Description from S&P website
“The S&P Global Clean Energy Index provides liquid and tradable exposure to 30 companies from around the world that are involved in clean energy related businesses. The index is comprised of a diversified mix of Clean Energy Production and Clean Energy Equipment & Technology companies.”
Google Finance page:
http://www.google.com/finance?q=INDEXSP:SPGTCLEN
In comparison, MSCI World is down 5.63% over the same period.
Wow, what’s going on here? Did governments just run out of money to fund this stuff?
I couldn’t check out the index content, but I am sure that european / western solar panel makers are a significant component of the index, and well, many of them are going to shit or went bankrupt recently, getting killed by Chinese competition. Of course, the fact that european governments have been curtailing feed in tarifs recently didn’t help them, but these companies are just not competitive anymore. They are selling their panels much below cost. Check out Q-Cells, global leaders a few years ago, and now bankrupt.
You could argue that the European consumer (ultimately the one who pays the feed-in tarif) has been subsidising the rise of the Chinese domination in this market. German panels account for less than 20% of panels installed in Germany.
You could also argue that former European giants failed to invest enough in R&D and just sat on their asses while making huge profits until the oversupply killed them.
I find that what is currently happening in Europe is quite interesting. It seems like many stocks related to electricity generation (solar, wind, utilities) are going to shit.
“Soros was known as the only private citizen to have his own foreign policy”
I like your analysis, Viceroy. The Euro crisis is basically making government support for these things dry up and Chinese competition is doing the rest.
But why aren’t Chinese companies in the index. Are they private, or chinese A-shares? How is this index weighted?
You want a quote? Haven’t I written enough already???
Here is the fact sheet for the index. There is about 60% weight in combined Europe plus US. So, competition from developing countries is a plausible factor. Falling commodity prices, like natural gas, might also be important.
http://www.standardandpoors.com/servlet/BlobServer?blobheadername3=MDT-Type&blobcol=urldata&blobtable=MungoBlobs&blobheadervalue2=inline%3B+filename%3DFactsheet_SP_Global_Clean_Energy_Index.pdf&blobheadername2=Content-Disposition&blobheadervalue1=application%2Fpdf&blobkey=id&blobheadername1=content-type&blobwhere=1243870968124&blobheadervalue3=UTF-8
“I’m a CPA! I got money b***h!”
Bchad, IMO, the over-supply on the market is the main cause for the crash in solar panels’ prices. The diminishing demand aspect caused by decreased government support is secondary, in Germany and France at least.
If you are the investor in a solar power plant, you will be looking to maximise you returns by investing in the cheapest solar modules possible, as long as they meet quality standards and as long as they are bankable. The major Chinese players have done a pretty good job at producing good quality products for a fraction of the costs and selling them for a fraction of the price, and banks have been increasingly willing to finance projects with chinese modules. So investors and developers have been going chinese.
I believe that the diminishing government support by the means of lower feed-in tarifs has actually partly resulted from the decrease in price of modules, as you need lesser incentives to give to investors/developers. Not the other way around.
Ohai, I don’t think that falling commodity prices has been a significant factor. Government support is rather a function of the level of achievement of long term targets of green power generation within a country. If you have a target of say, 20 GW for the next ten years, and you have met half of it after 2 years, the government tends to conclude that they need to slow things down. Also, in the case of natural gas, one of Germany’s main motivation was precisely to diminish its dependency on russian gaz imports.
Of course, the ramifications of what the is happening with the solar industry are pretty complex. Sure, the euro crisis is playing a role, but so are politics and lobbies (for example, Sarkozy was pretty friendly with Areva, a huge nuclear conglomerate), national energy security, etc.
It is indeed an interesting industry, and in the big scheme of things, I think that the “solar crash” that is happening now will contribute to bring us to grid parity faster, that is when power produced from clean sources is at least as cheap as power produced from fossil sources. Germany is pretty close to it with wind energy, and that is saying something.
“Soros was known as the only private citizen to have his own foreign policy”