ANALYSIS - US Vote Seen As One-Way Bet For Solar, Wind Power
Date: 05-Nov-08
Country: US
Author: Braden Reddall and Nichola Groom
Analysts said a national mandate for generating renewable power would be a relatively easy first step in any "green" agenda because dozens of states already have such policies, and the cost to a cash-strapped government would be negligible.
US voters were casting their ballots Tuesday, and Democrat Barack Obama held a decisive lead over Republican John McCain in national opinion polls, and Democrats are expected to win more seats in Congress.
"A Democratic Congress and Democratic president: I think almost certainly there will be a federal renewable portfolio standard," David Crane, chief executive of power company NRG Energy Inc, told Reuters.
That sentiment is shared by many in the energy sector who see an increase in government support coming as way to help jump start the economy and stimulate job growth. Natural gas and nuclear-fired power utilities, hybrid car technology and power grid improvement should also get a boost.
"A national renewable portfolio standard would be a big, big shift in policy, and that doesn't inherently have any cost to the federal government," Raymond James analyst Pavel Molchanov said.
Shares of solar companies, beaten down by credit worries and the drop in crude oil prices, have surged in response. Suntech Power Holdings Co Ltd, JA Solar Holdings Co Ltd , First Solar Inc and SunPower Corp are all up by more than 50 percent in the past week.
Shares of Denmark's Vestas, the world's No. 1 wind turbine maker, are up by nearly two-thirds in that time.
But any costly green initiatives may now come in for greater scrutiny with the price of crude oil trading at half its $147-a-barrel record in July, and the outlook for the economy -- and thus tax receipts -- growing so much darker.
"It's certainly not just a function of the presidency obviously," Molchanov said. "It also matters what is going to be the political dynamics in Congress and what the fiscal situation looks like.
"In other words, not everything is going to be politically doable because of budgetary constraints."
Crane, who gave money to both presidential candidates' campaigns, said he expected any new fiscal stimulus package from Congress would include infrastructure spending, and much of that could go towards power generation.
Barbara Boxer, a California Democrat who chairs the Senate Environment and Public Works Committee, told a recent news conference in San Francisco that infrastructure is a priority.
CARBON WINDFALL
Obama plans to fund federal clean energy support by selling carbon-emission permits to be traded, another area the markets will watch with the Democrats in control of Washington.
"The opportunity for a national cap and trade for carbon is going to be the real opportunity for investors to learn about and make money from in the energy area under an Obama administration," said David Kurzman, managing partner at Kurzman Cleantech Research.
Utilities with mostly natural gas and nuclear-fired power plants, such as KeySpan and Exelon Corp, will fare better under a cap and trade system because their power plants emit less carbon dioxide than coal-fired plants.
Those with large amounts of coal-fired generation, such as Duke Energy Corp and American Electric Power Co Inc, will fare worse, analysts said.
"A surcharge on fossil fuels to combat climate change may seem a poorly timed luxury for a nation in recession, but we do not expect the next president to de-emphasise climate change policies," FBR Research said in a note.
Analysts at Louis Capital Research noted a US drive for more hybrid cars would benefit Energy Conversion Devices Inc, which patented the nickel metal hydride storage technology used in hybrid electric vehicles.
Obama's green energy push may also have a big impact on the long-neglected problem of getting power from the source to users.
Power grid improvements should encounter little resistance. Calls for them are heard from energy reform advocates of all political stripes, since they do not require anyone to pick winners among the emerging alternative energy technologies.
After all, it's a long way from the barren stretches of desert where so much solar and wind power is generated, and the population centres that will pay for it.
What this means for the "smart grid," which many utilities have already started funding, depends on who you ask.
"The cheapest megawatt-hour is the one never produced," Kurzman said. "And, as a result, I think there is a tremendous amount of low-hanging fruit in simply having sensors and meters installed that can cut back power usage."
Potential beneficiaries include Swiss company Landis+Gyr, which received $1.1 billion in new financing in June and had been looking at floating shares; Redwood City, California-based Silver Spring Networks, which just got $75 million in venture capital funding; and Pittsburgh-based BPL Global.
But NRG's Crane was sceptical about whether such a national grid could be built, given the potential opposition of states.
"I'm not much of an optimist about the idea of a national high-voltage transmission system," he said. "I don't expect that to happen in my working life, and I'm 49, and I need to work a lot longer in the current financial climate."
(Reporting by Braden Reddall in San Francisco, Nichola Groom in Los Angeles, and Michael Erman in New York, editing by Richard Chang)