European renewables firms saw a boost to share prices, while mainstream utilities suffered, after German Chancellor Angela Merkel announced the country will double its 2020 renewables target and close its 17 nuclear power plants by 2022.
The oldest seven reactors, which were shut down immediately after the Fukushima disaster, will never be reopened.
The decision must be approved by the German parliament, but observers expect it to go through unhindered. Public protests against nuclear power have ramped up in Germany following the Fukushima meltdowns.
RWE and E.ON both saw their share prices drop yesterday in reaction to the news, with RWE falling 2.5% to a low of €40.00 ($57.64), from a close of €41.02 on Friday. The utility has seen its share price recover slightly this morning to about €40.56.
“This will mean that German utilities will have to divert a large part of their reserves to decommissioning their nuclear power stations just when they need to invest into new cleaner power capacity,” a note by analysts at Jeffries said. “We note that decommissioning costs have in nearly all cases proved to be more expensive than initially foreseen.”
The price of power and carbon allowances in Europe’s Emissions Trading System rose also. But share prices of German solar and wind firms saw the strongest reaction.
German solar cell manufacturer SolarWorld is trading this morning at more than €10, up 13% from the close on Friday, the last day of trading before the announcement was made, of €8.84.
Competitor Q-Cells is trading above €2, up from a close on Friday of €1.77.
However, Lee Clements, London-based investment manager at Impax Asset Management, cautioned that key decisions on the depth of cuts to German solar subsidies from next year are yet to be made. In any case, he noted, the rate of installations is likely to slow, from around 7GW last year to about 3.5GW this year.
“These were quite heavily beaten up stocks,” he added.
Offshore wind, energy efficiency tipped to benefit
Offshore wind projects and energy efficiency could be the big beneficiaries of the shift in policy, Clements said. Merkel also reiterated a target to reduce electricity demand by 10% by 2020.
“With most of the prime onshore sites already developed, we would expect offshore wind in the North Sea and the repowering of older sites to be promoted,” said Michael McNamara, an analyst at London investment firm Matrix Capital, in a note to investors.
Matrix predicts that two UK utilities, Scottish and Southern Energy and Centrica, are likely to benefit because of their offshore wind plans.
German wind turbine firm RePower saw its share price rise from a close on Friday of €131.10, to trade around €142.00 this morning. Nordex was up from a Friday close of €6.00 to around €7.23 today. Spain’s Gamesa also saw a 1.59% rise in its share price yesterday while Swedish turbine maker Vestas rose more than 2%.
Jess McCabe
