Clean energy stocks continued to rally this week even as the broad market declined significantly in connection with events in Japan, according to portfolio managers of the Guinness Atkinson Alternative Energy Fund. They addressed key points in their updated outlook for the sector and point to a number of significant events over the last 12 month that are changing the overall landscape for the energy sector; these include the gulf oil spill, ongoing unrest in the Middle East and North Africa region, oil prices above $100 and now potential nuclear meltdowns in Japan.
The managers note the sector’s current drivers are:
- Given Japan’s minimal fossil fuel reserves and high energy prices, alternative energy is likely to form a central role in its rebuilding strategy.
- Japan is now likely to see increased demand for natural gas which could put pressure on global natural gas prices, which is supportive of electricity prices and the alternative energy industry.
- Longer term, the cost of electricity has gone up. Any new nuclear energy will now be more expensive to build due to additional safety restrictions, or will be cut entirely. Both will lead to higher electricity prices. This means grid parity is closer than forecast for alternative energy technology.
- One example of this is Germany’s announcement shutting down older nuclear capacity. This means future support for wind and solar in the near term will be more positive in terms of setting solar fits for 2012.