Renewable Energy Industry is going through some of the toughest times yet with profits and share prices of Green Companies crashing. 2011 was a horrendous year with the biggest solar company by value First Solar being the worst performer in S&P 500. Many of the biggest wind and solar companies were mired in red ink as competition and oversupply from China led to green indicies falling by more than 50% . Many of the biggest companies collapsed and many others are on lifeline.
2011 also saw the top executives of companies leaving the companies as stock options became worthless and bonuses disappeared. With another tough year expected in 2012 many of the C level executives left to search for greener pastures. In some companies like Q-Cells, First Solar replacements have not been found as companies faile to lure good hires as they lack both monetary firepower and good short term growth. Chinese companies too have not gone unscathed with some like A-Power crashing under accounting problems. The Green Industry without good leaders will face a harder time in seeing over this decline.
Solar and Wind Stocks have been massacred in 2011 mainly due to the following reasons
1) Chinese oversupply which is outcome of its massive industrial overcapacity and investment. This has decimated wind and solar companies in the West while also leading to margins and profits collapsing
China’s rise in solar manufacturing has been nothing short of spectacular.From less than 5% of world marketshare it has gone to more than 50% in the current quarter.Some of its companies like Trina and Yingli are the lowest cost producers of solar modules in the world today.The Europeans like Solarworld and Q-Cells which were dominant until 2 years ago have been swept aside with Q-Cells bleeding red ink . Even in wind energy , China’s growth over the last 2-3 years has been awesome with more than 100% CAGR . It has helped in growing wind turbine manufacturers through domestic content requirements.Now that these companies have sufficient technology and are able to leverage their low cost advantages , China has removed the restrictions in Jan 2010 to attack other markets. Vestas the leading European turbine manufacturer like the solar makers has fallen into the red. The only way for these companies to survive is to move their manufacturing to Asia . Ultimately the technology will also follow ( Applied Materials has also move its R&D to Shanghai). Just like the semi and electronics industry,Europe will start looking like a marginal player in the global alternative energy industry. Despite strong domestic demand and policy support , the European industry has been outsmarted and outplayed by the Chinese
2) Commoditazation of Technology and Erosion of Entry Barriers
3) Massive and Irrational Subsidies by Asian countries to support Green Industry
Renewable energy companies are losing their allure with top executives after profits and stock prices collapsed across the industry, making it more difficult for boards to replace underperforming managers.
First Solar Inc., the biggest U.S. solar company, ousted its chief executive officer in October and is still seeking a replacement. At Vestas Wind Systems A/S, the largest turbine maker, the chairman and finance director are leaving after the company cut sales forecasts twice in three months, and CEO Ditlev Engel said his own job is safe.Q-Cells SE Chief Financial Officer Marion Helmes resigned in November, leaving her duties to Nedim Cen, the CEO, who has concentrated on refinancing the solar company’s debt instead of replacing her. Conergy AG, a German solar company negotiating with creditors, last month named Chairman Philip Comberg to serve as CEO until the end of this year, filling a post open for 15 months.