Environment & the World

Monday, February 19, 2007

Solar Boom?

Filed under: Economics, Energy, Oil — amirj @ 2:47 pm

Did you know that we’re in the middle of a solar economic boom of sorts? Even though this is a story that ought to interest and tickle environmentalists, it seems that the environmental community hasn’t accorded the topic nearly as much attention as the business community has. Indeed, this has been a business story with a heavy financial market angle, but is that all it should be?

So, what’s been happening? In the last two years numerous solar companies have begun to trade publicly on Wall Street, with a burst of solar initial public offerings in the past three months alone. If their growing market presence is notable, though, their market performance is even more so. Many of these solar companies’ stocks have soared. A look at a comparative chart of some of these stocks shows that their value has jumped up anywhere from 20% to 100% in the last three months alone. To get an idea of how impressive that is, compare those percentage gains to the single-digit interest rate that you earn in your savings account and then imagine what would have happened to your money had it been invested in those solar stocks. Furthermore, a look at the three major U.S. market index stocks (the Dow, Nasdaq, and S&P500) shows overall market gains of 2% – 4% over that same three month period, indicating that the solar stocks have truly been on fire.

Of course, this solar story is not without blemishes. There are some companies involved in the solar industry whose stocks have not done that well in the same period. A look at this chart reveals three such examples. Nevertheless, the number of solar stocks surging seems to outnumber the number of sluggish ones thus suggesting that a boom might be more of the rule and the sideways action or decline more of an exception. The other impressive angle to this story is that this recent boom took place when oil prices have been trading at relatively low prices compared to the summer highs near 80$/barrel. My impression has been that market leaders tend to favor alternative energy stocks when the price of oil spikes and brush it aside when the price of oil slides down to more tolerable levels–though that shortsighted trend might be decoupling.

What all this makes me wonder, then, is what should this story mean to the environmental community? To the environmental movement? The environmental community has focused on the dangers of climate change and with regard to energy, the need for governments to pass stronger pollution regulations and do much more to support alternative energy initiatives. The environmental community has, at times, also been willing to give pats on the back to corporations that show some kind of leadership in improving their energy efficiency and in supporting alternative energy. What the environmental community seems to shy away from is blatant attention to and support for the private sector companies that have made it their business to develop and sell the technologies that environmentalists want to see adopted on a larger scale.

It’s tough to pin-point the exact reason why the environmental community keeps its distance from the business sector. There are probably many reasons, some deeply ideological and value-based, others more plain. The thought of environmental non-profits cozying up to for-profit businesses seems like an unnatural fit, and perhaps might even be limited by tax laws(?). The lack of attention to industry trends might also have to do with the fact that environmentalists might feel let down by a corporate-dominated landscape which built a U.S. economy so heavily reliant on fossil fuels and so averse to environmental protection.

Times have changed, though. Green is more chic than it used to be and companies have started to discover that “going green” can pay off. To bring us back full circle, my question, then, is now that the  market seems to be sending us the right signals about solar power, what can we do to make sure that the market won’t let us down again? 

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