Sentiment over green investment blows hot and cold

Renewable energies made a cameo appearance in the debate about the possible secession of Scotland from Britain as John Swinney, the finance minister for Scotland, tried to convince Russian companies to buy stakes in clean energy projects in the country.

In America, support for clean energy is much less widespread than in Europe, and the tide could turn against the industry if a Republican candidate beats Barack Obama in November’s election. For instance, Mitt Rooney, the leading Republican contestant, has described renewables as an uncompetitive sector that only benefits “companies reaping profits from taxpayer subsidies.”

And all around the world, fossil fuel producers have been pushing the point that oil, coal and gas provide cheaper choices to help businesses to create much needed jobs in hard times. “It is hard to have any certainty on where the industry will go from a policy perspective,” Pidden points out.

The changing fortunes of some companies in the sector have been well documented. In January, Vestas, a Danish producer of wind turbines, announced it was going to dismiss more than 2,300 employees in an effort to cut costs and reverse the deterioration of earnings it saw in 2011.

Two German solar energy companies, Solon and Sollar Millennium, were declared bankrupt last December, only a few months after Solyndra, a California firm that had been cherry-picked by president Barack Obama as a leader for the green economy, had done the same.

According to a keenly watched index (see bar chart), clean energy stocks fell by 38% in 2011, and more than 70% since they peaked in November 2007.

But Pidden says that the situation is getting better as the rate of growth in renewable energy infrastructure has abated a little. That means that the gap between the increase of production and consumption could narrow. Rates should then stop falling, which would improve the prospects of the industry.

In fact, the sector started the year in recovery mode, with stocks going up by almost 8% until January 18. “We have seen something of a bounce already this year in equity prices of renewable energy companies,” Pidden says. “But there is an enormous amount of value that can still be found in the sector.”

Even though the developed world may restrain their enthusiasm for clean energy in the short term, emerging economies, such as China and Brazil, continue to invest heavily in renewable sources as they strive to meet their enormous energy demands. The challenge for windy Scotland is to convince investors that they are also on the right track for sustainable and affordable green energy sources.