Clean energy companies have defied negative economic trends over the past year, showing resilience in the face of a global recession.
Energy Monitor has analysed economic indicators covering five leading clean energy companies to provide an insight into the health of businesses leading the transition away from fossil fuels.
The results suggest clean energy companies have performed comparably well during a global recession that led the US, German and UK economies to shrink by 3.4%, 5.4% and 10%, respectively, in 2020, estimates the International Monetary Fund.
Energy Monitor’s analysis comes as parallel data shows renewables continued to expand rapidly across the world in 2020. Investment in renewables was up 0.9% in 2020 over 2019, says the International Energy Agency (IEA), compared with falls in investment in oil and coal of 8.5% and 6.7%, respectively.
The five companies – Schneider Electric, Vestas, NextEra, Xcel and Sunrun – were chosen to reflect different areas of the clean energy sector. They include engineering companies, large power utilities and a leading provider of residential solar energy.
Schneider Electric is a French engineering company specialising in energy efficiency and sustainability. It employs 137,000 people across six continents, with revenues of just under €30bn ($35.18bn) in 2019. Vestas is one of the world’s largest manufacturer of wind turbines, with revenues of around €12bn. Headquartered in Denmark, it employs 25,000 people in factories across Europe, the US, China, Brazil and Australia.
NextEra Energy and Xcel Energy are two major US utilities with respective revenues of approximately $20bn and $10bn, which have embraced the clean energy transition. NextEra is the world’s largest producer of solar energy. The company has installed 6.5 million solar panels over the past three years and plans to install a further 30 million by 2030. Wind power specialist Xcel was the first US utility to declare a net-zero 2050 target in December 2018, with the promise of an 80% emissions reduction by 2030.
Sunrun is the leading provider of residential solar panels and battery storage solutions in the US with revenues of around $900m, more than 3GW of solar capacity installed and 550,000 customers.
Stock market darlings
Before the pandemic hit, clean energy companies typically recorded higher gains on the stock market than those in other sectors, shows data from the IEA. Between 2018 and 2020, share indices of wind turbine manufacturers, solar equipment producers and renewable power generators increased by between 30% and 70%. This compares with the ‑20% to +20% changes across other major stock market indices in Europe and North America.
Share price data from 2020 suggests this positive stock market trend continued during the coronavirus pandemic. Between 3 January 2020 and 4 January 2021, Schneider, Vestas, NextEra, Xcel and Sunrun all saw their share price rise. Vestas saw a 127.6% rise to €198.56, while Schneider’s price rose 31% to €121.75. Xcel and NextEra grew 23.5% and 4.8% respectively to $74.2 and $65.66. Sunrun – exposed to the fast-growing private renewables market rather than the more stagnant utility power market – saw its share price grow 387% to $69.98.
“In 2020, we delivered a total shareholder return of approximately 30%, significantly outperforming the S&P 500 and the S&P 500 Utilities Index,” said NextEra CEO Jim Robo in a conference call marking the announcement of his company’s 2020 results. “Over the past 15 years, we have outperformed all other companies in the S&P 500 Utilities Index and 86% of companies in the S&P 500, while more than tripling the average total shareholder return of both indices.”
Writing in a letter to shareholders in January 2021, CEO of Xcel Energy Ben Fowke said: “The company posted solid results in 2020, delivering earnings of $2.79 per share, compared to $2.64 per share at the end of 2019. This is the 16th consecutive year Xcel Energy has met or exceeded its original earnings guidance.”
Daniel Atzori, a research partner at energy consultancy Cornwall Insight, says: “Renewable companies have been more resilient than other firms thanks to the long-term policy drivers behind decarbonisation. Investors and developers are reasonably confident the energy transition’s policy and economic fundamentals will not be impacted.”
He adds: “The Covid 19-induced socio-economic shock does not significantly alter the net-zero policy trajectory. On the contrary, in the UK and the EU economic recovery plans are increasingly inspired by the green agenda, giving the market even more confidence about the future direction of travel. It is also reasonable to expect that COP26 will add to the sense of urgency.”
Renewables is typically seen by investors as an infrastructure asset class that is attractive due to its predictable cash flows, Atzori says.
“Institutional investors are increasingly integrating environmental, social and governance principles into their investment strategies, boosting the stock of private capital available to be deployed in renewable assets,” he comments.
Revenues at all five clean energy companies were more resilient than those recorded by other energy companies. Vestas’s revenue grew from €12.1bn in 2019 to €14.8bn in 2020 – a sales record for the company. Sunrun’s revenue also grew from $858m to $922m over the same period. Schneider Electric’s annual results highlight the company’s “resilient business model” that saw profit margins at a 12-year high of 40.4%, and revenues rebound in the third and fourth quarters.
Moderate declines in revenue announced by Xcel, NextEra and Schneider Electric reflect global disruptions to supply chains and depressed demand amid the biggest global recession since World War Two.
Although revenue for the company declined by 6.4% in 2020, NextEra’s Robo believes short-term disruption provides no indication of the company’s long-term prospects.
“NextEra Energy remains well positioned to capitalise on the disruptive forces reshaping our industry,” he said in the conference call on the company’s 2020 results. “We believe a substantial, and economic, decarbonisation of the electricity, transportation and industrial sectors is possible, which represents a potential investment opportunity of trillions of dollars in the coming decades.”
Robust sales recorded at clean energy companies is in marked contrast to those of other energy companies. Revenues at Royal Dutch Shell nearly halved from $344bn to $180bn, while revenues at BP similarly plummeted from $278bn to $180bn.
Much of this decline is due to these companies’ high exposure to crude oil’s precipitous price fall in 2020. However, it is no coincidence either that both Shell and BP declared 2050 net-zero targets in 2020, indicating a serious pivot away from oil and gas towards clean energy markets with greater long-term growth potential.
“Questions have been raised about whether renewables are ready to replace fossil fuels to limit CO2 emissions,” writes Bert Nordberg, chairman of the board of directors at Vestas, in the company’s 2020 annual report. “To this end, one positive to emerge from the Covid-19 pandemic was clear evidence renewables can provide the foundations for more resilient societies, offering clean, stable and cost-competitive energy, as well as sustaining and creating jobs.”
Ready to hire
The jobs market is another area where clean energy companies have shown resilience. All five companies saw significant drops in the number of jobs advertised on their websites in April compared with January 2020, but by January 2021, each had recovered by varying degrees.
Schneider Electric advertised an average of 1,387 positions each day in January 2020, falling to 112 in April, before climbing back up to 1,073 in January 2021. Vivint Solar – a subsidiary of Sunrun – advertised an average of 144 positions each day in January 2020, falling to 24 in April, before climbing up to 186 in January 2021.
NextEra Energy and Vestas, meanwhile, barely saw their hiring strategies change during the pandemic. NextEra advertised a daily average of 252 jobs in January 2020, falling to 232 in April, before rising to 312 the following January. Vestas advertised a daily average of 852 jobs in January 2020, 700 in April and 667 in January 2021.
Xcel Energy is upbeat about job prospects, despite recording a more moderate hiring recovery, with a daily average of 124 jobs advertised in January 2021 versus 175 in January 2020.
“Our industry-leading wind expansion has created thousands of construction jobs, hundreds of permanent operations and maintenance jobs, while also supporting the communities that benefit from lease payments and property taxes,” says Xcel’s Julie Borgen.
The resilience of the clean energy jobs market reflects analysts’ expectations of the long-term prospects of jobs in renewables. The US Bureau of Labor anticipates the number of wind turbine technician and solar PV installer jobs to rise by 61% and 51% respectively, compared with an average growth rate of 4% across US jobs.
Solar power alone has the potential to create four million European jobs by 2050, says Walburga Hemetsberger, CEO of SolarPower Europe. “The Covid-19 pandemic has impacted all sectors of the economy, but solar has fared remarkably well with double-digit growth in 2020, and projections show continued growth in the years to come.”
The initial coronavirus-induced economic downturn had two main impacts on renewables: a slowdown in new capacity installations, and an increase in the share of power supplied.
Global renewable electricity capacity additions were 11% lower in the first half of 2020 than in the first six months of 2019, says the IEA. This was largely because of disrupted supply chains and construction projects temporarily delayed by lockdown restrictions. By mid-May, construction projects, equipment supplies, policy implementation and financing had largely returned to pre-pandemic levels.
Meanwhile, in April 2020, power consumption fell 5% in the US, 12% in Germany and 23% in India compared with the same month the previous year. Shares of wind and solar in the power generation mix increased, largely owing to their comparatively low cost, long-term power supply contracts, and policy dispatch rules that require energy from renewables to be prioritised, as far as possible, over other generators.
In Germany these trends translated into wind and solar increasing by 5.8 and 4.3 terrawatt hours (TWh) respectively in 2020, while generation from brown and hard coal declined by 20TWh and 13.9TWh respectively. Generation from natural gas also grew by 6.2TWh, increasing to replace old coal-powered stations and provide peak power supply to complement the increased share of variable renewables in the energy mix.
However, beyond short-term adjustments to the grid carried out to meet Covid-induced disruptions to power demand, financing data reveals that governments continued to invest in long-term renewables expansion during 2020.
The plummeting installation costs of solar PV and wind power translated into investment trends at odds with the global economic downturn. Global investment in solar PV increased 6.2% in 2020 compared with 2019, higher than the 5.3% growth in 2019 compared with 2018. The trend was similar with wind with 19.2% growth in investment in 2020 compared with 2019, versus 22% growth in 2019 compared with 2018.
2020 was a “record year” for US renewables installations, says Gregory Whetstone, president and CEO of the American Council on Renewable Energy. US solar and wind capacity increased by 23.9% and 12.3%, respectively, on the previous year, to 21,161MW and 23,088MW.
“In the face of significant Covid-19 headwinds and a largely unhelpful administration, this result was achieved through decreasing technology costs, increasing investor interest, supportive state policies, and robust demand from American businesses and consumers for affordable, pollution-free renewable power,” says Whetstone.