Solar Stocks Affected by BP Oil Spill

July 16 (Bloomberg) -- SunPower Corp. and Vestas Wind Systems A/S, the biggest solar-panel supplier in the U.S. and the world’s largest wind turbine maker, are losing more than Big Oil from BP Plc’s spill in the Gulf of Mexico.
Their shares have fallen as much as 22 percent since the leak began April 20, compared with a 12 percent decline in the 52-member Bloomberg World Oil & Gas Index that includes BP.
A bill in U.S. Congress to expand alternative energy in the biggest oil-consuming nation was set aside by legislators until they can review offshore-drilling safety. Investors in turn sold wind and solar stocks as support waned for the bill and as Europe considered cuts to clean-energy subsidies, said John Hardy, an analyst at Gleacher & Co. in Greenwich, Connecticut.
“There’s a lot of rhetoric out there on the possibility that the spill could help renewable energy,” Hardy said in an interview. “I see it delaying clean-energy legislation until the Senate’s ready to deal with offshore drilling.”
Before the spill, the legislation’s authors included an expansion to offshore oil exploration to win the Republican votes needed to pass a law that caps the greenhouse gases. Such limits would have helped shares of emissions-free wind and solar energy compete with generators that burn coal and natural gas.
The compromise, underpinned by increased offshore drilling, collapsed after the spill. Democrats who wanted emissions legislation have since threatened to pull their support if the bill continued to call for more oil drilling.
Disaster’s ‘Irony’
“It’s ironic that this disaster is jeopardizing energy legislation when it’s clear that we need it more than ever,” said Kevin Landis, who manages $260 million at Firsthand Funds including SunPower and competitor Suntech Power Holdings Co. “It’s definitely a drag on the renewable sector.”
Denmark’s Vestas has lost 16 percent since the rig explosion that triggered the spill, knocking 11.08 billion Danish krone ($1.92 billion) from its market value. SunPower has dropped 22 percent, almost twice the loss of the oil index, whose members were hit by drilling bans in other nations after the BP spill and predictions of higher insurance premiums by explorers including Brazil’s Petroleo Brasileiro SA.
Vestas and SunPower underperformed the 88-member WilderHill New Energy Global Innovation Index. It lost 12 percent in the period, helped by gains in companies more focused on non-U.S. markets or energy-saving products like light-emitting diodes.
Canada Oil Sands
The losses contrast even more with gains of Canada’s largest oil-sands producers, which tap deposits of crude mixed with earth in a method that can scar landscapes and add to global warming pollution. Canadian energy stocks are trading at their highest premiums to global oil stocks in five years.
Investors may be concerned with declining government incentives from Germany to the U.S. as nations seek to save money, said Roger Ballentine, president of Green Strategies Inc., a consulting company Washington.
“We’re heading into a long-term period of fiscal austerity,” Ballentine, a climate adviser to the Clinton Administration, said at a conference in New York on June 29.
The reaction by U.S. Congress to promote environmental rules has been less than in 1969, when a public backlash against oil drilling ensued from the much smaller spill off Santa Barbara. The movement led lawmakers to devise the Clean Air Act and the Environmental Protection Agency, the foundation of hundreds of regulations on the energy industry today.
Santa Barbara Spill
The Gulf oil spill probably won’t create the same societal shifts that occurred after the Santa Barbara oil spill in 1969, said Joshua Schimel, chairman of the environmental studies program at the University of California at Santa Barbara, which was created as a result of the 1969 spill.
“The Santa Barbara spill happened at time when people were already waking up to pollution and to the damage we were doing to the environment and to its habitability,” Schimel said.
Also, the oil fouled a beach of a politically connected, affluent and highly educated community that did not have strong economic ties to the oil industry, Schimel said. “In Santa Barbara, oil was not really part of our economy. In the Gulf, there are lots and lots of communities that depend on it.”
Most Americans oppose President Barack Obama’s ban on deepwater oil drilling in response to the spill, holding the company responsible for the “freak accident,” according to a Bloomberg national poll conducted July 9-12. BP said yesterday it stopped the flow from the leaking well for the first time and may know within two days whether it is safe to leave a new sealing-cap system installed over it in place.
State Incentives
San Jose, California-based SunPower, which has more panels installed in the U.S. than other manufacturers, is building solar plants from California to Florida in states that provide incentives. The company needs a renewable energy and climate protection bill to boost orders for its high-efficiency panels, Chief Executive Officer Tom Werner said at a conference in New York on June 9.
Solar panel and wind turbine manufacturers said they will continue to press for a national standard that would build upon efforts in 30 states that require utilities to get an increasing share of power from renewable energy. They just aren’t depending on that happening this year.
“We aren’t counting on that oil leak to increase demand for solar,” said Peter Xie, president of Solarfun Power Holdings Co., a Chinese maker of solar power cells and modules. He made the comments during an interview in New York on June 14. “We need to get costs down so that we can compete without subsidies.”
Vestas Plan
Vestas was counting on a U.S. mandate for utilities to buy renewable energy and a price set on carbon emissions that would help the industry compete with coal and natural gas. They were central to its plans to spend $1 billion to expand U.S. manufacturing to gain a bigger share the American market.
To gain support from Republicans, lawmakers said they next may strip a climate-protection provision to pass an energy bill that would require utilities to get 15 percent of their electricity from renewable sources by 2021.
The compromise would fail to address the environmental costs of oil drilling and coal mining that a carbon cap would, leaving fossil fuels with an ongoing advantage, according to Lewis Hay, Chief Executive Officer NextEra Energy Inc., the largest U.S. producer of wind and solar energy.
“I really would like for us to pass comprehensive climate and energy legislation,” Hay said in a June 23 interview. “We’re all investing less dollars until we get greater clarity and that’s not good for the economy and it’s not good for jobs.”
--With assistance from Simon Lomax in Washington D.C.; Editors: Todd White, Randall Hackley
To contact the reporters on this story: Christopher Martin in New York at cmartin11@bloomberg.net; Mark Chediak in San Francisco at mchediak@bloomberg.net.
To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net.