The public purse may sustain green industry

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The recession and financing freeze have hit renewable energy and clean tech like the plague, only less selectively.

Here’s a sampling of the harm. Wind energy producer Noble Environmental, whose IPO has been shelved, is purging staff. The stock of GT Solar, an equipment maker that posted a solid profit in the fall quarter, slumped below $2 late last month. Energy Recovery, whose technology conserves energy in seawater desalination, has lost about half its value since July, while cash on the balance sheet accounts for almost half the capitalization of solar giant Suntech Power.

Experience suggests that fatalities will occur in a toxic environment like this. In some cases, imprudent or unlucky investors will suffer a total loss. The overpopulated solar sector in particular may witness a few funerals in 2009.

For those with itchy trigger fingers, these wallowing shares may turn out to be profitable trading vehicles. In the near term, even stocks ultimately destined for delisting may leap at evidence of economic improvement, or perhaps indirect but powerful signals such as the appointment of credible environmentalists to run Barack Obama’s EPA and Energy Department.

When hedge funds are done dumping shares to meet margin calls, when mutual funds are finished selling their losses to dress up their portfolios for year-end reports, if fresh news suggests early 2009 will be simply ugly but not dire, these stocks may rally.

And then, perhaps, fall back.

If the most pessimistic economic forecasters are right, corporate failures will proliferate in clean tech and the limping large players will absorb a batch of the smaller ones. But 2009 may not be so painful, thanks to the largess of the public sector.

Stimulus has become the slogan in Washington as the ascendant Democrats prepare their agenda, and they are not talking about stimulating SUV sales or drilling in wildlife refuges. As the financier of last resort, the next government is bound to wield its powers to further a sustainability platform. ...

... No need to repeat the details of Obama’s energy and enviro proposals here. Suffice it to say he sees green industry as strategic rather than discretionary -- a means of preserving the planet, achieving energy security and growing the economy. And if it’s strategic, this industry’s fortunes won’t be dictated by oil, gas and coal prices.

There seems to be little daylight between him and key lawmakers on that score. Yesterday, House Speaker Nancy Pelosi (D-San Francisco) said a proposed $500-billion package would emphasize “creating jobs for the 21st century,” with a focus on energy projects, according to Reuters. Combine this with potentially dramatic legislative changes that favor the environment and disadvantage the fossil economy, and the sustainability sector could come back to life in the not-too-distant future.

With the public sector writing more of the checks and calling more of the shots, green companies will have to adapt to new rules of doing business, some of which will be written to support them. Potentially, there’s a mixed blessing in this relationship. Once they become bureaucratic imperatives, such programs are practically eternal -- look at farm subsidies and the Pentagon budget. That shores up uncertain markets and evens out stock volatility. The risk is that it dampens the zeal to innovate.

-- Edward Silver