The energy transition begins to be a reality in the bags. What at the moment are little more than ambitious corporate and institutional plans, is taking shape in the stock markets. The renewables rise like foam while fossil fuel companies see their value reduced to a very small part of what they added just a few months ago.
Examples are repeated on exchanges around the world, but the evolution of two benchmarks such as Exxon Mobil and NextEra is paradigmatic. The Wall Street oil giant has seen its capitalization shrink 50% in the last year. It has even lost its place in the Dow Jones index after 92 years of tenure. Meanwhile, and in the same period, the renewable specialist based in Juno Beach (Florida) has risen 32%.
If these percentages are translated into numbers, the evidence for how the market is advancing the transition of the system towards cleaner energies is even clearer. A year ago, Exxon Mobil’s market capitalization was around $ 290 billion. Now, at 145,663 million, it remains below the 146,140 million that NextEra marks.
The divergence of behavior is more justifiable if one takes into account that the economic reconstruction plans that are seeing the light around the world promise to place renewables as one of their backbones. This is, in other words, a shower of financing to the sector by billions in multiple geographies.
While more and more large investors are they exclude from their portfolios everything that has to do with fossil fuels, money is plentiful to support clean energy projects. A trend that has been going on for a long time but has accelerated with the outbreak of the pandemic. A turnaround that has taken place in many other changes that the future of the world economy had already pointed to, such as digitization.
This is confirmed by various economic studies published in recent months. The International Renewable Energy Agency (Irena) points out that global investments in clean energy reached $ 3 trillion over the past decade, but capital outlays in the industry are expected to double each year through 2030.
Beyond investment and future forecasts, production numbers also support this stock market turnaround. Renewable energies generated three-quarters of the new electrical capacity already in 2019.
And if the analysis is limited to Spain, which is located among the ten world powers of renewable development, the sector added six gigawatts (GW) more of installed capacity only in 2019. This year a new record is expected that leaves this figure small.
In the absence of more specificity, the minister Teresa Ribera already gave defining clues when at the beginning of this month he presented his part in the reconstruction plan “Spain Can”. The head of the branch announced that 37% of the 72,000 million euros that the country will receive in European funds will go to the ecological transition, with “a clear commitment to floating offshore wind.”
Fever without bubble
In a recent economic forum, a manager of one of the ‘Big Four’ explained that “European funds are an opportunity to that companies make investments that alone could not undertake”. However, industry experts argue that, even regardless of these capital injections, renewables are going through a golden age to finance new projects.
The sector reject the idea of a bubble and it speaks more of an investment fever that also has its reflection in the inflow of capital in the stock market. Analysts do not miss that the dizzying 171% rally accumulated by Solaria In the last year and his kind business prospects have been two powerful letters of introduction to his promotion from the Ibex Small Cap to the Ibex 35 in just four months.
This investment appetite has also been one of the determining factors for the Murcian renewable Soltec has gone public. His will be the first pure debut on the Spanish market after two years of drought. The company aims to raise up to 165 million euros in the coming days if its best forecasts are met and debut with a price of up to 4.82 euros per share.
While the outlook for clean energy has only improved, those for fossil fuel consumption have been getting worse. The stoppage of travel and industrial activity imposed by the containment measures against Covid-19 around the world have left such a bleak outlook that even the futures on a barrel of oil traded negative for the first time in its long history last April.
With a panorama to which not even the Organization of the Petroleum Exporting Countries and its partners (OPEC +) knows well how to respond, it is not surprising that companies in the sector are struggling increasingly to electrify your business. Repsol, which has lost 55% of the Spanish stock market so far this year, is determined to transform itself and turn towards an increasingly green model.
The company chaired by Antonio Brufau began this turnaround two years ago with its entry into the electricity and renewables marketing sector with the purchase of Viesgo. Your goal is become a net zero emissions company by 2050. A strategy that is being followed by European comparables such as BP, Shell, Total and Engie.
At the opposite pole within the Spanish market, Iberdrola stands out for trading against the tide at historical highs after having added increases of 25% since January. The company chaired by Ignacio Galán has planned continue to invest billions in renewable energy and in the networks and storage facilities necessary to integrate them into the system.
Its former investee, Siemens Gamesa, is at this point in the turmoil 2020 the second best value of the entire Ibex 35. The restructuring plans that the company has put in place, and whose final consequences are yet to be seen, have resulted in an increase in market capitalization of nothing less than 65% since January.
The trend is clear if two of the major industry benchmark indices in Europe are compared. He Stoxx Europe 400 Oil & Gas, which brings together the largest listed fossil fuels in the Old Continent, lost about 44% in the last year. The European Renewable Energy Total Return (ERIX) that brings together green energy companies adds up to 67% in the same period.
The energy transition has even started is well advanced in the bags. Now it remains to be seen that the investment and industrial replacement plans will be materialized so that it also begins to be an increasingly widespread reality on a day-to-day basis.