NEWS New York Times coverage, “Renewable Energy Stumbles Toward the Future”, April 22, 2016

New York Times cov­er­age of changes in the clean energy indus­try.

It was just last sum­mer that SunEdi­son was a Wall Street dar­ling, the very air around the fast-​​growing com­pany seem­ing to shim­mer with potential.

SunEdi­son was, after all, a red-​​hot com­pany in a red-​​hot space — renew­able energy. Its mar­ket cap­i­tal­iza­tion reached nearly $10 bil­lion, putting it on a par with the likes of Wynn Resorts of Las Vegas. Among the believ­ers bet­ting on its stock was the hedge-​​fund heavy­weight David Ein­horn of Green­light Cap­i­tal. With plans to buy Vivint Solar for $2.2 bil­lion, SunEdi­son appeared unstoppable.

And then the com­pany went super­nova. Its shares fell from around $32 last sum­mer to 34 cents this week. Mr. Ein­horn furi­ously tried to dump his stake in recent weeks. In early March, Vivint said, “thanks, but no thanks” and exited the deal with SunEdison.

On Thurs­day, to the sur­prise of no one, SunEdi­son filed for bank­ruptcy — one of the largest in a series of recent green-​​energy failures.

There is a time­less ele­ment to SunEdison’s swift demise: an exec­u­tive with an Icarus com­plex chas­ing a fast-​​growing mar­ket embarks on an aggres­sive strat­egy fueled by cheap debt. Soar. Crash. Burn. Repeat.

Yet the col­lapse raises a big­ger ques­tion: Can renewable-​​energy com­pa­nies be prof­itable? Can green make green?

The answer, of course, is yes. Just as soon as they cross over a fun­da­men­tal hur­dle: find­ing a strat­egy that actu­ally works.

We haven’t totally fig­ured out exactly what the busi­ness mod­els are going to look like, for who wins and who loses,” said Jason Bor­d­off, direc­tor of the Cen­ter on Global Energy Pol­icy at Colum­bia University.

Sig­nif­i­cantly, though, the sud­den decline in oil prices isn’t largely to blame. The dif­fi­cul­ties run much deeper, echo­ing indus­trial col­lapses of ear­lier eras — the telecom-​​industry boom and bust of the 1990s and early 2000s, and dis­rup­tive cycles before that.

On the sur­face, the var­i­ous green-​​energy com­pa­nies all seem to be pur­su­ing dif­fer­ent strate­gies. But there is a uni­fy­ing prob­lem they have yet to over­come: Find­ing enough cus­tomers to sup­port the costly infra­struc­ture they must first build.

SunEdi­son is far from being the only trou­bled green-​​energy business.

Aben­goa, which grew from a small elec­tri­cal equip­ment com­pany in Seville, Spain, to a multi­na­tional solar and bio­fuel giant, is in restruc­tur­ing pro­ceed­ings in the United States and abroad. Solazyme, a once-​​promising maker of algae-​​based bio­fu­els, has aban­doned the energy mar­kets and changed its name in favor of focus­ing on ingre­di­ents for per­sonal care and food prod­ucts for com­pa­nies like Unilever and Hormel. And NRG has pulled back from its head­long rush into alter­na­tive energy as it restruc­tures to focus on its con­ven­tional oper­a­tions after the ouster of its chief exec­u­tive, David Crane.


A tower belong­ing to the Aben­goa solar plant near Seville, Spain. CreditMarcelo Del Pozo/​Reuters 

What’s remark­able is that these lead­ing energy com­pa­nies are strug­gling at a time when reg­u­la­tory, pub­lic and investor sup­port for the renewable-​​energy indus­try has arguably never been greater.

On Fri­day, world lead­ers are sign­ing the Paris agree­ment on cli­mate change, a sweep­ing com­mit­ment to lower car­bon emis­sions that prac­ti­cally requires that renew­able devel­op­ment be steeply ramped up. At the end of last year, Amer­i­can law­mak­ers extended impor­tant tax cred­its for green energy sev­eral more years, while in recent days, the Sen­ate approved a broad energy bill that would fur­ther pro­mote clean power.

More­over, investors around the world sank hun­dreds of bil­lions of dol­lars into clean-​​energy tech­nolo­gies last year even as the prices of com­pet­ing fos­sil fuels — oil and nat­ural gas — tumbled.

Though devel­op­ment in renew­able energy climbed in the last 15 years, the indus­try is still widely con­sid­ered to be in its early stages. Nonethe­less, there has been a race among com­pa­nies to develop, com­mer­cial­ize and even­tu­ally pros­per from what many see as one of the largest tec­tonic eco­nomic shifts in decades.

Last year, China started con­struc­tion on a mas­sive solar farm in the Gobi desert that is expected to gen­er­ate enough power to light up one mil­lion homes. Dong Energy is devel­op­ing a multibillion-​​dollar wind farm off the York­shire coast that could even­tu­ally power even more.

And in the United States, the fed­eral gov­ern­ment recently approved a major new trans­mis­sion line to move wind-​​generated elec­tric­ity east from the Great Plains.

But all good bub­bles burst. What is hap­pen­ing in renew­able energy now has sim­i­lar­i­ties to the telecom­mu­ni­ca­tions bub­ble of the 1990s. Led by hard-​​charging exec­u­tives seek­ing big pay­days, giants like World­Com, Global Cross­ing and Adel­phia started far-​​reaching acqui­si­tion and capital-​​expenditure pro­grams — burn­ing through bil­lions of dol­lars — to buy cable com­pa­nies or bury long-​​haul fiber-​​optic cable under land and sea. They were all chas­ing expected high demand and soar­ing rev­enues from the dawn of the Internet.

Those rev­enues even­tu­ally mate­ri­al­ized, but they came too late for the first movers of the rev­o­lu­tion. After cre­at­ing a broad­band glut, and buried under moun­tains of debt — let’s not for­get the var­i­ous account­ing scan­dals and frauds — the many com­pa­nies col­lapsed into bankruptcy.

But the infra­struc­ture they cre­ated lived on. Last week­end, when you binge-​​watched the fourth sea­son of “House of Cards” or streamed your own cook­ing show on Face­book Live, chances are bet­ter than not that your data zoomed through at least some of those networks.

In that case, it turned out that if you build it, they will indeed come. But as many renew­able energy com­pa­nies are learn­ing, build­ing it costs dearly.

Even before SunEdi­son, the land­scape of green energy com­pa­nies was lit­tered with failed strategies.

Dozens of solar-​​focused com­pa­nies around the globe have dis­ap­peared, through bank­ruptcy, insol­vency or just shut­ting their doors, since 2009 when prices for solar pan­els plunged as com­pe­ti­tion from China increased.

Among the high-​​profile fail­ures was that of Solyn­dra, a solar mod­ule man­u­fac­turer, which became a sym­bol of green energy ambi­tions gone awry for the Obama admin­is­tra­tion after it burned through $527 mil­lion in gov­ern­ment loans.

Oil Prices: What’s Behind the Drop? Sim­ple Economics

The oil indus­try, with its his­tory of booms and busts, is in a new downturn.

Part of the conun­drum for these com­pa­nies is that the most effec­tive way to cut costs has been to grow, to take advan­tage of economies of scale, cer­tain forms of financ­ing and gen­er­ous sub­si­dies that were set to expire.

But with all that growth has come debt, and an inabil­ity to show a profit, even if the com­pa­nies are cre­at­ing value.

Clearly in a mar­ket that has had a lot of growth, you are going to have some com­pa­nies — and in this case many com­pa­nies — that try to do too much, too fast,” said Shawn Kravetz, founder of Esplanade Cap­i­tal, which invests in solar power. “We’re going to con­tinue to see a shakeout.”

The vul­ner­a­bil­ity to shift­ing con­di­tions has been evi­dent for indus­try lead­ers like SolarCity and Sun­Power, com­pa­nies whose stock prices can swing wildly with energy mar­kets and pol­icy changes.

But it is espe­cially the case at SunEdi­son, where its chief exec­u­tive, Ahmad R. Chatila, set about expand­ing, seem­ingly in all direc­tions at once.

With roots in mak­ing com­po­nents for solar pan­els, SunEdi­son aimed to become the world’s largest renew­able energy devel­op­ment com­pany. It bought ven­tures in wind and energy stor­age, looked to increase man­u­fac­tur­ing, entered big new mar­kets and cre­ated new sub­sidiaries known as yield­cos to help it raise cheaper financ­ing by buy­ing the projects it developed.

That strat­egy was fur­ther com­pli­cated by ques­tion­able account­ing and opaque finan­cial report­ing — SunEdi­son has received an inquiry from the Secu­ri­ties and Exchange Com­mis­sion and a sub­poena from the Jus­tice Depart­ment — that con­founded even experts in the field.

”This is going to be a big indus­try glob­ally, but we’re stum­bling and bum­bling to get there,” said Erik Gor­don, a clin­i­cal assis­tant pro­fes­sor at the Ross School of Busi­ness at the Uni­ver­sity of Michi­gan. “If they weren’t try­ing to beat each other to the next rooftop they wouldn’t be need­ing to do this finan­cial engineering.”

Still, indus­try ana­lysts and exec­u­tives say that despite the fall of SunEdi­son, the future for renew­able energy is bright.

Indeed, there are a few stal­warts in the renewable-​​energy race.

Take First Solar. The com­pany, which sup­plies solar pan­els and devel­ops solar farms, has had its share of trou­bles. It has been the tar­get of share­holder law­suits claim­ing it hid big prob­lems and mis­rep­re­sented its prospects. Its stock, at $62 a share, is a far cry from its bubble-​​peak of $311 in the spring of 2008.

But by adopt­ing a slower-​​growth strat­egy and reduc­ing debt, First Solar is a rar­ity in the green-​​energy indus­try. It is prof­itable. Last year, the com­pany made $546 mil­lion on $3.6 bil­lion in revenue.

For now, First Solar may be an anom­aly, par­tic­u­larly amid uncer­tainty around the pres­i­den­tial elec­tion and the pol­icy stances of can­di­dates like Hillary Clin­ton and Don­ald J. Trump on renew­able energy sources. Some warn that a lull could set­tle over the indus­try in the short term.

“The Sec­re­tary Clin­ton per­spec­tive on lots of dis­trib­uted clean energy couldn’t be more dif­fer­ent than the Trump view,” said Daniel M. Kam­men, the direc­tor of the Renew­able and Appro­pri­ate Energy Lab­o­ra­tory at the Uni­ver­sity of Cal­i­for­nia, Berke­ley. “That could mean hugely dif­fer­ent things for the growth of the industry.”

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