg McCoach, editor of the Mining Speculator, talks about why debts do matter and how it relates to the price of gold.

$1 Gas PricesThe Buying Opportunity of a Lifetime
Ian Cooper discusses the cold realities of coming Iran negotiations and the real possibility of $200 oil.  

The War on Fracturing: EPA's Latest Report Clears Hydraulic Fracturing
For many, the bitter pill to swallow is that our good fortune in oil and gas production has come on the back of hydraulic fracturing...

China's Oil Sands Ambitions: Investing in Canadian Black Gold
The United States can no longer take Canadian energy for granted.

Energy ETFs: Long, Short, Leveraged
A guide to energy exchange-traded funds (ETFs) and notes (ETNs).

Cove Energy is Gushing: The Economist is Reading My Stuff
As the Kenya oil boom story gets more press, these stocks will move higher. They already are. In the next year or two, Kenya will emerge from being the punch line of a marathon joke to a viable investment choice.

Investing in Graphite: Prices Up 250% Already
Now is the time to take advantage of the graphite bull. Here's what you need to know... 

China Rare Earth: Molycorp's Acquisition
I firmly believe graphite miners are about to experience the thousand-percent run-ups witnessed by rare earth companies over the past few years.


Elon Musk's Lithium Revolution is Upon Us

Question of the Day

Which industry in California is responsible for the most energy usage?