Transition Investors Pile Into Buyers’ Market for Wind and Solar

Investors in energy transition businesses are enjoying a shift in market sentiment that has led to valuation slumps turning a lot of wind, solar, battery storage, and other companies from the area into great bargains.

Bloomberg reports that the recent crash in wind, solar, battery, and other transition-related stocks has whetted buyers’ appetite on the grounds that the fundamentals of these businesses remain sound.

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“We think the fundamentals of renewable power are as strong as they’ve ever been,” Ignacio Paz-Ares, the deputy chief investment officer of Brookfield Asset Management’s renewable power and transition department, told Bloomberg. “Whenever we see a dislocation between what the market noise is and the fundamentals, that creates a very good opportunity for us to make acquisitions at very attractive entry prices,” he explained.

Among Brookfield’s recent deals in that space were the $1.7-billion purchase of an onshore renewables portfolio from the UK’s National Grid and a $1.75-billion purchase of an offshore wind portfolio from Danish Orsted. Brookfield’s largest deal, however, was the acquisition of French Neoen, which is active in wind, solar, and battery storage. The price tag of the deal was $6.6 billion.

“Stock prices haven’t done well over last few years, but in the real economy clean is booming,” Aniket Shah, head of sustainability and transition strategy at Jefferies, told Bloomberg. “When sentiment around something is low, it’s a good time to be a buyer.”

The buildout of wind and solar in key markets has indeed been accelerating in the past few years and that may count as a boom. However, this boom has exposed certain shortcomings of the technology that have played a part in the stock crash, namely, the impossibility of generating electricity on demand, which leads to waste, higher costs for backup generation, and the extraordinary dependence on government subsidies for profitability.

By Irina Slav for Oilprice.com

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