Market Fall Masks Renewable Energy’s Bright Future
The recent stock market plunge has dragged oil prices with it, as the price of a barrel of light crude in the US fell below $40. Stocks in clean-energy companies are also getting hammered: the MAC Solar Index, which tracks solar energy companies, has fallen more than 31 percent in the last three months.
Prominent solar providers First Solar, SunEdison, and SolarCity have all taken a market beating over that period, as have wind power suppliers and installers. Traditionally, the price of oil has been inversely related with the fortunes of renewable energy: the cheaper oil gets, the less competitive renewables, which have historically been more expensive on a per-megawatt basis, become. That continues to be true in the transportation sector: sales of electric vehicles have faltered in the U.S. this year as gas prices have fallen. In the broader energy sector, however, it’s a more tenuous, even false, connection.
“Ever since the oil prices began to decline in the middle of last year, investors have wrongly drawn negative correlation between the fall in oil prices and solar,” Mercom Capital CEO Raj Prabhu told PV magazine last week. “There is no real connection here.” That’s true mainly for three reasons: one, unlike solar and wind energy, oil is hardly used to generate electricity in developed economies anymore; two, in many markets, the price of producing power from renewable sources has fallen along with oil prices; and three, the fundamentals of the renewable energy business have never been stronger, regardless of stock market swings.
As the global coal industry declines, and as natural gas prices remain near historic lows, the conventional wisdom holds that utilities will switch to producing electricity from natural gas, rather than solar or wind. That, however, is not the case: according to the Solar Energy Industries Association, solar power accounted for more new generation capacity additions than any other resource in the first quarter of 2015, representing more than half the total of new installations in the U.S. Even as the markets’ fall gathered force last week, the Wall Street Journal reported on the solar power boom unfolding in West Texas, in the heart of the oil patch.