Steve Gorham
Originally published in Real clean energy.
Headlines promote renewable energy equipment companies as part of efforts to transition to net-zero CO2 emissions by 2050. The share is growing. But market returns for renewable energy equipment companies are poor, so investors should be careful.
The Renewable Energy Industry Index (RENIXX) is a global stock index of the 30 renewable energy industry companies with the largest stock market capitalization in the world. Current RENIXX companies include Enphase Energy, First Solar, Orsted, Plug Power, Tesla and Vestas.
The German IWR established RENIXX on May 1, 2006, with an initial value of 1,000 points. This month, the RENIXX index is at 1,013 points, with value growth over the past 18 years essentially zero. By comparison, the S&P 500 has more than quadrupled over the same period. RENIXX has fallen for three consecutive years starting in 2021, losing about half of its value.
Despite growing sales, wind turbine manufacturers have faced serious financial challenges over the past three years. Rising costs, high interest rates and project delays continue to impact the profitability of wind power projects and equipment suppliers. Shares of Denmark's Vestas Wind Systems, the world's largest supplier, have risen just 7% in the past 16 years, and are down 58% from their 2021 highs. It will be difficult to make profits in 2023, and dividends to shareholders will be suspended.
Other major wind power suppliers are also bad investments for shareholders. Shares in Siemens Gamesa, the second-largest turbine maker, have fallen 65% since their 2021 peak. Other top wind power suppliers have seen their share prices fall significantly since 2021, including China's Goldwind Technology (down 77%) and Germany's Nordex (-36%).
Eighty percent of the world's solar panels are manufactured in China, and the top six suppliers are also located there. The solar panel industry is plagued by overcapacity and fierce competition. Since 2021, the share prices of the top seven suppliers have all fallen by more than 50%.
Tesla was founded in 2003, and until 2018, it remained the only publicly traded pure electric vehicle stock. Mercedes, General Motors, Ford, BMW and Honda combined. But Tesla is an exception.
But for the most part, electric vehicle (EV) companies are terrible investments. Between 2020 and 2024, 31 electric vehicle companies will be listed on U.S. stock exchanges. Of the 31 companies, only Chinese company Li Auto has seen its share price rise since its initial public offering (IPO). Thirty electric vehicle companies saw their share prices fall, the biggest decliners.
Electric vehicle companies whose prices fell from their IPO prices include Fisker (-99%), Nikola (-94%), NIO (-50%), Lucid Group (-75%) and Rivian (-88%). Another six of the 31 companies went bankrupt. Tesla, Chinese company BYD and Li Auto are the only EV companies currently making profits.
ChargePoint is the world's largest dedicated charger company for electric vehicles (second only to electric vehicle manufacturer Tesla), with more than 25,000 charging stations in the United States and Canada. ChargePoint went public in 2021 through a merger with Switchback Energy Acquisition Corporation and was valued at $2.4 billion. The company is currently valued at approximately $585 million, down 76% since 2021.
It's unclear which charging company will make money. A high-speed 50-kilowatt electric vehicle charger costs about five times as much as a traditional gasoline pump. Eighty percent of electric vehicle charging is done at home, reducing the need for public charging. ChargePoint, EVgo, Wallbox, Allego and Blink Charging are currently valued at a fraction of their original IPO prices. Even with continued massive government subsidies, no EV charger company will be able to make a profit.
Plug Power is a leading supplier of hydrogen energy systems, including batteries for hydrogen vehicles and electrolysers that produce green hydrogen fuel. The company was founded in 1997 and went public in October 1999 at a split-adjusted price of approximately $160 per share.
But in its 27-year history, Plug Power has never turned a profit. Financial reports show that the company will lose $1.45 billion in 2024, up from a loss of $43.8 million in 2018.
Traditionally established companies are finding that recycling equipment may not be doing well. In 2023, Ford sold 116,000 electric vehicles and lost $4.7 billion, or more than $40,000 per vehicle. GE's wind turbine business lost $1.1 billion in 2023.
Between 2010 and 2022, the U.S. federal government's annual subsidies to recycling equipment companies range from $7 billion to $16 billion. Increase to approximately US$80 billion in 2022.
Without fears of man-made climate change and increasing levels of government subsidies and mandates, many green companies would not exist. It’s doubtful whether carbon dioxide pipelines, heavy-duty electric trucks, offshore wind systems, green hydrogen fuel equipment and electric vehicle charging stations will become viable businesses in unsubsidized capital markets.
Last year, leading financial firms canceled climate change commitments. Bank of America, JPMorgan Chase, State Street and PIMCO have withdrawn from Climate Action 100+, an initiative aimed at forcing companies and investment funds to address climate issues and adopt environmental, social and governance (ESG) policies. But it's hard to invest in recycling equipment companies when they're losing money.
Steve Goreham is a speaker and best-selling author on energy, environment, and public policy Green Collapse: The coming failure of renewable energy.
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