Let’s Stop Bailing Out on Alternative Energy

Stuart Pearlman

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Investors are continuing to bail out of alternative energy stocks—good, promising companies such as ABB, American Superconductor, Evergreen Solar, and Itron. These companies and many like them were Wall Street darlings not that long ago. Not anymore.

As shown in the share prices of a sample of publicly held energy-tech companies (see table), the average 2008 to 2009 decline of these stocks is now at 63%—dwarfing even the severely depressed Standard & Poor’s Index (down 41%) and the Dow Jones Industrial Average (down 39% from its 52-week high as this article is written).

One reason for the deterioration of energy-tech stocks is that traders have historically abandoned alternative and renewable energy shares when energy prices are falling. And that’s the bailout we don’t need. It is, to paraphrase former Federal Reserve Chairman Alan Greenspan, “irrational pessimism.” The bears are ravishing the market.

Turning around the bear market in alternative energy stocks will be hard to do. In-and-out traders don’t pay much attention to the promise or the details of emerging technologies that have the potential to combat our energy problems. They only care about the profit or loss of their last trade and prospects for their next trade.

Traders don’t think much about the gas lines of the mid-1970s, the global effect both Gulf wars had on energy prices, or the oil price spike to $147 a barrel in summer 2008. But longer-term investors in alternative energy should care a great deal about those seminal events. When similar energy market conditions re-emerge in the years ahead, those investors could be positioned for a big win.

To help investors make the decision to bet on a new generation of energy technologies, alternative and renewable energy developers, producers, and proponents have to do much more than just promise relief some time in the distant future. When energy markets are distressed, as they are now, alternative energy proponents must spend more time and effort delivering persuasive, factual messages about near-term advantages and longer-range potential to investors and the general public. Perhaps most importantly, they must clearly demonstrate measurable results.