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Why Alternative Energy Stocks Are Flaming Out

By Rich Smith - Mar 18, 2020 at 2:49PM

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Oil is getting cheaper. That's not great news for energy alternatives.

What happened

Clean Energy Fuels (CLNE -1.80%)First Solar (FSLR -1.05%)Plug Power (PLUG -0.72%)Ballard Power (BLDP -2.29%), and Vivint Solar (VSLR).

Together, these five stocks make up a good chunk of the green economy, pioneering the use of clean natural gas, solar power, and novel fuel cell technologies that promise to unshackle the world from its dependence on oil, make distributed generation of power more feasible, and help put an end to global warming.

That is, they might do all of these things if their stocks don't all plummet to zero -- which kind of feels like the direction they're heading on a day like today. As of 2:20 p.m. EDT, shares of First Solar are down 10.8%, Ballard Power 12%, Plug Power 16.2%, Clean Energy 16.7%, and Vivint Solar a staggering 18.8%.

Big red arrow over a stock chart

Image source: Getty Images.

So what

Why is this happening? Well, coronavirus, obviously. That's kind of been the theme of this entire market rout over the past few weeks.

Today, Johns Hopkins University reports there are more than 211,000 confirmed cases of COVID-19 stretching across 157 countries worldwide, and 8,700 deaths have been reported.  

Yet coronavirus is not the end of this story. As the pandemics applies brakes to the global economy, demand for oil is plummeting -- and oil prices along with it. Just today for example, the price of a barrel of West Texas Intermediate crude plummeted 23% to less than $21 a barrel, and the international benchmark Brent Crude oil isn't much more -- down 12.5% to $26 and change.  

Now what

Here's why this is significant: Alternative energy sources -- and stocks like First Solar and Vivint Solar, like Plug, Ballard, and even Clean Energy Fuels -- are "alternative" because they're alternatives to oil.

Granted, there's always a "green" angle to these things, but "green" has always felt a bit touchy-feely on Wall Street. More important is how green energy compares to black gold in terms of dollars and cents. And from that perspective, the cheaper oil gets, the less attractive alternatives to it become.

Long story short: Coronavirus plays a part in this story, sure. But oil prices are the real plot line to follow. Until oil prices recover, don't expect alternative stocks to do well.

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Stocks Mentioned

First Solar, Inc. Stock Quote
First Solar, Inc.
FSLR
$65.77 (-1.05%) $0.70
Clean Energy Fuels Corp. Stock Quote
Clean Energy Fuels Corp.
CLNE
$4.90 (-1.80%) $0.09
Plug Power Inc. Stock Quote
Plug Power Inc.
PLUG
$16.45 (-0.72%) $0.12
Ballard Power Systems Inc. Stock Quote
Ballard Power Systems Inc.
BLDP
$7.24 (-2.29%) $0.17
Vivint Solar, Inc. Stock Quote
Vivint Solar, Inc.
VSLR

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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