Financial consulting firm, KCI Investing’s Elliot Gue has advised investors to sell their wind and solar energy stocks saying that both industries face “massive overcapacity and falling profit margins.” The energy expert said significant transmission costs, although wind is more cost-competitive than solar, do not compare to conventional energies like coal and natural gas.
Gue said, “For solar energy stocks, a big drop in subsidies from the German government remains a major headwind.” Yet it is important to remain energy independent, enacting a step-down plan. Suani Teixerira Coelho, the Executive Secretary of the Centro Brasilero de Referencia en Biomasa (CENBIO), emphasized at the World Future Energy Summit held in January the importance of lowering subsidies in a gradual process to become more independent. Germany’s feed-in tariff (FIT) system has been perceived as a role model for other countries looking into the program in order to get renewable energy schemes off the ground. And after the FITs to help produce more RE, the country feels its industry is strong enough to begin the slow, gradual process by decreasing the subsidies.
Gue said that 2009 wind figures did not meet expectations as there were excess supplies with insufficient demand. He detailed Vestas Wind Systems, the world’s largest wind turbine manufacturer, and its missed 2009 revenue goals only securing €6.6 billion as opposed to its projected €7.2 billion. For 2010, Vestas cut its revenue outlook by about €1 billion. And while this isn’t a significant decrease, it should be noted that Vestas is also facing heavy competition from other large-scale manufacturers like Siemens and GE.
In addition, the World Wind Energy Association (WWEA) released its World Wind Energy Report for 2009 that showed a growth rate of 31.7%, the highest rate since 2001. Based on accelerated development and further improved policies, WWEA increases its predictions and sees a global capacity of 1,900,000 MW as possible by the year 2020. However, Gue said that while China added the most wind capacity last year compared to any other country that the Asian country faces a surplus of manufacturing capacity. Yet China isn’t the only country gaining more wind recognition so it isn’t fair to use one company and one country as a projector for the entire industry.
Gue’s perceptions on the solar and wind industry are rather pessimistic, especially when other factors indicate a boom in both. He has recently discussed an economic shift in the green industry similar to that of the classic bubble burst theory. However, the industry is still largely under-exploited. Therefore, the “bubble” hasn’t reached full capacity and still has room to grow long before it bursts.
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