Solar index inches up 0.8% after climate announcement
Forecast for global renewable-energy demand remains strong
The WilderHill New Energy Global Innovation Index of companies in renewable and low-carbon energy barely budged, gaining less than 0.1 percent on Friday. Solar stocks rose slightly, with the Bloomberg Intelligence Global Large Solar Energy Valuation adding as much as 0.8 percent. The research group’s wind index, the Bloomberg Global Wind Energy Valuation Peers, increased by about the same.
European wind energy companies traded down a little. Vestas Wind Systems A/S, the world’s largest wind-turbine manufacturer, fell by as much as 3 percent, one of the bigger swings. The company generates about 40 percent of its sales from the Americas. Gamesa Corp. Tecnologica SA, another turbine maker, slid 1.2 percent. Energias de Portugal SA, the Lisbon-based utility that has said it will channel 70 percent of new investment into the U.S., dropped 0.5 percent.
The muted response is a sign that investors expect demand for clean energy will continue go grow, in the U.S and around the world.
“I don’t think there is going to be an unwillingness for renewables because they leave the Paris accord,” said Vestas Chairman Bert Nordberg by phone. “We have a huge backlog in the U.S., we’re going to build a lot there.”
The reaction extended a similar mood on Thursday afternoon following the news, suggesting that investors have already moved beyond their gut reactions, said Joseph Osha, a San Francisco-based analyst at JMP Securities LLC. Most solar shares declined, with Canadian Solar and JinkoSolar both down more than 5 percent, on the first reports that Trump intended to withdraw the U.S. from the Paris agreement that came out on May 31.
“It was widely expected that he would do something like this so the market has had a lot of time to price it in,” said Deepa Venkateswaran, analyst at Sanford C Berstein Ltd. “But the rest of the world will continue to focus on decarbonization.”
Michael Liebreich, the London-based founder of Bloomberg New Energy Finance, put it another way: the Paris accord is “nothing more than an international framework for discussion and expectation-setting. There’s nothing binding about Paris other than discussions.”
In the U.S., federal tax credits and state-level renewables mandates have been key drivers of wind and solar growth. It’s not clear how Trump’s plan will affect these policies, if at all.
“The U.S. is so hedged around the initiatives at the state level,” Liebreich said in an interview Thursday. “As long as those are not dismantled on an accelerated time frame, nothing appreciably will change.”
Analysts at Kepler Chevreux SA continue to have a positive on Vestas and Gamesa despite the decision on the Paris accord and actually see the decline in shares as an “excellent buying opportunity,” according to analyst Douglas Lindahl.
“More than 190 nations have signed the Paris agreement and the U.S. now joins a very small club of outsiders not part of the accord,” he wrote by email. “In the end, the cheapest/most cost efficient energy alternative will be the natural choice for energy investments which speaks in the favor of the wind industry.”