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Energy crisis bursts green shares bubble

January 22, 2022

By Paul Homewood



The energy crisis has burst a multibillion-pound bubble in green stocks as gas prices surge and the world confronts the true cost of net zero.

Shares in renewable energy companies have tumbled to their lowest level in 16 months, almost completely unwinding gains made during a stampede into companies aiding the shift away from fossil fuels.

It comes as new figures revealed that private equity snapped up oil and gas firms worth almost £12bn last year, a huge increase from £232m in 2020 as the sector ploughs investment into renewable energy.

A basket of global clean energy shares, which includes renewable giants Iberdrola, Vestas and Orsted, has tumbled 45pc since the record peak a year ago, wiping tens of billions of pounds off their “excessive” value.

Rising material costs, frothy valuations and escalating interest rates have dampened investor enthusiasm after a flood of money into the sector.

Surging gas prices are also thought to have raised concerns, because they highlight the challenge of ditching fossil fuels.

Stewart Cook, co-head of European markets at Berenberg, said: “Clean energy stocks were caught up in the record moves higher in non-profitable, almost concept-like themes such as ESG and electric vehicles. These moves and valuations were exaggerated by huge inflows to investors and liquidity chasing these relatively small, embryonic sectors.”

Renewable stocks have fallen by a fifth since the start of December after being hit by a wider shift by investors out of pandemic winners, particularly in tech, into more traditional sectors as interest rates rise.

Solar shares have slipped 45pc from their record peak, while wind firms have dropped by a quarter.

Mr Cook said there were some “excessive valuations and asset price moves” on wider markets that have “burst”. However, he added that many clean energy stocks still “have great fundamental reasons to own for the long-term”.

Analysts have warned that a rush into environmental, social and governance-friendly assets risks creating ethical stocks bubbles.

Buyout firms are cashing in on the gas price crisis by swooping in as listed companies flee the oil and gas sector in fear of climate campaigners.

Private equity firms spent £11.9bn on European oil and gas businesses in 2021, compared to just £232m in 2020, according to global law firm Mayer Brown. Deals involving UK firms were worth £2.4bn.

Norway’s HitecVision, and the US’s Postlane Partners have been among the more acquisitive firms in the sector over the latest year, its research found.

Oil and gas companies are under growing pressure from shareholders to cut their emissions and switch to renewable energy, with BP pledging to cut its oil and gas production 40pc within the decade.

James West, partner at Mayer Brown, said: “There are still excellent returns on offer in the oil and gas industry. Majors are facing pressure to divest some of their assets as part of the transition to renewables and this is creating an opportunity for specialist private equity funds to pick up assets at valuations they like.”

It’s a reminder that renewable energy companies only exist because of subsdies.

Meanwhile private equity investors are cute enough to have worked out that fossil fuels still have a long term future, and are buying up assets on the cheap from public oil and gas companies who are running scared from climate campaigners.

  1. Wiggers42 permalink
    January 22, 2022 10:11 am

    All those “ethical” investors selling fossil fuel companies’ shares seem unaware that other investors will just pick up a bargain.

    • Nicholas Lewis permalink
      January 22, 2022 2:17 pm

      precisely and whats worse is its pension companies doing it so they are green but when the income drys up to pay the pensioners no doubt that burden will also fall on the rest of us. The West is getting itself into a place that only bad things will come out of it.

      • Gerry, England permalink
        January 22, 2022 5:31 pm

        Yes, watch the Royal London virtue signalling tv advert. Glad I no longer have a pension with them.

  2. Devoncamel permalink
    January 22, 2022 10:23 am

    Yet more evidence of madness also featured in the DT. This is the root cause, fanatical environmental activism.

    A ban on conservatories is the sort of idiocy that could finish off Boris and ‘net zero’!preferred/0/package/854/pub/854/page/66/article/263794

  3. Nicholas Lewis permalink
    January 22, 2022 10:30 am

    So we are now headed into the daft situation where global O&G divests itself of income producing assets into an absolute perfect moat for PE who will benefit hugely from the use of fossil fuels for several decades yet and at a price that will continue to escalate if exploration and development continues to be squashed. Then to add fuel to the fire, no pun intended, govts will raid the money printing presses to give subsidies to consumers further increasing PE wealth at the expense of the people. And before you know it the world will be run by monolithic unaccountable bodies.

    Ive been despairing all week that even credible news programmes can’t make the connection why the gas price is so high. People have no idea that the impact this will have on inflation is baked in for at least 18mths whilst all businesses react to rising energy bills. The answer is simple and and its under our feet not somewhere else half way round the world.

    As I say by all means have a transition to green energy but if you fail to acknowledge that it is a 30-40 year plan and can ONLY be achieved if you keep current day energy costs down all that will happen is the ordinary person will end up paying dearly for it and the society we have built will slowly crumble away leaving potentially civil anarchy.

    • Phoenix44 permalink
      January 22, 2022 10:57 am

      Most people seem to be unable to make the connection between prices that generally fall along with increasing quality as provided by the private sector when governments don’t intervene, prices that rise when governments intervene with markets and increasing prices (costs or “investment” if you are G. Brown) and decreasing quality when things are run by government.

      The endless special pleading or deliberate ignoring of facts and reality to justify the state being in charge is depressing,

  4. Martin Brumby permalink
    January 22, 2022 10:33 am

    Looks like some cracks are at last appearing in the vast frozen river of GangGreen’s stupidity and virtue signalling.

    Perhaps a smidgeon of “warming” might lead to an almighty flood of reality?

    • Phoenix44 permalink
      January 22, 2022 11:02 am

      The obvious flaw is that virtually all Green technologies require a vast amount of old-fashioned, non-Green input, whether it’s mined materials, manufacture/transportation or installation/maintenance.

      Increasing non-Green costs feeds through rapidly in to the costs of going Green. And there’s only so much consumers are willing/able to pay.

      And of course very few of these Green technologies are actually new or innovative so there’s no actual cost saving or productivity improvement. Madness always runs into economics.

      • January 22, 2022 11:29 am

        The obvious flaw is that virtually all Green technologies require a vast amount of old-fashioned, non-Green input, whether it’s mined materials, manufacture/transportation or installation/maintenance.

        That is because all Green technologies are parasitic industries.

      • January 22, 2022 12:28 pm

        You might also include the monumental cost of eventual disposal

  5. Ray Sanders permalink
    January 22, 2022 11:54 am

    Dare I suggest that certain people in the private equity sector have been engineering this situation. How come the likes of Chris Hohn spend donate huge amounts to the like of XR?
    Are they also, unseen, buying up those hated fossil fuel stocks on the cheap? What a scam eh?

  6. Thomas Carr permalink
    January 22, 2022 11:54 am

    Again, the urgent need is to have the following set out repeatedly in the broadcast , print and scientific media:
    “Fuel poverty is the direct fault of government policy”
    No palliatives, ultimately at tax payers’ expense, mitigate the folly of indulging the Green agenda in taking coal and gas out of the supply of power in the UK.

    • Gamecock permalink
      January 22, 2022 12:58 pm

      Decadence follows from prosperity. As prosperity ends, decadence dies, as people can no longer afford their decadence.

  7. January 22, 2022 12:05 pm

    Surging gas prices are also thought to have raised concerns, because they highlight the challenge of ditching fossil fuels.

    Surging gas prices are due to demand overtaking supply. How do renewables advocates propose to offer a satisfactory alternative to gas, which would then reduce demand for it? Nothing so far suggested cuts the mustard, or amounts to anything more than vague hopes with little or no substance but lots of expense (batteries, hydrogen, pumped storage etc.)

    • Gamecock permalink
      January 22, 2022 1:00 pm

      It can get vastly worse. Biden sabre rattling with Russia over Ukraine could lead to Europe’s gas being cut off.

      • Ron permalink
        January 22, 2022 4:16 pm

        You may not be aware that the E.U. imposed sanctions on Belarus. One set of sanctions blocked anyone from purchasing Potash and it derivatives from that country. Belarus satisfies about twenty percent of the world market for Potash.

        Should you care? ‘Well, if you eat food you should. Seventy per cent of the world’s agricultural output is driven by fertilizer. fifty percent of that fertilizer is nitrogen based. Potash is essential to producing nitrogen based fertilizer. As is natural gas at which must be reliably available and at a relatively cheap price. Europe is seeing the closing of their fertilizer manufacturing as a result of their policies in these two areas.

        Major fertilizer producer Russia is utilizing the cheap natural gas rejected by Europe and the suddenly available cheap Potash to dramatically increase their production of fertilizer. At the same time they have blocked the export of fertilizer except under special circumstances to favored partners. Ditto for all the other major producers except North America which is exploiting the opportunity to make large amounts of profits from the rising prices.

        The damage to the ability of the soil to produce the same amount of output as prior to the disruption lasts about one to one and a half years from the end of the disruption and resumed application of fertilizer.

        Since the current disruption to fertilizer production and pricing is one hundred per cent policy driven, and since there is no one in authority who is even hinting at changing either the sanctioning or green energy policy, we can expect soaring food prices in wealthy countries and widespread hunger, even starvation and societal breakdown in large parts of the world. That will last for a couple of years even if we start to reverse course tomorrow.

      • bobn permalink
        January 22, 2022 9:34 pm

        Ron you are right but have a few details wrong. Natural gas is used to provide Nitrogen fertilizer. Potash is potassium. An essential nutrient and Potash (potassium) is generally spread as granular fertiliser. So potash is not used to make nitrogen. The big 4 nutrients for plant growth are nitrogen, potassium, phosphate, magnesium. All are usually spread annually. A garden centre general fertilizer pack is usually just a formulation containing those 4. Potassium is usually more important than nitrogen as a fertilizer.

  8. Gamecock permalink
    January 22, 2022 1:04 pm

    ‘It’s a reminder that renewable energy companies only exist because of subsdies.’

    AND, as Phoenix44 points out, FREE backup. The irony being that the more penetration renewables make into the market, the less backup there will be.

  9. Dave Andrews permalink
    January 22, 2022 5:17 pm

    This paper published in Nature Reviews gives an excellent overview of the mining that is required for “the green energy revolution” and EV use.

    ‘Mining our green future’ by Prof Richard Herrington, Dept Earth Sciences, Natural History Museum, UK

    • jimlemaistre permalink
      January 22, 2022 7:23 pm

      That is a VERY important reference . . . Thanks for that !

    • jimlemaistre permalink
      January 22, 2022 7:33 pm

      The one that Bothers me the most, however is Neo Dymium Boron . . . Rare Earth Magnets. The tailings pond in Mongolia, 80 % Global production, releases more radiation than All the nuclear Reactors in the USA . . . Every Day . . . Pages 8 & 9

      The whole ‘Green Movement’ is a pack of debauchery and outright Lies . . .

      My Thoughts . . .

  10. willem post permalink
    January 26, 2022 4:08 pm

    War in Ukraine would lead to an “ENERGY CRISIS”

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