Clean-tech stocks fi­nally have enough muscle to buck a down­turn.

Sci­ence be­ing em­braced by util­i­ties, firms

National Post (National Edition) - - FINANCIAL POST - BRIAN ECKHOUSE

Even as the pan­demic con­tin­ues to drive down con­sumer spend­ing and de­press oil prices, in­vestors are spend­ing big on clean-tech com­pa­nies. Shares are now at or near record highs, the lat­est sign that wind and so­lar are no longer fringe bets.

Elec­tric-car­maker Tesla Inc. has grabbed much of the attention with a 251 per cent jump this year. But the stock surge is hit­ting across clean tech, from so­lar in­stall­ers to fuel-cell providers to wind com­pa­nies. Vivint So­lar Inc. has tripled and Sun­run Inc. nearly tripled, while Sun­nova Energy Internatio­nal Inc. and En­phase Energy Inc. have dou­bled. The WilderHill New Energy Global In­no­va­tion In­dex of 87 com­pa­nies has soared 31 per cent this year, eclips­ing the Nas­daq’s 22 per cent gain — and hit­ting highs last seen 12 years ago.

It’s a re­mark­able swing from the last big eco­nomic slump, in 2008, when in­vestors fled a re­new­ables in­dus­try that was then al­most com­pletely re­liant on gov­ern­ment sub­si­dies — and viewed by many as sci­ence ex­per­i­ments. Now, so­lar and wind are cheap and es­tab­lished and de­sired by util­i­ties and cor­po­ra­tions alike. Tril­lions of pub­lic and pri­vate dol­lars are ex­pected to be poured into clean-energy projects over the next decade. And while some green sec­tors are still bur­dened with an up-and-down his­tory, even energy in­vestors burned by the oil rout are look­ing at clean tech. Gas and oil stocks are down some 40 per cent this year.

“I’ve never had more phone call re­quests from peo­ple who want to get ed­u­cated,” said Jef­frey Os­borne, an an­a­lyst at Cowen & Co. who’s cov­ered clean energy for 15 years.

The roots of the green rally go back to late last year. Rooftop so­lar was look­ing hot, thanks to an im­mi­nent Cal­i­for­nia rule re­quir­ing most new homes to be pow­ered by the sun. Share­hold­ers and en­vi­ron­men­tal ac­tivists, mean­while, were in­creas­ingly pres­sur­ing in­vestors to search for do-good com­pa­nies, those that score high in mea­sures rat­ing their en­vi­ron­men­tal, so­cial and gov­er­nance poli­cies, or ESG. In Jan­uary, Black­Rock Inc., the world’s largest as­set man­ager, pledged to fo­cus more on cli­mate change.

Then the coro­n­avirus hit, oil prices col­lapsed and stocks fell across the board. Yet un­like a decade ago, re­new­ables shares bounced back in an al­most V-shaped re­cov­ery after it be­came clear that de­mand for wind and so­lar wasn’t fun­da­men­tally weak­ened by the pan­demic. The in­dus­try’s re­silience in the face of the na­tional shut­down was “pretty ex­tra­or­di­nary,” said Jef­frey Eckel, chief ex­ec­u­tive of­fi­cer of Han­non Arm­strong Sus­tain­able In­fra­struc­ture Cap­i­tal Inc., which in­vests in cli­mate change so­lu­tions.

In­vestors have also been en­ticed by the po­ten­tial of mas­sive gov­ern­ment spend­ing and tax breaks for green projects to stim­u­late the econ­omy. After Joe Bi­den, the pre­sump­tive Demo­cratic nom­i­nee for pres­i­dent, un­veiled a stag­ger­ing four-year, US$2 tril­lion cli­mate-change pro­posal last month, in­ter­est in clean energy “kind of ex­ploded in the first 48 hours,” said Os­borne. “The plan lit­er­ally had al­most everything un­der the sun,” he added. A week later, lead­ers in Europe passed a re­cov­ery pack­age that in­cluded more than US$550 bil­lion for green projects.

The U.S. last year con­sumed more energy from re­new­able sources than from coal — the first time that’s been the case since the late 1800s. More than 51,000 megawatts of new wind and so­lar power in the coun­try are likely to be added by April 2023, out­pac­ing nat­u­ral gas, oil and coal-fired gen­er­a­tion, according to an es­ti­mate by the U.S. Fed­eral Energy Reg­u­la­tory Com­mis­sion. So­lar and on­shore wind power are now the cheap­est new sources of elec­tric­ity for at least two-thirds of the world’s pop­u­la­tion. And that comes with­out gov­ern­ment sub­si­dies in parts of Europe while in­cen­tives are de­clin­ing in the U.S.

Gold­man Sachs Group Inc. projects that spend­ing on re­new­able power will over­take that of oil and gas drilling next year for the first time. The in­vest­ment bank sees as much as US$16 tril­lion of clean-energy op­por­tu­ni­ties through 2030. Among the rea­sons: Bor­row­ing rates have risen to as high as 20 per cent for hy­dro­car­bon projects com­pared with as lit­tle as 3 per cent for clean energy.

Re­new­ables are “a le­git­i­mate energy play that’s rid­ing on the back of pos­i­tive eco­nom­ics,” said Michael We­in­stein, an an­a­lyst at Credit Suisse Group AG.

The in­dus­try, of course, hasn’t to­tally shed its boomand-bust rep­u­ta­tion. Some in­vestors are still lick­ing their wounds from col­lapses as re­cent as 2016, some brought about by overly ag­gres­sive growth and fi­nan­cial prob­lems. “Peo­ple are still fear­ful of prof­it­less pros­per­ity,” Os­borne said. And now, after Bi­den’s am­bi­tious plan has been di­gested, “a dose of re­al­ism” has set in.

Even to­day, “the word ‘so­lar’ sets alarm bells off for a lot of peo­ple,” said Till Bech­tol­sheimer, co-founder of New York-based Arosa Cap­i­tal Man­age­ment LP. “It’s not un­til you spend time in the space that you start to un­der­stand that it’s not in dan­ger of go­ing away.”

Arosa Cap­i­tal started in 2013 fo­cused on oil and gas plays, but has been investing in clean energy each year since 2017. Its hold­ings now in­clude oil gi­ants such as Cono­coPhillips as well as cli­mate in­vestor Han­non Arm­strong. Another hold­ing is Sun­run, Amer­ica’s largest res­i­den­tial-so­lar com­pany. Its stock surge this year was hy­per-charged after it agreed to buy ri­val Vivint.

Sun­run has had dozens of con­ver­sa­tions this year with peo­ple look­ing to learn more about re­new­ables, according to Patrick Jobin, se­nior vice pres­i­dent of fi­nance and in­vestor re­la­tions.

“The larger the sec­tor becomes,” he said, “the more in­vestors have to look at us.”


The WilderHill New Energy Global In­no­va­tion In­dex of 87 com­pa­nies has soared 31 per cent this year, eclips­ing the Nas­daq’s 22 per cent gain — and hit­ting highs last seen 12 years ago.

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