By Jared Cummans
For the next two months, all anyone will be talking about is who will win the November election and how that will impact our nation. From our economic standing to our energy policy, each presidential candidate offers a different plan for how they plan to move forward. One investing segment that is of particular interest is that of alternative energy as the Republican and Democratic parties have very opposing views and policies for green energy. The biggest question that alternative energy investors are asking is whether or not a Mitt Romney presidency will mean troubled times for this green sector.
Romney has been quite adamant about his energy policy and how he intends to set himself apart from our current president. Romney has attacked the Obama administration for its subsidies and tax breaks for companies like Solyndra, calling it irresponsible and unethical funding. Romney’s plan aims to attack fossil fuels with full force, making the U.S., Canada, and Mexico energy independent by the year 2020. One of his biggest policies will focus on fast-tracking the Keystone XL Pipeline, a controversial project that has the potential to bring a significant amount of oil sands into the country from Canada.
Romney promises that coal will no longer be a four letter word in his administration, but that clean coal will be praised and used in a much wider manner. “I will pursue dramatic regulatory reform to accelerate the exploration and development of oil and gas, to facilitate construction of vital infrastructure and to preserve and expand crucial electricity capacity. I will streamline permitting processes and create fixed timelines. Businesses can live with yes or no, but government must stop saying maybe or wait” says Romney.
Though Romney maintains that he will be investing in renewable energy, his focus will be almost entirely on fossil fuels, which could leave green companies like First Solar (NASDAQ:FSLR) out to dry. Romney’s energy stance will come with a list of advantages and disadvantages for renewable energy which we outline below.
One of the things that Romney is aiming for is to allow a free market to find the best and brightest green energy companies. As government subsidies are pulled, as is Romney’s plan, only the biggest and best companies will be able to survive, allowing investors to find the strongest alternative energy companies to allocate to. Though he claims to be a proponent of alternative forms of energy, Romney thinks they should live or die by free economics, as he would likely fall under the category of those who feel that alternative energy will never become widespread in our lifetimes.
Aside from a free market, Romney’s plan offers little advantages over Obama’s, as his policy to strengthen oil and gas firms leave little room for solar or wind firms.
One of the biggest attacks on Romney’s plan comes from the fact that he does not appear to be very environmentally conscious. “The word climate does not appear in the energy plan. That is a conspicuous absence” says Michael Levi of the Council on Foreign Relations in New York. Romney seems to have little in the way of climate policies to combat some of the more aggressive oil policies, like green lighting the Keystone XL Pipeline despite it travelling through one of the largest aquifers on the face of the earth. Romney’s plan is to increase burning fossil fuels which will do little to combat climate change (it in fact will be bad news for climate change management).
Of course, the biggest threat that investors need to worry about is the pulling of funds from some of the biggest names in green energy. Without government subsidies, many alternative energy companies will have trouble funding as well as breaking even. Though green energy may be better for the environment, the fact remains that these energy sources simply cannot compete with the low cost options provided by fossil fuels, hence the subsidies in the first place. Renewable energy investing has been bad enough over the past few years, but a Romney presidency could put a nail in that coffin. Of course, that is not to say that a Romney administration would potentially do wonders for fracking companies and other new oil technologies, but it is almost certain that green energy would suffer.
What to Watch
Below, we outline some of the most popular alternative energy investments to keep an eye on as the election day nears.
- First Solar (FSLR): One of the largest solar firms out there, First Solar is based in Arizona, and has a market cap of more than $1.8 billion. FSLR has lost approximately 90% since hitting its pre-recession high. That could mean a good buying opportunity, but its EPS of -6.4 (standard for most solar stocks) is less than encouraging.
- Trina Solar (NYSE:TSL): A Chinese company that has its hands in nearly every facet of developing photovoltaic modules. Unlike FSLR, this stock was able to regain lost ground from the recession through 2011, but fell prey to a major fallout that struck the entire solar world. Since peaking early last year, the stock is down about 85% while exhibiting a beta of roughly 2.92 along the way. TSL has a market cap of $289 million and trades 1.5 million times per day.
- Guggenheim Solar ETF (NYSEARCA:TAN): This ETF has more than $42 million in assets while it invests in some of the biggest names in the global solar industry. Though it is the go-to fund for most solar investors, its performance in recent years has been abysmal. TAN is down more than 78% in the trailing three years as the solar industry has been in a free fall in recent times.
Disclosure: No positions at time of writing.
Disclaimer: Commodity HQ is not an investment advisor, and any content published by Commodity HQ does not constitute individual investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities or investment assets. Read the full disclaimer here.