According to the U.S. Energy Information Administration, the amount of electricity generated from coal has dropped from 44.6 percent to 36 percent just in the last year. With the regulatory burden facing coal, utilities are rapidly switching to natural gas whose price has been extremely low.
While Obama has punished the coal industry his aggressive promotion and support of renewable energy has failed to reward shareholders of renewable energy stocks.
Unlike coal, a free-market demand for renewable power such as solar and wind power does not exist. The use of renewable energy is artificially driven by government through state mandates and financially supported by state and federal subsidies.
Accordingly, investors in renewable energy are subjected to an enormous amount of political risk. Even without coal, its high price energy faces competition from low natural gas prices.
The spectacular failure of the share price of First Solar – a solar panel maker – highlights the risk for investors betting on Obama’s clean energy policy.
Before the stock market crash, First Solar hit its high around $300 a share and since then it’s been all downhill. In May 2009, when the Waxman-Markey cap-and-trade bill which included a national renewable energy mandate passed the House of Representatives, First Solar was trading at about $190 a share and at $120 in July 2010 when the Senate Democrats officially declared the end of the legislation.
This week First Solar is selling at around $13 a share. In addition to the absence of a federal mandate for renewable energy, the company was hurt by falling government subsidies in Europe and competition from China.
In April, First Solar announced it was reducing 30 percent of its employees and closing two production facilities in Germany. Reduction in European subsides was the major reason for its business problems.
The dependency of the company’s business on government support was made clear when a company official stated its business in Europe “is not viable without significant subsidies.”
Similarly, wind energy has also been a loser for investors. A wind energy exchange trade fund FAN, whose investments are concentrated in wind power companies, has dropped from about $11 a share to about $6 during the last year.
A major concern for investors is the Production Tax Credit for wind power. The income tax credit of 2.2 cents per kilowatt-hour for wind energy producers is scheduled to expire at the end of this year unless Congress acts to extend the tax incentive.
President Obama’s effort to direct the power sources for electricity production has resulted in enormous losses for investors and jeopardizes thousands of jobs. Through his executive powers, Obama showed he can destroy an industry but he is helpless to override the inherent limitations of renewable energy to create a market.
As many investors and employees in the energy sector will testify, President Obama fails as energy Investment Officer- in-Chief.
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