Just as alternative energy enterprises were beginning to take off and the world is demanding a switch from fossil fuels, along comes cheap oil, swamping many operations’ chances at remaining profitable.
A solar energy company star from Spain with operations in the US capable of producing enough power to supply thousands of American homes, was lauded by President Barack Obama in 2010. “It’s good news that we’ve attracted a company to our shores to build a plant and create jobs right here in America,” he said.
The company, Abengoa, built two plants in Arizona and California, and supplies electricity to more than 160,000 homes. It’s a world leader in solar thermal technology.
Now it could become the biggest corporate bankruptcy in Spain’s history, reports the New York Times, a testament to the difficulties of alternative energy companies remaining viable, particularly in the face of plummeting oil prices and vanishing government incentives.
And it’s hardly the only renewable energy operation struggling, notes The Times. The UK’s SSE is rethinking its wind farm operations, and Solar City and other similar US companies pulled out of Nevada when the state cut its support for rooftop solar systems.
A report two years ago predicted that electric cars would likely be hit the most by cheaper oil, because they’re directly competitive with gas prices. Less effected, the report predicted, would be wind and solar power companies. But it turned out that cheap oil has a wider psychological effect in stalling consumers’ drive toward alternative energy — or in valuing stocks in renewable energy companies, say experts.
So while news isn’t good for oil producers as prices per barrel plunge along with company stock, stocks for many renewable energy companies have also taken a major hit. That might be an opportunity for a stock bargain, say some investment analysts, but “given what’s going on with energy prices, I think you have to look a decade out,” Larry Berman, chief investment officer and co-founder of ETF Capital Management in Toronto, warned early this year. “We’re going to continue to need renewable energy and that’s not going to change because oil is cheaper.”