Why Are ‘Renewable’ Equipment Companies Such Poor Investments?

Written by Steve Goreham on October 4, 2024. Posted in Current News

Headlines promote ‘renewable’ energy equipment companies as part of efforts to transition to ‘Net Zero’ carbon dioxide emissions by 2050

Wind and solar system providers, electric vehicle manufacturers, ‘green’ hydrogen producers, and other ‘green’ equipment firms form a growing share of world industry.

But ‘renewable’ equipment firms suffer poor market returns, so investors should beware.

The Renewable Energy Industrial Index (RENIXX) is a global stock index of the 30 largest ‘renewable’ energy industrial companies in the world by stock market capitalization.

Current RENIXX companies include Enphase Energy, First Solar, Orsted, Plug Power, Tesla, and Vestas.

IWR of Germany established the RENIXX on May 1, 2006, with an initial value of 1,000 points. This month, the RENIXX stood at 1,013 points, essentially zero value growth over the last 18 years.

In comparison, the S&P 500 Index more than quadrupled over the same period. The RENIXX is down three years in a row from 2021, losing about half its value.

Wind turbine manufacturers faced serious financial challenges over the last three years, even with rising sales. Rising costs, high interest rates, and project delays continue to impact the profitability of wind projects and equipment suppliers.

The stock of Denmark-based Vestas Wind Systems, the world’s largest supplier, rose only seven percent over the last 16 years, and its stock price has fallen 58 percent from a high in 2021. Vestas struggled to make a profit in 2022 and 2023 and suspended dividends to shareholders.

Other major wind suppliers have also been poor investments for shareholders. The stock of Siemens Gamesa, the number two turbine maker, is down 65 percent since a peak in 2021.

Gamesa reported a loss of €4.4 billion in 2023 and received a €7.5 billion bailout from the German government that same year. Other top wind suppliers suffered major stock price declines since 2021, including Goldwind of China (down 77 percent) and Nordex of Germany (down 36 percent).

Some 80 percent of the world’s solar panels are manufactured in China and the top six suppliers reside in China. The solar panel industry is beset by overcapacity and severe competition.

Stock prices of the top seven suppliers have all declined by more than 50 percent since 2021. The stock of U.S. firm First Solar has risen since 2021 but remains below its all-time high price reached in 2008.

Tesla, which was founded in 2003, remained the only pure-play, publicly traded EV stock until 2018. By the end of 2021, Tesla’s value had soared to over $1 Trillion, boasting a market value more than Toyota, Volkswagen, Mercedes-Benz, General Motors, Ford, BMW, and Honda combined.

But Tesla is the exception.

But in most cases, electric vehicle (EV) companies have been very poor investments. Between 2020 and 2024, 31 EV companies went public on U.S. stock exchanges. Only one of these 31 companies, the Chinese firm Li Auto, saw its price rise since the initial public offering (IPO).

Thirty EV firms saw their stock prices fall, most precipitously.

EV company price declines from the IPO price include Fisker (-99 percent), Nikola (-94 percent), NIO (-50 perent), Lucid Group (-75 percent), and Rivian (-88 percent). Six others of the 31 companies went bankrupt. Tesla and Chinese firms BYD and Li Auto are the only EV firms profitable today.

ChargePoint is the world’s largest dedicated EV charger company (behind EV manufacturer Tesla), with over 25,000 charging stations in the U.S. and Canada. ChargePoint went public in 2021 by merging with Switchback Energy Acquisition Corporation, valued at $2.4 billion.

The firm’s value today is about $585 million, down 76 percent since 2021.

For fiscal year 2024, ChargePoint lost $458 million on revenue of $507 million.

It’s not clear that any charging company can make money. High-speed, 50-kilowatt EV chargers cost about five times as much as traditional gasoline pumps.

Around 80 percent of EV charging is done at home, reducing the demand for public charging. ChargePoint, EVgo, Wallbox, Allego, and Blink Charging are all valued today at small fractions of their original IPO price.

No EV charger firm is profitable, even after continuing to receive large government subsidies.

Plug Power is a leading supplier of hydrogen energy systems, including battery-cells for hydrogen vehicles and electrolyzers to produce ‘green’ hydrogen fuel. Founded in 1997, the company went public in October 1999 at a split-adjusted price of about $160 per share.

But during its 27-year history, Plug Power has never turned a profit. According to financial reports, the firm lost $1.45 billion in 2024, up from a loss of $43.8 million in 2018. Its current stock price is under two dollars per share.

Traditional established firms are finding that ‘renewable’ equipment can be poor business.

In 2023, Ford lost $4.7 billion on sales of 116,000 electric vehicles, or over $40,000 per vehicle.

General Electric’s wind turbine business lost $1.1 billion in 2023.

The U.S. federal government provided subsidies to ‘renewable’ equipment companies of between $7 billion and $16 billion per year between 2010 and 2022. But the Cato Institute estimates that because of the passage of the Inflation Reduction Act in 2022, subsidies will skyrocket to about $80 billion in fiscal year 2025.

Without the fear of human-caused ‘climate change’ and a rising level of government subsidies and mandates, many of these ‘green’ companies would not exist.

It’s doubtful that carbon dioxide pipelines, heavy electric trucks, offshore wind systems, ‘green’ hydrogen fuel equipment, and EV charging stations would be viable businesses in unsubsidized capital markets.

During this last year, leading financial firms pulled back on their climate pledges.

Bank of America, JP Morgan, State Street, and Pimco withdrew from Climate Action 100+, which seeks to force companies and investment funds to address ‘climate issues’ and adopt environmental, social, and governance (ESG) policies.

But it’s difficult to invest in ‘renewable’ equipment companies when they are losing money.

See more here realclearenergy.org

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