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The 2023 Renewable Energy Crash

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In the last few months, investors in renewable energy have had a pretty bad time. Stock price crashes, offshore wind auctions canceled, and write-downs have contributed to a rather despondent mood.

So what happened? And Why? And where could things go from here?

A Brutal Correction

The largest clean energy ETF, QCLN, has suffered an almost 50% decline since its peak in 2021.

finviz dynamic chart for  QCLN

This correction is even more brutal in some sub-sectors of the clean energy industry, with the situation especially painful for the wind industry. For example, the leading offshore wind operator Orsted stock (DNNGY) is now priced below its 2017 IPO level (excluding dividends).  The largest wind turbine manufacturer, Vestas (VWDRY), is back to its 2008 price level (excluding dividends).

This surprised many investors, with renewable becoming a larger part of the energy mix and widely viewed as the future of energy systems.

A Convergence of Causes


The first problem in the renewable energy sector started with a profit warning from Siemens Energy in June 2023. Quality problems in its Gamesa branch meant that some turbine engines would need to be replaced much sooner than expected, hurting the company's profits. This led to a sudden drop of 36% in the stock price.

The bad news kept piling up when Orsted warned of problems on its US projects in August 2023, with some maybe having to be canceled entirely.

This created a wave of concern in the industry, with many offshore auctions for wind projects meeting little enthusiasm or even failing entirely, like in the UK in September 2023.


Besides technological issues at Siemens, inflation is the root cause of the sudden wave of troubles in the wind industry.

Projects calculated a few years ago are now facing increasing costs on labor and equipment, as well as supply chain damage by the pandemic. So, what made sense economically in 2020 or 2021 might not make sense anymore in 2023.

Rising rate

Compounding on the inflation issue, central banks all over the world have raised interest rates to put inflation under control. This surprised market participants and industrial companies, after 3 decades of declining rates, marked only by temporary and short-lived spikes.

Source: Chartstorm

This means that huge capital-intensive projects, like renewable energy, are now facing financing costs much higher than in the previous decade.

This can also hurt companies that need to refinance their debt load, a common situation for fast-growing renewable companies.  As a result, July to September 2023 saw a record outflow of capital from clean energy ETFs.

This is a more generalized problem affecting the energy sector, including solar farms, utilities, and solar panel manufacturers.

Grid Saturation & Storage

While the previous factors are mostly out of the control of the industry, one additional growing issue is starting to hurt renewable energy. Power grids have been designed around fossil fuel-based power generation (and hydro + nuclear power). This means that the intermittency of renewables can become a growing issue in the larger part of the grid they represent.

This is supposed to be mitigated by utility-scale energy storage. The problem is that investments in this sector have lagged behind, resulting in occasional renewable energy waste. Similarly, in periods of low wind or sun intensity, the lack of energy storage capacity forces grid operators to fall back on fossil fuels like gas or coal.

This is getting corrected, with a +75% storage capacity growth between 2021 and 2022. But this might take a few years to catch up and weigh on the renewable sector as a whole until it is solved.

Source: IEA

What Now?

A Wall Of Worries

Some issues are temporary but serious in the short term.  The durability of older models of wind turbines might not be as good as initially forecasted. This is for sure true for the Siemens Gamesa turbines, but this is now a concern for the rest of the industry as well.

Grid saturation and the mismatch between demand and production of electricity is likely to stay for a few years until energy storage has caught up with the renewable revolution. This might have different effects for different sub-sectors:

  • Green utilities might see profits down for a few years from having to curtail production or invest more in energy storage.
  • Producers of wind turbines and solar panels must be strategic in what market they target.
  • Energy storage companies, both operators and manufacturers, could experience an unprecedented boom.

None of these problems are unsolvable, but they will not be solved overnight either.

Higher Costs For Longer

The important thing to consider is that energy generation of any kind is a capital-intensive industry. This is true for renewable, as well as for fossil fuels or nuclear.

So it is likely that growing power generation will be more costly from now on, no matter the technology used. At least, as long as inflation and higher interest rates are the new normal.

Other investing sectors were also damaged by this macroeconomic environment; for example, the entire US utility sector is down to a 3.5-year low in October 2023. Even “safe” investment vehicles like US bonds “have suffered the steepest decline in history,” according to Bank of America.

This is true in the fossil fuel industry as well. Shale oil is not growing much in its production, preferring to keep a close eye on rising costs and favoring returning capital to shareholders. There are now just 504 operating rigs in the US, compared to 1,609 in 2014 at the peak of the shale boom.

The higher costs are likely to last, as more expensive energy (of all kinds) will likely contribute to keeping inflation high. Other factors like geopolitical chaos (as sadly illustrated by the wars in Ukraine and now Israel), deglobalization, and unionization will also be contributing to keeping inflation higher for longer.

Ongoing Technological Progress

The renewable revolution was made possible thanks to continuous solar and wind technology progress. This has caused a collapse of renewable energies' costs, making them competitive with fossil fuels and nuclear, with solar costs down 90% in 10 years.

Now, this trend of declining costs, thanks to technology, is compensated by rising costs due to inflation. But this does not mean renewable technologies have stopped progressing.

For example, the most innovative companies with cheaper or more efficient solar panels, like First Solar (FSLR), could be among the big winners in the sector in the long term.

finviz dynamic chart for  FSLR

It is also possible that other technologies make a comeback, like nuclear, thanks to innovative Small Modular Reactors (SMR), something we discussed in our articles “Top 5 Nuclear Stocks To Invest In (October 2023)” and “The Nuclear Debate: A Power Solution for the Future or a High-Stakes Gamble?”.

So investors should stay optimistic over technological progress and count on a new round of innovation to durably make renewables (and maybe nuclear) the dominant, low-carbon solutions for energy generation in the future.

The increasing push of electrification for heating, transportation, and industrial demand currently covered by fossil fuels should also guarantee a constantly growing demand for power generation for decades.

Jonathan is a former biochemist researcher who worked in genetic analysis and clinical trials. He is now a stock analyst and finance writer with a focus on innovation, market cycles and geopolitics in his publication 'The Eurasian Century".