Clean Energy: A Bubble Burst?

Clean Energy: A Bubble Burst?
marvelmozhko / Pixabay

The rapid rebound in clean energy shows signs of weakness. Indeed, investor enthusiasm apparently overestimated growth potential and overlooked challenges such as fierce competition and pressure on margins. We adjust our view to cautious, as today’s elevated valuations increase the risks of a reality check and further setbacks. However, selected opportunities are still on offer, primarily for those companies that have an “edge” to safeguard their profits, said Norbert Rücker, Julius Baer’s director of economics and research for Next Generation.

Get The Full Ray Dalio Series in PDF

Get the entire 10-part series on Ray Dalio in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues

Q4 2020 hedge fund letters, conferences and more

Rebound In Clean Energy

The clean energy issue saw a dramatic rebound through January, followed more recently by consolidation. Benchmarks, such as the S&P Global Clean Energy Index, are down more than 15% from their highs. Investor enthusiasm apparently outpaced fundamentals. The clean energy business is highly competitive and the challenges companies face in achieving sustainable profits should not be underestimated.

Hedge Fund Launches Jump Despite Equity Market Declines

Last year was a bumper year for hedge fund launches. According to a Hedge Fund Research report released towards the end of March, 614 new funds hit the market in 2021. That was the highest number of launches since 2017, when a record 735 new hedge funds were rolled out to investors. What’s interesting about Read More

The transition to renewable energy, that is, to wind and solar energy, was already in full swing before 2020. Capital is not a constraint on the transition, but rather on lengthy permitting processes that reflect the so-called "no" issues. in my backyard "(NIMBY). Therefore, the green stimulus has its limits. Substantial capital inflows, in part augmented by the large amount of funds that oil companies command, inflate the prices paid for projects and put pressure on rates of return. Of course, some companies have advantages in terms of knowledge and scale, but on average, the clean energy business faces pressure on its margins.

Pressure On Energy Prices

The latest UK offshore wind auction attracted attention in this regard. Strong growth in clean power generation puts pressure on energy prices in the longer term and shortens the duration of new power purchase agreements. The exposure of energy producers to price volatility increases, undermining the inherent stability of the business model. Some of the recent earnings posts point to this problem.

We see risks that the clean energy issue is about to face a reality check. We adjust our position to cautious as today's elevated valuations increase vulnerability to a setback. However, some opportunities are still on offer.

Norbert Rücker, Next Generation Director of Economics and Research, Julius Baer

Updated on

Jacob Wolinsky is the founder of, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at) - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver
Previous article Global Economy To Rebound In 2021 With APAC To Lead Recovery
Next article There’s A “Chip” Shortage: And TSM Holds All The Cards

No posts to display