FT: Cheap Oil Burns Green Energy

  • Date: 18/12/14
  • Pilita Clark, Financial Times

Tumbling oil prices have long been seen as kryptonite for clean energy companies — and share prices of some of the world’s best known renewable power groups have slumped in the wake of the latest slide in crude.

epa03927166 A fire truck goes past a burning wind turbine in the Boerdekreis region near Magdeburg, Germany, 27 October 2013. The cause of the fire is still unclear. EPA/STR©EPA

Shares in Denmark’s Vestas, the world’s largest wind turbine supplier, dived after the oil producers’ cartel Opec decided not to cut production in late November and prices are still down 11 per cent, noticeably below the broader market.

The Chinese solar panel giant, Yingli Green Energy, and Tesla Motors, the US electric carmaker, have suffered even sharper share price falls. Crude’s surprise rise of $3 a barrel to $63.40 on Wednesday did little to halt the decline

Even before Opec’s move, lower oil prices appeared to be hitting hybrid cars in the US, where sales were down 11 per cent in November compared with the same month last year. Sales of some models of fuel-hungry sports utility vehicles, meanwhile, were as much as 91 per cent higher last month than a year ago.

That trend may not be so pronounced in other industrialised countries where taxes make up a bigger component of pump prices than they do in the US. And some analysts say the market has overreacted when it comes to wind and solar companies.

However, there is still a large question about how a prolonged period of low crude prices might affect global investment in clean energy, which has climbed from $60bn in 2004 to about $251bn last year.

A large chunk of that investment has been powered by the growth of renewable energy subsidies and analysts say a sustained bout of cheap oil dents the arguments many governments make that consumers are better off funding renewables because fossil fuel prices are likely to rise while wind and solar prices fall.

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