Wind Energy in US hits an Air Pocket in 2010 due to Low Gas Prices and Federal apathy

28 May, 2010
Gas,GE,Renewable Energy,Siemens,Suzlon,USA,Vestas

Wind TurbineWind Energy in 2010 has ground to a halt in the US after a record 10,000 MW were installed in 2009.The ARRA grants in 2009 which gave a 30% cash grant for wind farm development plus the 2008 pushed out orders led to a path breaking 2009 for Wind Energy in the US .Almost 30% of the total installed capacity in the US was constructed in 2009 alone.Wind Energy accounts for roughly 39 GW of electricity capacity in the US or roughly 4% . The major reason for the slowdown has been Gas prices which were ruling at $8/BTU at the peak have crashed down to $4.2/BTU making Gas based Power much cheaper .Wind Energy is one of the  cheapest forms of Renewable Energy at around 8-10c/KwH.However , it has been tough for Wind Farm developers to sign Power Purchase Agreements (PPAs) with utilities given that electricity demand has contracted in the US . Wind Energy has hit a perfect Storm driven by a confluence of negative factors.Total Wind Energy Capacity declined by a whopping 80% y/y in first quarter of 2010 compared to the first quarter of 2009.The factors contributing to this decline are

  1. Decline in Electricity Demand in the US for the first time  in 50 years due the Economic Crisis
  2. 25% Decline in Gas Prices making Gas based power generation cheaper in comparison to Wind power
  3. Lack of a National Renewable Energy Standard (RES) which mandates a certain percentage of electricity generation done through Cleaner Energy at the federal level

US losing the Clean Energy Race to China

US lags far behind in Wind Energy equipment production with only General Electric(GE) being the only US manufacture in the top 10 rankings.A  slowdown in the home market will make it even tougher for US companies to compete with Chinese suppliers which are looking to expand outside.The Government has been tardy about passing a Climate Bill which would give a boost to Renewable Energy.China on the other hand is  looking to dominate Wind Energy just like it is currently dominating Solar Energy.

US Turbine Producers face a Bleak 2010

The US Wind Energy Turbine Manufacturers have been pushing for a RES at the federal level as wind farms require long term financing which in turn requires policy stability.With 30% Cash Grants expiring this year and no Federal Push on the Energy and Climate issues , its tough for Wind Farm developers to get financing.Suzlon,  Gamesa, Vestas and GE which have large US factories will have to run theirFactories at low utilization levels waiting for a friendly Green policy.

Top Five Green Investments for the Risk Averse Investor

16 May, 2010
GE,Green Investing,Renewable Energy,Samsung,Siemens

Investing in Green stocks  is fraught with a lot of risk due to the following factors

  • The demand and supply can fluctuate a lot as the industry is new and largely dependent on government subsidies
  • Technological innovations can make the business models off companies redundant
  • Unlike Dotcoms,green investments are capital intensive which makes it difficult for start-up to scale up in this space

However the Green Industry is going to be one of the Biggest Industries in the next decade and investors need  take advantage from this coming trend.One way of doing it would be to invest in Mega Cap Conglomerates which have/will have Large Investments  in the Green Sector.Though returns are not going to be out sized due to the large size of these companies and slow overall growth rates ,the attendant risk is also much less.The Top Five companies which provide a safe way to invest in Green Technology are

  1. Siemens -This company has major investments across the whole green spectrum from renewable energy (Wind , CSP ), Smart Grid ,Energy Efficiency,Lighting and Energy Storage.Some people in fact think that Siemens is the Best Green Investment
  2. General Electric - Like Siemens it has one of the broadest signatures in the Green Area.GE is already  a top 5 players in the Global Wind Market,has investments in the Energy Storage , strong presence in Lighting,Energy Efficiency and Smart Grid but is way behind in Solar Energy
  3. Corning - This Glass Giant generates  diverse revenue streams from Green Business.It is making Glass which goes into the solar modules while its Life Sciences Business makes products which reduce pollution from Diesel Vehicles and Coal Plants.
  4. Dow Chemicals – This material giant is making strong investments in the solar space like “Solar Shingles” .With its immense materials expertise , it is gaining strong traction from the makers of modules as it provides encapsulates and other materials which increase the efficiency of modules.It also holds a big stake in Hemlock which is the largest producer of polysilicon in the world(Main Raw Material for crystalline solar modules)
  5. Samsung - This South Korean Giant has made its intentions clear with  huge investments planned into the Green Industry.Though its current green businesses are small,it has the Technology and the Balance Sheet strength to be the biggest player in this space.
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