Green Energy Investment Is Falling, but Don't Panic Yet

Even though the overall amount of money invested in clean energy is falling, there are still markets worth looking at.

Jan 27, 2014 at 9:42AM

According to Bloomberg, global investment in clean energy fell in both 2012 and 2013. The numbers are alarming, but certain industries within the space are still growing. It pays to examine the situation as growth varies greatly by fuel type and continent. Over-reliance on volatile government subsidies has hurt many markets, but there are still successful clean energy companies to invest in.

Clean energy investment (billions of $)

  EMEA AMER ASOC Total Investment 
2011 127 88 103 318
2012 106 71 109 286
2013 68 66 121 254

Bloomberg New Energy Finance

There is a huge difference between Europe, the Middle East, and Africa and the rest of the world. The EMEA region has seen new clean energy investment fall by $59 billion in the past two years, while the rest of the world has seen a net decrease of just $4 billion. The reality is that the Euro area has seen low or no growth over the past couple years, subsidies have been scaled back, and rising energy costs, driven partly by renewables, are pushing the industry to relocate to other regions.

U.S. wind challenges
Europe is not the only region facing challenges. Between 2012 and 2013 the U.S. saw new clean energy investment fall 8.4% in dollar terms. As total investment dollars have fallen, U.S. wind and U.S. solar have parted ways. New U.S. wind capacity fell from 13,077 megawatts (MW) in 2012 to 71 MW in the first three quarters of 2013, while the solar industry installed 2,053 MW in the first three quarters of 2012 and 2,440 in the first three quarters of 2013.

Falling government subsidies, cheap natural gas, and the need for more large transmission lines have put a lid on wind's U.S. growth. These difficulties helped to push Siemens' (NYSE: SI) wind power orders down by 34% between the fourth quarter of 2012 and Q4 2013. The company did recently get an order for a 468 MW U.S.- utility offshore wind farm, but this is more of an experiment to test the economics of offshore U.S. wind.

In addition to challenges in the U.S. wind market, Europe's depression has hurt Siemens and helped push its 2013 revenue 2% below its 2012 revenue. Suffice it to say Siemens has a challenging future ahead.

Solar keeps on growing
In terms of new installations measured in MW, U.S. solar has seen steady growth since 2008. Cost deflation is a big part of this picture. Manufacturers have cut costs to help spur demand, even though it puts some downward pressure on revenue. 

SunPower (NASDAQ:SPWR) is a great example of a company that has grown and thrived in spite of difficulty. Its products have proven so popular that its panels were sold out in Q1 2013. From 2010 to 2012 it managed to increase its revenue from $2.2 billion to $2.4 billion, even though its earnings before interest, taxes, depreciation, and amortization fell from $309 million to $-6 million. In the recent quarter, SunPower has continued to grow its earnings, bringing its EBITDA up to $141 million from -$45 million in Q4 2012.

SunPower's earnings are coming back, and it is slowly expanding capacity. Strong research and development spending, capacity expansion, and support from Total should help SunPower continue to break away from second-tier competitors.  

Over the past three years, First Solar (NASDAQ:FSLR) and Yingli Green Energy (NYSE:YGE) have come out ahead with First Solar in first place. First Solar's strong utility sales have helped it to post a 12.2% profit margin and a 33.2% gross margin. On the R&D front, First Solar is improving. If it really can raise its efficiencies beyond 16% in the next couple of years, then it should be able to maintain a good position in the utility market.

In the 2010 to 2013 period, Yingli grew its modal shipments from 1,062 MW to an estimated 3,200 MW to 3,300 MW. Even though Yingli's gross margin has come back, it posted a net loss of $39 million in Q3 2013. This company is one of the strongest Chinese solar manufactures, but it is still producing losses while First Solar and SunPower are making profits. Until the Chinese government shuts down more excess capacity, it is best to take a wait-and-see approach with Yingli.

Final thoughts
Falling government subsidies and low economic growth have hurt the overall level of clean energy investment. While wind turbine manufactures like Siemens face a very volatile market, the solar market enjoys steadier growth. First Solar's strong utility connections and SunPower's quality products have helped the companies to become profitable even while the overall clean energy industry faces headwinds.

The best way to invest in energy?
Imagine a company that rents a very specific and valuable piece of machinery for $41,000… per hour (that’s almost as much as the average American makes in a year!). And Warren Buffett is so confident in this company’s can’t-live-without-it business model, he just loaded up on 8.8 million shares. An exclusive, brand-new Motley Fool report reveals the company we’re calling OPEC’s Worst Nightmare. Just click HERE to uncover the name of this industry-leading stock… and join Buffett in his quest for a veritable LANDSLIDE of profits!

Joshua Bondy has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers