The rally in solar shares after Japan’s atomic accident may fizzle because the crisis won’t quickly boost demand for renewable power, investors including First Empire Asset Management’s Michael Obuchowski said.
“The hysteria that helped run up solar stocks was not warranted by the damage in Japan,” Obuchowski, chief investment officer of the Hauppauge, New York-based firm that owns shares in First Solar Inc. (FSLR), said in an interview. “Down the road it may lead to policy changes and the restoration of incentives, but I don’t see that happening yet.”
The Bloomberg Global Leaders Solar Index fell 1.6 percent today, having risen as much as 10 percent since March 11, when an earthquake and tsunami in Japan knocked out cooling systems at a Tokyo Electric Power Co. reactor, releasing radioactive pollution. While the incident triggered speculation governments will scale back nuclear power in favor of renewable, solar panel demand is stagnating.
Installations worldwide will climb 2.7 percent to 18.9 gigawatts this year after more than doubling last year, Bloomberg New Energy Finance estimates. Government decisions needed to push up demand faster aren’t likely to be made this year, said Tucker Twitmyer, who helps manage $400 million in clean energy investments at EnerTech Capital Partners.
‘Dependent on government’
“Solar is still so dependent on government incentives I don’t think we’ll see any real boost to sales in the short term,” Twitmyer said from the fund’s base in Conshohocken, Pennsylvania. “The real winners will be natural gas and energy efficiency.”
Tempe, Arizona-based First Solar, the world’s biggest supplier of thin-film panels, climbed 10 percent since the accident through yesterday and China’s Trina Solar Ltd. (TSL) rose 20 percent. First Solar was down 2 percent to $150.98 as of 12:37 p.m. and Trina sank 3.6 percent to $26.88. The Bloomberg solar index dropped 1.7 percent to 112.66 points.
Germany has idled seven reactors and said it would review plans to extend the life of other plants. Britain, Spain, China and India also are considering the lessons they can learn from the accident, which may delay efforts to expand nuclear power there.
Setback for nuclear
While that’s a setback for nuclear energy, it will take longer for a shift toward renewable power supplies because the cost of wind and solar remains too high to compete without subsidies, John Rowe, chief executive officer of Exelon Corp. (EXC), said in an interview at Bloomberg’s headquarters in New York.
“What’s happening in Japan will definitely increase demand for solar and wind,” said Rowe, whose Chicago-based company is the biggest U.S. operator of nuclear plants. “Right now, though, the prices are too high to compete with natural gas, which is the real queen here.”
Germany, France, Spain and Britain are curbing incentives for solar energy, and legislation that would have mandated more renewable energy use stalled in the U.S. last year.
New natural gas turbines can produce power for about $60 a megawatt-hour, which is 28 percent cheaper than new wind power and 75 percent less than solar photovoltaic panels, New Energy Finance estimates.
Gas-fired generation is the likeliest beneficiary in the U.S. from the crisis in Japan, said Angus McCrone, chief editor at New Energy Finance in London. China will shift its focus for the 2020s further into efficiency, wind and coal with carbon capture and storage, the technology that traps and buries coal- burning emissions, he said.
‘Seismic risk’
“The U.S. and China are likely to persevere with current reactor building plans, but long-term nuclear expansion in both countries will be scaled back and subject to higher seismic risk hurdles,” McCrone said.
The Obama administration plans to expand a loan guarantee program for nuclear plants to $36 billion, from an existing $18.5 billion, U.S. Energy Secretary Steven Chu said in a congressional hearing on March 16.
“It shouldn’t make any noticeable difference to short term PV demand,” said Jenny Chase, solar analyst at New Energy Finance. In the longer term, “consumers will find solar levies a sweeter pill to swallow if they think the alternative is more nuclear power.”
