Michael Giberson
Is now a good time for investors to get into solar energy? A story from the Wall Street Journal raises that question (article available here via the Washington Post):
Shares of solar energy companies in the United States and Asia have fallen about 25 to 50 percent in recent months as declining oil prices have cooled interest in renewable-energy stocks. But analysts who see long-term growth potential in the $10 billion global solar equipment industry say the recent pullback is creating a buying opportunity.
The prospects for solar power may be particularly strong in Asia, which is rapidly becoming a production hub for photovoltaic cells, which turn sunlight into electricity.
Or maybe it is time to invest in silicon — the article notes that “a tight supply of silicon is plaguing the solar industry.”
Any industry which relies on government subsidies or incentives for its continued existence is the wrong place for your money, no matter how cheap its stocks. What the government giveth, the government can also taketh away.
I think it’s probably a little more complicated than Mr. Reid says. By his reasoning, no one should invest in automobile companies, since their profits are dependent on the government supported road system. From an externalities point of view, the current lack of a good, stiff carbon tax can be seen as a subsidy for the oil industry, so I guess we shouldn’t expect any profits from investing in the oil industry either.
It’s always “a little more complicated”. Nothing in which government is involved is simple.
Both solar and wind have a history of boom/bust cycles, usually triggered by federal/state incentives. If you are willing to accept significant risk, or are a “market timer”, they may be acceptable places to invest.
The US auto companies may well be a poor place to invest, especially now. Government is driving massive investments in alternative-fueled vehicles and alternative powerplants. However, the investments in ethanol-fueled vehicles are dependent on ethanol subsidies and fuel blending mandates. The investments in fuel cell vehicles are dependent on hydrogen fuel production and distribution subsidies. New CAFE standards would require massive investments to reduce fuel consumption while retaining utility.
The suggestion that the lack of punishment (stiff carbon tax) is a subsidy is fascinating. Are we to accept the concept that anything the government doesn’t tax is being subsidized. Would that be true, for example, of prostitution or religion? How about drug smuggling? Is government failure to tax 15% of my Social Security benefit a subsidy? Is the portion of my income which remains after taxes a subsidy? Enquiring minds want to know!
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